In a Small Open Economy with a Floating Exchange Rate

question 134

Multiple Choice

In a small open economy with a floating exchange rate, an effective policy to increase equilibrium output is to:

• A) increase government spending.
• B) increase taxes.
• C) increase the money supply.
• D) decrease the money supply.

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Definitions:

Filtration

The process of separating solids from liquids or gases using a filter medium that allows only the fluid to pass through.

Active Transport

The movement of molecules across a cell membrane from a region of lower concentration to a region of higher concentration, requiring energy.

Vital Capacity

The maximum amount of air a person can expel from the lungs after a maximum inhalation, used to assess the health of respiratory systems.

Tidal Volume

The volume of air moved into or out of the lungs during a normal breath.