DQuestion 41 1 pts Temporary tax cuts would cause a shift in the AA-curve, altho
ID: 1112696 • Letter: D
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DQuestion 41 1 pts Temporary tax cuts would cause a shift in the AA-curve, although the direction is ambiguous. the AA-curve to shift left. the DD-curve to shift right. the AA-curve to shift right. the DD-curve to shift left. Question 42 1 pts How is the AA schedule derived? It is derived by the schedule of exchange rate and output combinations that are consistent with equilibrium in the domestic money market and the foreign exchange market. It is derived by the schedule of exchange rate and output combinations that are consistent with equilibrium in the foreign money market and the domestic exchange market. It is derived by the schedule of exchange rate and output combinations that are consistent with equilibrium in the domestic bond market and the foreign asset market. It is derived by the schedule of exchange rate and output combinations that are greater than equilibrium in the foreign money market and the domestic exchange market. lt is derived by the schedule of interest rate and output combinations that are consistent with equilibrium in the domestic money market and the foreign exchange market. Question 43 1 pts If the economy starts in long-run equilibrium, a permanent fiscal expansion will cause O an increase in exchange rate, E. O shifting of the AA curve up and to the right O a decrease in output, Y. O an increase in output, Y O a decrease in exchange rate, EExplanation / Answer
Ans:
41) the DD curve to shift to right
The tax cut will increase the real income and resulting in increase in the quantity demand due to which the demand curve shifts to right.
42) it is derived by the schedule of interest and output combinations that are consistent with equilibrium in the domestic money market and the foreign exchange market.
An increase in output when the slope is negative it will lead to increase in domestic interest rate and a domestic currency appreciation.
43) a decrease in exchange rate E
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