In the Mundell-Fleming Model, If the Price Level Falls, Then

question 72

Multiple Choice

In the Mundell-Fleming model, if the price level falls, then the equilibrium income _____ and the real exchange rate _____.

• A)rises; appreciates
• B)rises; depreciates
• C)falls; appreciates
• D)falls; depreciates

Classify the proceeds from sales of assets, depreciation, and sales of bonds into operating, investing, or financing activities.

Explain why stocks may be priced above the net value of a firm's assets.

Identify and explain different types of activities in the statement of cash flows.

Calculate financial ratios and interpret their implications.

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Definitions:

Merchandise

Goods that are bought and sold in commerce, particularly those related to retail trade.

Services

Intangible products that are consumed at the point of sale and do not result in ownership of physical goods.

Net Exports

The balance of a nation's trade, measured by subtracting its imports from its exports of goods and services.

Depreciation

The process of allocating the cost of a tangible or physical asset over its useful life, reflecting the decrease in value of an asset over time due to use, wear and tear, or obsolescence.