All Flashcards
What is the impact of expansionary fiscal policy on aggregate demand?
It increases aggregate demand.
What is the impact of contractionary fiscal policy on aggregate demand?
It decreases aggregate demand.
What is the impact of expansionary monetary policy on interest rates?
It lowers interest rates.
What is the impact of contractionary monetary policy on interest rates?
It raises interest rates.
What is one potential benefit of imposing a tariff?
Protecting domestic jobs.
What is a negative consequence of tariffs for consumers?
Consumers pay higher prices.
How do quotas affect the prices consumers pay?
Quotas lead to higher prices for consumers.
What is the impact of a tariff on domestic production?
It leads to increased domestic production.
What is the impact of a quota on government revenue?
Quotas do not generate revenue for the government.
What is the impact of expansionary monetary policy on net exports?
It tends to increase net exports as the currency depreciates.
How does increased tourism to a country affect its currency?
Increases demand for the currency, causing it to appreciate.
How do rising export prices affect a country's currency?
Decreases demand for the currency, causing it to depreciate.
How do higher relative interest rates affect a country's currency?
Increases demand for the currency, causing it to appreciate.
How does expansionary fiscal policy affect a country's currency value?
It tends to depreciate the currency due to rising prices and increased imports.
How does contractionary fiscal policy affect a country's currency value?
It tends to appreciate the currency due to falling prices and decreased imports.
How does expansionary monetary policy affect a country's currency value?
It tends to depreciate the currency due to lower interest rates and rising prices.
How does contractionary monetary policy affect a country's currency value?
It tends to appreciate the currency due to higher interest rates and falling prices.
How does a tariff on imported goods affect domestic prices?
Tariffs increase domestic prices for consumers.
How does an import quota affect the quantity of imports?
Quotas decrease the quantity of imports.
How does increased domestic income affect the supply of a country's currency?
Increases the supply of its currency on the market as citizens import more.
In a FOREX graph, what does a rightward shift of the demand curve indicate?
An increase in demand for that currency, leading to appreciation.
In a FOREX graph, what does a leftward shift of the demand curve indicate?
A decrease in demand for that currency, leading to depreciation.
On a tariff graph, what area represents government revenue?
The rectangle formed by the tariff amount and the quantity of imports after the tariff.
On a tariff graph, how is the change in consumer surplus represented?
By the area between the original price, the new price with the tariff, and the demand curve.
On a tariff graph, how is the change in producer surplus represented?
By the area between the original price, the new price with the tariff, and the supply curve.
On a quota graph, what happens to the supply curve?
The supply curve shifts to the right, reflecting the limited quantity of imports allowed.
On a quota graph, what area represents the revenue gained by foreign producers?
The area between the world price, the quota price, and the quantity of imports under the quota.
What does the intersection of supply and demand curves represent in a FOREX graph?
The equilibrium exchange rate.
How is the quantity of imports shown on a tariff graph before a tariff is imposed?
The horizontal distance between the domestic supply and demand curves at the world price.
How does a tariff affect the quantity of imports shown on a graph?
It reduces the horizontal distance between the domestic supply and demand curves at the new price.