In a Small Open Economy with Flexible Exchange Rates,a Contractionary

question 68

Multiple Choice

In a small open economy with flexible exchange rates,a contractionary monetary policy would

• A)cause an exchange rate depreciation in the short run.
• B)increase domestic output in the short run.
• C)decrease domestic output in the short run.
• D)decrease domestic output in the long run.

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Definitions:

Tradeoff

The balance achieved between two desirable but incompatible features; a compromise.

Prosocial Behavior

Actions intended to benefit others, including helping, sharing, donating, co-operating, and volunteering.

Less Prone

Having a reduced likelihood or susceptibility to something.

Prisoner's Dilemma Game

A concept in game theory where two individuals acting in their own self-interest do not produce the optimal outcome for either party.