All Else Being Equal, If the Prospect of a Recession

question 56

Multiple Choice

All else being equal, if the prospect of a recession leads the Federal Reserve to ease monetary policy, the equilibrium value of the exchange rate for the U.S. dollar will:

• A)rise.
• B)fall.
• C)remain fixed.
• D)either rise or fall depending on whether the supply or demand for dollars changes more.

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Definitions:

Federal Government's Budget

The financial plan for a fiscal year, detailing the government's projected expenses and revenues, managed by the federal government.

Recessionary Gap

A situation where the real GDP is lower than the potential GDP, and the economy is producing below its capacity.

Income Tax Surcharge

An additional charge on the basic income tax liability, often applied to higher income brackets to collect additional revenue from them.

Federal Deficit

The amount by which the government's total budget outlays exceed its total receipts for a fiscal year.