ECS2602 ASSIGNMENT 3 ONLINE ASSESSMENTSEMESTER 2 2022

ECS2602 ASSIGNMENT 3 ONLINE ASSESSMENTSEMESTER 2 POSSIBLE QUESTIONS AND SOLUTIONS Question 1 of 15 This question is based on the following diagram of an IS-LM model for an open economy A decrease in government spending causes ... A. a decrease in the demand for goods and the level of output; a decrease in the demand for money and the interest rate; a depreciation of the domestic currency and the trade balance deteriorates as exports increases. B. a decrease in the demand for goods and the level of output; a decrease in the demand for money and the interest rate; a depreciation of the domestic currency and the trade balance improves as exports increases. C. a decrease in the demand for goods and the level of output; an increase in the demand for money and the interest rate; a depreciation of the domestic currency and the trade balance improves as exports increases. D. a decrease in the demand for goods and the level of output; a decrease in the demand for money and an increase in the interest rate; an appreciation of the domestic currency and the trade balance improves as exports increases. Feedback: Question 2 of 15 An expansionary fiscal policy, for example an increase in government spending (G), causes an increase in the demand for goods (Z) and the level of output and income (Y) and consequently ... A. an increase in the demand for money and the interest rate; a depreciation of the domestic currency and the trade balance improves as exports increases. B. an increase in the demand for money and the interest rate; an appreciation of the domestic currency and the trade balance deteriorates as exports decreases. C. a decrease in the demand for money and the interest rate; a depreciation of the domestic currency and the trade balance improves as exports increases. D. an increase in the demand for money and the interest rate; an appreciation of the domestic currency and the trad