4) If foreign residents buy more domestic bonds, the result for the domestic eco

Question

4) If foreign residents buy more domestic bonds, the result for the domestic economy is that,
Answer
a.
the domestic currency becomes stronger and the domestic country has more capital inflow
b.
the domestic currency becomes stronger and the domestic country has less capital inflow
c.
the domestic currency becomes weaker and the domestic country has more capital inflow
d.
the domestic currency becomes weaker and the domestic country has less capital inflow

7) Suppose there is a permanent increase in taxes, this will cause,
Answer
a.
the LRAS curve to shift to the right and the SRAS curve to shift to the right
b.
the LRAS curve to shift to the right and the SRAS curve to shift to the left
c.
the LRAS curve to shift to the left and the SRAS curve to shift to the right
d.
the LRAS curve to shift to the left and the SRAS curve to shift to the left

8) Which of the following combinations will cause the biggest increase in domestic output (in the short run)?
Answer
a.
weaker foreign economies and a weaker domestic currency
b.
weaker foreign economies and a stronger domestic currency
c.
stronger foreign economies and a weaker domestic currency
d.
stronger foreign economies and a stronger domestic currency

Explanation / Answer

4. a. the domestic currency becomes stronger and the domestic country has more capital inflow 7. a. the LRAS curve to shift to the right and the SRAS curve to shift to the right 8. b. weaker foreign economies and a stronger domestic currency

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