Suppose That a Change in Trade Policies Leads to a $20

question 109

Multiple Choice

Suppose that a change in trade policies leads to a $20 billion increase in net exports.If the value of the multiplier is 2, what is the size of the shift in the aggregate demand after
The multiplier process works through the economy?

• A)$40 billion
• B)less than $20 billion
• C)more than $40 billion
• D)cannot be determined without information on the trade policies in question

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Definitions:

Using Sinking Fund

The practice of setting aside money over time into a separate account to repay debt or replace a major asset in the future, thus avoiding a large lump-sum expense.

Market Value

Market value is the amount for which something can be sold in a given market at a particular time.

Redemption Value

The price per share a corporation pays to redeem or retire capital stock.

Preferred Stock

Class of capital stock that has preference to a corporation’s profits and assets.