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:

Hot Spot

A volcanically active site interpreted to be above an unusually high-temperature region in the deep crust and upper mantle.

Crust Thickness

The measurement of the Earth's outermost layer's depth, varying between the oceanic and continental crusts.

Oceanic Crust

The thin part of Earth's crust that underlies the ocean basins, composed mostly of basalt and denser than the continental crust.

Core

The innermost part of the Earth, composed primarily of iron and nickel, divided into a solid inner core and a liquid outer core.