If the Government of a Small Open Economy Wishes to Reduce

question 132

Multiple Choice

If the government of a small open economy wishes to reduce a trade deficit, which policy action will be successful in achieving this goal?

• A) increasing taxes
• B) increasing government spending
• C) increasing investment tax credits
• D) imposing protectionist trade policies

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Definitions:

Status Quo Bias

A cognitive bias that explains individuals' preference for current circumstances to remain unchanged or for decisions to be made that do not alter the current state.

Super-Size

A term often associated with fast food, indicating an option to upgrade a meal to a larger size with more of the product.

Solar Panels

Devices that convert sunlight into electricity, using photovoltaic cells.

Anchoring

A psychological tendency to overemphasize the importance of the first information encountered (referred to as the "anchor") when one is making choices.