Suppose That the Fed Decides to Increase the Growth Rate

question 7

Multiple Choice

Suppose that the Fed decides to increase the growth rate of the money supply in the United States.What is most likely to happen to the U.S.trade deficit and to GDP?

• A)The trade deficit will fall; GDP will fall.
• B)The trade deficit will rise; GDP will rise.
• C)The trade deficit will fall; GDP will rise.
• D)The trade deficit will rise; GDP will fall.

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Definitions:

Salvaged

The recovery of value from an asset that has been damaged, discarded, or no longer useful in its original form.

Depreciation Tax Shield

A reduction in taxable income resulting from the allowance for depreciation expenses, which ultimately decreases tax liabilities.

Tax Rate

The percentage at which an individual or corporation is taxed, which can be applied to income, property, sales, and other taxes.