Question 51 Assume that Country Y engages in expansionary fiscal policy to stimulate its economy. Which of the following statements relating to imports and exports is correct?

A) Country Y will have an increase in both its imports and its exports, since real GDP will increase.

B) Country Y will have a decrease in imports since its currency will depreciate, given its higher real GDP.

C) For Country Y, expansionary fiscal policy will lead to higher interest rates, an appreciated currency, and reduced net exports.

D) Country Y will experience lower interest rates and a depreciation of its currency, leading to an increase in net exports.

E) For Country Y, the combination of lower interest rates and higher real GDP will decrease imports and increase exports.

Question 52 Which of the following is a limitation of GDP?

A It measures the income inequality in the society.

B It does not consider the non-market transactions.

C It implies that growth is sustainable.

D It accounts for all household work done by housewives.

E It does not show the consumption expenditure in the economy.

Question 53 Which of the following is the expected outcome of a reduction in income taxes on high-income individuals?

A Only decrease aggregate demand

B Increase aggregate demand and increase aggregate supply

C Increase aggregate demand and decrease aggregate supply

D Only increase aggregate supply

E Decrease aggregate demand and decrease aggregate supply

Question 54 Which of the following fiscal policy actions is taken by the government to eliminate inflationary gap in the economy?

A Decreasing government purchase of goods and services and increasing taxes

B Decreasing taxes and increasing government purchases of goods and services

C Increasing government spending and decreasing transfer payments

D Increasing government spending and taxes

E Increasing government transfer payments and decreasing taxes

Question 55 The table below shows the production of goods in two countries, A and B, for jewelry and cloth.