Figure 13.2.Australian Economy Under a Fixed Exchange Rate System
-Refer to Figure 13.2.Starting at equilibrium income $50 billion,where (S-I) ₀ intersects (X-M) ₀,suppose that improving profit expectations lead to an autonomous increase in Australian investment of $5 billion.Australian income thus ____ which leads to Australia's trade account moving to a ____.

Question

Figure 13.2.Australian Economy Under a Fixed Exchange Rate System

-Refer to Figure 13.2.Starting at equilibrium income $50 billion,where (S-I) ₀ intersects (X-M) ₀,suppose that improving profit expectations lead to an autonomous increase in Australian investment of $5 billion.Australian income thus ____ which leads to Australia's trade account moving to a ____.

Quizplus · Accepted Answer

An increase in investment leads to an increase in income, causing the trade account to move to a deficit as imports rise with higher income.

Figure 132