Tackle the Test: Multiple-Choice Questions

452

Questions 1–5 refer to the following scenario:

The United States and Mexico are trading partners. Suppose a flu outbreak significantly decreases U.S. tourism in Mexico and causes the Mexican economy to enter a recession. Assume that the money that would have been spent by U.S. tourists in Mexico is, instead, not spent at all.

  1. Question

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    Which of the following occurs as a result of the recession in Mexico?
  2. Question

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    What is the effect of Mexico’s falling income on the demand for money and the nominal interest rate in Mexico?
  3. Question

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    Given what happens to the nominal interest rate, if the aggregate price level in Mexico decreases, what will happen to the real interest rate?
  4. Question

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    Suppose the aggregate price level in Mexico decreases relative to that in the United States. What is the effect of this price level change on the demand, and on the exchange rate, for Mexican pesos?
  5. Question

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    If the Mexican government pursues expansionary fiscal policy in response to the recession, what will happen to aggregate demand and aggregate supply in Mexico in the short run?