In a Two-Good,two-Period Model,the Government Expenditure Multiplier

question 30

Multiple Choice

In a two-good,two-period model,the government expenditure multiplier

• A) is larger in an open economy because net exports fall.
• B) is larger in an open economy because net exports are unaffected.
• C) is smaller in an open economy because net exports fall.
• D) is smaller in an open economy because net exports increase.
• E) is larger in an open economy because net exports increase.

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Definitions:

Valuation Allowance

A reserve set aside against deferred tax assets due to uncertainty regarding their realization in the future.

Fair Value Adjustments

Fair value adjustments are accounting practices to revise the book value of an asset or liability to its current market value.

Trading Security

A financial asset that a company holds primarily for the purpose of selling it in the short term to profit from price fluctuations.

Fair Value

The estimated market value of an asset or liability, based on current market conditions.