The Adjustments Required to Successfully Expand a Model of a Closed

question 42

Multiple Choice

The adjustments required to successfully expand a model of a closed domestic economy into one that accommodates international trade include

• A) the explicit addition of net exports in the accounting identity defining aggregate demand.
• B) the explicit recognition that net exports depend on both GDP and the exchange rate.
• C) the explicit recognition that the exchange rate depends on the domestic real rate of interest.
• D) all of the above.
• E) none of the above.

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