Which of the Following Policies Would Keep an Economy Operating

question 37

Multiple Choice

Which of the following policies would keep an economy operating at full potential while combating an excessive trade deficit and an overvalued domestic currency?

• A) Reducing government spending and increasing the domestic money supply so that the interest rate falls at potential GDP
• B) Increasing both government spending and the domestic money supply so that the interest rate increases at potential GDP
• C) Reducing both government spending and taxes so that the interest rate falls and GDP climbs above potential
• D) Increasing both government spending and taxes so that the interest rate increases even as GDP climbs above potential
• E) Placing import restrictions on the country's largest imports

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Definitions:

Initial Public Offering

The first sale of stock by a private company to the public, often referred to as going public.

Business Plan

A formal document that outlines a company's goals, strategies for achieving them, and the financial forecasts associated with these strategies.

Basic Elements

The fundamental components or principles that form the essential parts of a whole.

Loan

Borrowed money that is expected to be paid back with interest.