At the peak of an economic cycle, aggregate demand ____, unemployment _______, inflation _______, and the current account balance tends toward _______?
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Answer: D. is static; low; rises; deficit
Explanation
At an economic peak, aggregate demand is static or high, unemployment is low, inflation rises, and trade balances often shift toward a deficit due to high import demand.
Related questions
Q1. Simultaneous monetary expansion and government spending increases imply that investment will ?
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Answer: B. not be reduced as much as it would have been
Monetary expansion lowers interest rates, stimulating private investment spending. Government spending increases normally crowd out investment via higher interest rates. Combining both policies offsets the crowding out e...
Q2. If ABC Typing Service generates a return exceeding the opportunity cost of capital, then ?
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Answer: D. the firm is earning are economic profit
Economic profit requires total revenue to exceed all explicit and implicit opportunity costs. The opportunity cost of capital represents the minimum return required by investors. Earning returns above this threshold guar...
Q3. A graphical line where lower vertical coordinates correspond to higher horizontal coordinates exemplifies ?
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Answer: D. a negative linear relationship
Downward sloping lines show that lower vertical values pair with higher horizontal values. Negative linear relationships maintain constant inverse proportionality between variables. Graphical coordinates move in opposite...
Q4. If the Bank of England curtails the money supply to combat inflation, floating exchange rates assist this effort because ?
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Answer: C. as the money supply is decreased the interest rate will increase and the price of UK exports and UK imports will fall.
Decreasing the money supply raises interest rates, which causes capital inflow, currency appreciation, lower import prices, and reduced export competitiveness.
Q5. Economic expansion automatically strengthens government budgetary balances by ?
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Answer: B. Improve
Economic expansion increases tax revenues and reduces welfare spending, which automatically improves government budgetary balances.
Q6. If the EU imposes apparel import quotas on China, depressing UK clothing imports, which statement holds for the foreign exchange market ?
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Answer: D. The demand for Pounds increases and the pound appreciates
Import quotas on foreign goods reduce the supply of the domestic currency in foreign exchange markets, raising demand and causing the currency to appreciate.