Assume That a Small Open Economy Gets Involved in a Global

question 78

Multiple Choice

Assume that a small open economy gets involved in a global war, in which its government purchases increase and the rest of the world's government purchases also increase. Then, for the small country, net exports:

• A) will certainly decrease.
• B) will certainly increase.
• C) may increase or decrease.
• D) will remain the same.

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Definitions:

Fannie Mae

A government-sponsored enterprise (GSE) in the United States aimed at expanding the secondary mortgage market by securitizing mortgages into mortgage-backed securities.

Capital Stock

The total amount of physical goods a company owns for the purpose of production, including buildings, machinery, and equipment.

Productivity

The measure of the efficiency of production, often quantified as the ratio of output to input in the production process.

Investment

The purchase or construction of any new plant, equipment, or residential housing, or the accumulation of inventory; represented by I.