According to the Mundell-Fleming Model, in an Economy with Flexible

question 56

Multiple Choice

According to the Mundell-Fleming model, in an economy with flexible exchange rates, expansionary fiscal policy causes the exchange rate to ______ and expansionary monetary policy causes the exchange rate to ______.

• A) rise; rise
• B) rise; fall
• C) fall; fall
• D) fall; rise

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Definitions:

Sales Tax

A tax imposed by governments on the sale of goods and services, typically a percentage of the retail price.

Low-Income

Referring to individuals or families that earn significantly less than the average income level, often qualifying for various forms of government assistance.

Positive Economics

Real-world economics that focuses on describing, analyzing, and explaining economic phenomena as it actually is, not as it should be.

Ceteris Paribus

A Latin phrase meaning "all other things being equal," used in economics to isolate the effect of one economic variable from the influence of others.