Consider a Simple Aggregate Expenditure Model Where All Components of Aggregate

question 125

Multiple Choice

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. The marginal propensity to consume is ⅔. Holding all else constant, if net exports increase by $50 billion, what happens to
Aggregate demand?

• A) It shifts left by $150 billion.
• B) There is a movement down along a given aggregate demand so that aggregate quantity demanded increases by $150 billion.
• C) It shifts right by $150 billion
• D) There is a movement down along a given aggregate demand so that aggregate quantity demanded increases by $50 billion.

Understand the concept of production possibility frontier and its implications for opportunity cost and economic efficiency.

Comprehend the idea of opportunity cost in various trade-offs and its calculation in different scenarios.

Grasp the concept of autarky, its definitions, and implications for a country's economy.

Identify and differentiate between goods and services traded internationally.

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Definitions:

Currency Swap

A financial agreement to exchange principal and/or interest payments of a loan in one currency for equivalent amounts in another currency.

Exchange Rate Risk

The potential for investors to experience losses due to changes in currency exchange rates.

Interest Rate Swap

A financial derivative agreement between two parties to exchange one stream of interest payments for another, based on a specified principal amount.

Floating-Rate Loan

A loan with an interest rate that adjusts periodically based on a reference interest rate index, reflecting changes in market interest rates.