Imagine Two Economies That Are Identical Except That for a Long

question 170

Multiple Choice

Imagine two economies that are identical except that for a long time, economy A has had a money supply of $1,000 billion while economy B has had a money supply of $500 billion. It follows that

• A)real GDP and the price level are lower in country B.
• B)real GDP, but not the price level, is lower in country B.
• C)the price level, but not real GDP is lower in country B.
• D)neither the price level or real GDP is lower in country B.

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Definitions:

U.S. Net Capital Outflow

The difference between the amount of U.S. assets bought by foreigners and the amount of foreign assets bought by Americans within a specific time period.

Chinese Currency

Refers to the official currency of China, primarily the Renminbi (RMB), with the yuan as the basic unit.

Trade Deficit

A situation where a country's imports of goods and services exceed its exports, leading to more money leaving the country than coming in from foreign nations.

Net Outflow

The difference between the outflow of funds for foreign investments by citizens and the inflow of foreign funds for domestic investments.