Without Considering the Effect That a Change in the Value

question 83

Multiple Choice

Without considering the effect that a change in the value of a currency might have on trade, the net effect of an expansionary fiscal policy is:

• A)ambiguous with respect to the trade balance, but positive with respect to the exchange rate.
• B)ambiguous with respect to the exchange rate, but negative with respect to the trade balance.
• C)negative with respect to the exchange rate and positive with respect to the trade balance.
• D)positive with respect to the exchange rate and negative with respect to the trade balance.

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Definitions:

Median Voter Theorem

A theory that suggests the outcome of a majority vote is most likely to match the preferences of the median voter.

Majority-Rule

A decision-making process that follows the principle that the opinions or preferences of more than half of the members of a group have the authority to make decisions binding on the whole group.

Median Voter

A theoretical concept in political science and economics suggesting that the outcome of a majority rule voting process will reflect the preferences of the median voter when preferences are single-peaked.

Decision Making

The cognitive process of selecting a course of action from among multiple alternatives.