In a Small Open Economy with Perfect Capital Mobility, If

question 1

Multiple Choice

In a small open economy with perfect capital mobility, if the exchange rate is flexible, what would be the effect of an expansionary monetary policy?

• A) It would cause the domestic interest rate to increase permanently.
• B) It would cause the domestic interest rate to decrease permanently.
• C) It would cause the domestic interest rate to increase temporarily.
• D) It would cause the domestic interest rate to decrease temporarily.

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Definitions:

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A legal obligation of one party to act in the best interest of another, often in financial matters or trusteeship.

Fraud

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Fraud

Purposeful misleading to achieve unlawful benefits or to cheat someone out of their legitimate rights.

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