In a Two-Good,two-Period Model with Trade,an Increase in Government Spending

question 32

Multiple Choice

In a two-good,two-period model with trade,an increase in government spending will have a tendency to cause

• A) interest rates to rise.
• B) the trade balance to improve.
• C) the domestic exchange rate to appreciate.
• D) the taxes to increase.
• E) the current account surplus to decrease.

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Definitions:

Relative Advantage

The degree to which a new product, service, or idea is perceived as better than the existing standard by potential adopters.

Trialability

The extent to which an innovation or product can be experimented with on a limited basis before it is fully adopted.

Observability

The degree to which the results of an innovation or change can be seen and understood by others, impacting its acceptance and diffusion.

Intrinsic Motivation

The drive to engage in activities for their own sake and personal rewards, rather than for some external compensation or pressure.