Suppose That the Economy Is Initially in a Long-Run Macroeconomic

question 104

Multiple Choice

Suppose that the economy is initially in a long-run macroeconomic equilibrium.A shock then hits the economy and we observe that the unemployment rate decreases and the price level decreases.We can conclude that ________ has increased and there is now a(n) ________ gap.

• A)aggregate supply; inflationary
• B)aggregate demand; recessionary
• C)aggregate supply; recessionary
• D)aggregate demand; inflationary

Recognize the factors influencing the demand for a country's currency and its international purchasing power.

Explore the concept of a "carry trade" and its impact on currency valuation.

Assess the economic impact of currency movements on pricing and import/export attractiveness.

Explain how external financial shocks can affect the valuation of a currency.

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Definitions:

Average Tax Rate

The proportion of total taxable income that an individual or entity pays in taxes, calculated by dividing the total tax paid by the total taxable income.

Capital Gains

Capital gains are the profits realized from the sale of assets such as stocks, bonds, or real estate, which exceed the purchase price.

Non-Eligible Dividends

Dividends that are paid out by a company from earnings that have not been taxed at the general corporate tax rate.

Average Tax Rate

The percentage of total income that is paid in taxes, calculated by dividing the total amount of taxes paid by total income.