Suppose the Rest of the World Experiences a Recession That

question 27

Multiple Choice

Suppose the rest of the world experiences a recession that causes a reduction in foreign income (Y*) .From the domestic economy's perspective,this reduction in foreign income will cause which of the following as the domestic economy adjusts to the drop in Y*?

• A)a reduction in income and a reduction in imports
• B)a reduction in imports and an increase in net exports
• C)the NX line to shift up
• D)an ambiguous effect on net exports

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Definitions:

Negotiable Instrument

A document guaranteeing the payment of a specific amount of money, either on demand or at a set time, with the payee able to transfer it to another holder.

Consideration

In contract law, something of value given by one party in exchange for something of value from another party, forming the basis for a contract.

Binding Contract

An agreement between parties that is legally enforceable in a court of law.

Commitment

The state or quality of being dedicated to a cause, activity, or undertaking.