Suppose There Are Two Countries That Are Identical in Every

question 23

Multiple Choice

Suppose there are two countries that are identical in every way with the following exception.Country A is pursuing a fixed exchange rate regime and country B is pursuing a flexible exchange rate regime.Suppose taxes are increased in both countries rises by the same amount.Given this information,we know that

• A)the change in output in A will be greater than in B.
• B)the change in output in B will be greater than in A.
• C)the change in output will be the same in both countries.
• D)the relative output effects are ambiguous.

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