Question

Which of the following will increase the demand for U.S. products in the international market?

a. A tariff imposed by the U.S. on imported goods

b. A depreciation of foreign currency

c. A rise in the domestic demand for goods and services

d. A depreciation of the U.S. dollar

e. An increase in the average price level in the U.S.

When estimating GDP, changes in the level of inventory are calculated because:

a. it shows the level of business spending by firms.

b. it is a good indicator of the competitiveness of the economy.

c. it provides information about a firm’s expectations.

d. it indicates the level of employment in the economy.

e. it determines the value of goods produced in a year but not sold in that year.

Answer 1

1. Option D.

• When the US dollar depreciates, the purchasing power of dollar increases.
• This is because the relative prices of US goods and services falls when compared to the prices of foreign goods and services.
• This will hence increase the demand for US product's in the international market.

2. Option E.

• We know that GDP includes the value of all the final goods and services produced within an economy in a given year.
• When estimating GDP, changes in the level of inventory are calculated because it determines the value of goods produced in a year but not sold in that year.