Question

EXERCISE 1:TRUE OR FALSE 1. If the dollar appreciates relative to foreign currencies, we would expect a country's net exports to fall. If government decreases its purchases by $20 billion and the MPC is 0.8, equilibrium GDP will decrease by $100 billion. When a private closed economy is at equilibrium, then (GDP-C) is equal to planned investment. If planned investment is larger than saving, then real GDP will increase as the economy adjusts toward equilibrium. 5. Positive net exports increase aggregate expenditures beyond what they would be in a closed economy and thus have an expansionary effect on domestic GDP. In a closed private economy, an unplanned decrease in inventories will cause firms to increase real GDP. 7. If households and firms in an economy would save all extra income that they receive so that MPC = 0, then the multiplier in that economy is zero. 8. If the MPC in the economy is 0.7 and aggregate expenditures fall by $10 billion, then real GDP will fall by $17 billion.

Answer 1

1) True

If the dollar appreciates (the exchange rate increases), the relative price of domestic goods and services increases while the relative price of foreign goods and services falls. 1. The change in relative prices will decrease U.S. exports and increase its imports.
The net exports will fall.

2) True

3) True

Please post the other questions separately. Thanks and good luck:)