1. Assume the Marshall-Lerner condition holds. Which of the following will cause
ID: 1142460 • Letter: 1
Question
1. Assume the Marshall-Lerner condition holds. Which of the following will cause an increase in net exports? A. An increase in government spending. B. An increase in investment. C. A reduction in foreign output D. A reduction in the real exchange rate. E. All of the above. 2. Which of the following will always cause an increase in net exports? A. A reduction in domestic output. B. An increase in the real exchange rate. C. An increase in government spending. D. An increase in investment. E. All of the above. 3. For an open economy, which of the following expressions represents private saving (5)? A. I+T-G+CA B. I+T-G-CA. C. I+G-T+CA D. G-T+CA-I. E. None of the above. 4. Suppose policy makers want to increase Y and increase NX. Which of the following policies would most likely achieve this? A. An increase in government spending B. A real depreciation. C. A reduction in taxes and an increase in the real exchange rate D. An increase in the real exchange rate. 80 2 3 8Explanation / Answer
Answer 1
D A reduction in the real exchange rate
other options mentioned in question would not increase net exports .Therefore option D is correct answer .
Answer 2
A . A reduction in domestic output
If we decrease the domestic output the goods generated would be more and thus the net export of the country could be increased . Whereas the other option won,t increase the net exports of the country.
Answer 3
E. None of the above
the correct quation is I + G - T + NX so the above options given are wrong
Answer 4
B. A real depreciation
Real depreciation is the best key factor by which policy makers can increase both the Y and NX. While the the option a.c.d bith the factors can not be increased by policy makers at once .
Answer 5
B Ip curve shift to the left and becomes steeper
Ip curve generally shifts to right when foreign interest rates increase . Therefore option c and option d are not valid as in the quesion the foreign interest rate becomes lower . when the IP curve shift to left it lifts up . So option B is correct .
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