Under a Floating Exchange Rate Regime with a High Degree

question 45

Multiple Choice

Under a floating exchange rate regime with a high degree of capital mobility, in the short run an expansionary fiscal policy will most likely create pressure on:

• A)the domestic currency to appreciate.
• B)the domestic currency to depreciate.
• C)monetary authorities to revalue the domestic currency.
• D)monetary authorities to devalue the domestic currency.

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