Assume That There Is a Simultaneous Increase in Government Spending

question 12

Multiple Choice

Assume that there is a simultaneous increase in government spending and a monetary contraction. In a flexible exchange rate regime, we know with certainty that such a policy mix will cause which of the following?

• A) A decrease in net exports.
• B) An increase in the domestic interest rate.
• C) An increase in the exchange rate.
• D) Both A and B.
• E) Both B and C.

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Definitions:

Cognitive Demands

The mental effort required to perform a task, including thinking, problem-solving, and decision-making.

Paid

Receiving money or compensation for services rendered or work done.

Processes

Sequences of actions or methods followed in order to achieve particular outcomes or objectives.

Rewards

Benefits, either material or symbolic, given in recognition of one’s effort, achievement, or service.