Question

When a temporary adverse supply shock hits a large open economy, it causes the current account...

When a temporary adverse supply shock hits a large open economy, it causes the current account to ________ and investment to ________.

Answer: A, but i have no idea why the investment falls. can anyone explain in detail ? ( not in the form of your handwriting, i may not recognize it)

A) fall; fall

B) rise; remain unchanged

C) fall; remain unchanged

D) rise; fall

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Option A

Fall; Fall

-----

An adverse supply shock decreases supply and shifts SRAS curve to the left which increases price level and decreases actual real GDP in the economy.

The increased price level decreases export in the economy which causes to decrease current account as a current account is the balance of trade and transfers.

The decreased production and higher prices decrease investment as the which is an upward movement along the AD curve.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
When future labour income falls in a large open economy, it causes the current account to...
When future labour income falls in a large open economy, it causes the current account to ________ and investment to ________. Please solve this question by using the concept/idea of national and savings in open economy with world interest rate. A) fall; rise B) rise; remain unchanged C) fall; remain unchanged D) rise; rise
Consider the impact of a temporary adverse supply shock on the economy. The shock is most...
Consider the impact of a temporary adverse supply shock on the economy. The shock is most likely to affect the A. LM curve B. AD curve C. IS curve D. FE curve In the short run, before general equilibrium is restores, the FE line shifts _________ and causes _________ A. right; no change in output or the real interest rate B. right; output to rise and the real interest rate to decline C left; no change in output or the...
A small open economy responds to a domestic epidemic with lockdowns that sharply reduce private consumption....
A small open economy responds to a domestic epidemic with lockdowns that sharply reduce private consumption. This causes the world real interest rate to ________ and the country's current account balance to ________. A. remain unchanged; rise B. rise; rise C. rise; fall D. remain unchanged; fall
Consider a large open economy that has a zero-current account balance. What are the effects on...
Consider a large open economy that has a zero-current account balance. What are the effects on the world real interest rate, national saving, investment, and the current account in equilibrium if: (a) future income rises? (b) business taxes decline? Explain using graphs. (For full credit make sure you label the axes and the curves)
when money supply increase permanently in a large open economy, what happens to the long term...
when money supply increase permanently in a large open economy, what happens to the long term nominal interest rate? a, long term nominal interest rate increase b, long term nominal interest rate decrease c, long term nominal interest rate unchanged d, long term nominal interest rate may increase or decrease
1. In the short-run IS-LM model with income taxation, taxes are given by ?=? +??. Suppose...
1. In the short-run IS-LM model with income taxation, taxes are given by ?=? +??. Suppose that MPC = 0.75 and the marginal tax rate ?=0.2. Then, when ? decreases by 1000, then for any given interest rate, the IS curve shifts: Select one: a. to the left by 1000. b. to the right by 3000. c. to the right by 3750 d. to the right by 1875. 2. Suppose that the adult population in an economy is 28 million,...
1. The amount of __________increases when the economy goes into a recession and decreases when the...
1. The amount of __________increases when the economy goes into a recession and decreases when the economy goes into an expansion. a. structural unemployment b. seasonal unemployment c. cyclical unemployment d. frictional unemployment 2. It is difficult for cyclically unemployed persons to find jobs because a. they typically do not meet the qualifications required for the available jobs. b. the economy is in a recession. c. they voluntarily quit their last jobs and employers may view them as unreliable. d....
Can I have your opinion on this research and possible correction? The global economy and government’s...
Can I have your opinion on this research and possible correction? The global economy and government’s ability to control its country’s currency. Definition of terms Global economy is an economic interdependence established between the most influential countries that drives the worldwide economic environment. It is also the aggregate economic output, movement and influence of all countries. (My Accounting course). Currency is the medium of exchange for goods and services. In short, its money, in the form of paper or coins,...
Whatever It Takes: How the Fed Aims to Rescue the Economy The central bank is using...
Whatever It Takes: How the Fed Aims to Rescue the Economy The central bank is using tactics from the last financial crisis and deploying new ones to keep money flowing. Here are the basics. The Federal Reserve, under Jerome H. Powell, is moving to shore up the American economy during the coronavirus pandemic. Credit...Yuri Gripas/Reuters By Ben Casselman March 23, 2020 The Federal Reserve on Monday pledged to do, in essence, whatever it takes to keep the economy from collapsing...
Please read the article and answear about questions. Determining the Value of the Business After you...
Please read the article and answear about questions. Determining the Value of the Business After you have completed a thorough and exacting investigation, you need to analyze all the infor- mation you have gathered. This is the time to consult with your business, financial, and legal advis- ers to arrive at an estimate of the value of the business. Outside advisers are impartial and are more likely to see the bad things about the business than are you. You should...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT