The Mainstream View of Macro Instability Is That

question 169

Multiple Choice

The mainstream view of macro instability is that

• A)changes in the money supply directly cause changes in aggregate demand and thus cause changes in real GDP.
• B)changes in investment shift the aggregate demand curve and thus cause changes in real GDP.
• C)bursts of innovation put the economy on an unsustainable growth path, eventually producing recession.
• D)changes in technology and resource availability are the two main sources of fluctuations of real GDP.

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Definitions:

Freely Flexible Exchange Rates

A currency system where the value of a currency is allowed to fluctuate according to the foreign exchange market without direct government intervention.

Trade Deficit

A situation where a country's imports of goods and services exceed its exports of them.

Peso Price

The value of a good or service expressed in pesos, the currency of various Latin American countries.

Exchange Rate Appreciation

Exchange rate appreciation refers to the increase in value of one currency relative to another, meaning you need fewer units of the appreciating currency to buy one unit of another currency.