When a Temporary Adverse Supply Shock Hits a Large Open

question 39

Multiple Choice

When a temporary adverse supply shock hits a large open economy,it causes the current account to ________ and investment to ________.

• A)fall; fall
• B)rise; remain unchanged
• C)fall; remain unchanged
• D)rise; fall

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Definitions:

Demand Curve

A graph showing the relationship between the price of a good and the quantity of that good that consumers are willing to purchase at various prices.

Willingness to Pay

The maximum amount a consumer is ready to spend on a good or service.

Consumer Surplus

The discrepancy between the amount consumers are prepared to pay for a product or service and the price they actually spend.

Consumer Surplus

Consumer surplus is the difference between the total amount that consumers are willing and able to pay for a good or service and the total amount they actually pay.