In a Large but Open Economy, When a Fiscal Expansion

question 39

Multiple Choice

In a large but open economy, when a fiscal expansion takes place, the interest rate goes up and some investment is crowded out, and the expansion also causes a trade:

• A)surplus and a fall in the real exchange rate.
• B)deficit and a rise in the real exchange rate.
• C)surplus and a rise in the real exchange rate.
• D)deficit and a fall in the real exchange rate.

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