If crowding out happens then Question options: a trade deficit led to a deprecia

ID: 1226132 • Letter: I

Question

If crowding out happens then

Question options:

a trade deficit led to a depreciation of the dollar which increased interest rates and reduces investment.

as the value of the dollar increases, imports increase and crowd out purchases of domestically produced goods.

deficit spending by government increased interest rates and led to less private investment.

The equation of exchange states that

Question options:

money in circulation ´ prices = velocity ´ income

real GDP = prices ´ money in circulation ´ velocity

real GDP = money in circulation ´ velocity

nominal GDP = money in circulation ´ velocity

money in circulation ´ income = velocity ´ prices

a trade deficit led to a depreciation of the dollar which increased interest rates and reduces investment.

as the value of the dollar increases, imports increase and crowd out purchases of domestically produced goods.

deficit spending by government increased interest rates and led to less private investment.

The equation of exchange states that

Question options:

money in circulation ´ prices = velocity ´ income

real GDP = prices ´ money in circulation ´ velocity

real GDP = money in circulation ´ velocity

nominal GDP = money in circulation ´ velocity

money in circulation ´ income = velocity ´ prices

deficit spending by government increased interest rates and led to less private investment.

Ans-nominal GDP = money in circulation ´ velocity

Explanation-The formula of exchange rate is-M*V=P*T

Where,M=Money supply

V=Velocity of money

P=Average price level of good.

T=Index of expenditure.

M × V= P × Q = Total Spending or GDP.

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