The Sequence of Events Following an Increase in the Federal

question 117

Multiple Choice

The sequence of events following an increase in the federal deficit would be higher interest rates, a(n)

• A)depreciating dollar, and a larger current account deficit.
• B)depreciating dollar, and a smaller current account deficit.
• C)appreciating dollar, and a larger current account deficit.
• D)appreciating dollar, and a smaller current account deficit.

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Definitions:

Price Ceiling

a legally established maximum price for goods or services, aimed at keeping prices from rising to high levels.

Equilibrium

A condition in markets where supply equals demand, and there is no external pressure for change.

Shortage

The insufficiency of a good or service that occurs when the quantity demanded exceeds the quantity supplied; shortages occur when the price is below the equilibrium price.

Price Elasticity of Demand

The rate at which demand for a product responds to its price being altered.