In the Monetary Small Open-Economy Model with a Fixed Exchange

question 23

Multiple Choice

In the monetary small open-economy model with a fixed exchange rate,a temporary decrease in domestic total factor productivity in the absence of any other shocks

• A) decreases output and the current account surplus.
• B) increases output and the current account surplus.
• C) increases output and decreases the current account surplus.
• D) decreases output and increases the current account surplus.
• E) leaves output unchanged and decreases the current account surplus.

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Definitions:

Desirable Outcomes

Refers to the expected or hoped-for results of actions, policies, or strategies that are considered beneficial or advantageous.

Fallacy Of Composition

The erroneous belief that what is true for a part is necessarily true for the whole.

Better View

An improved or more favorable perspective or visual outlook on something or from a specific location.

Ceteris Paribus

A Latin phrase meaning "all other things being equal," used in economics to isolate the effect of one variable change in a model.