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

question 26

Multiple Choice

In the monetary small open-economy model with a fixed exchange rate,a devaluation of the domestic currency in the absence of any other shocks

• A) increases the current account surplus and has no effect on the domestic money supply.
• B) decreases the current account surplus and has no effect on the domestic money supply.
• C) increases the domestic money supply and has no effect on the current account surplus.
• D) decreases the domestic money supply and has no effect on the current account surplus.
• E) decreases the current account surplus and increases the price level.

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Definitions:

Inner Voice

The internal dialogue or stream of consciousness that reflects one's thoughts, beliefs, or internal monologue.

Superego

In psychoanalytic theory, the part of the personality that acts as a moral center, enforcing societal standards and ethics.

Libido

In psychoanalytic theory, it refers to the energy of the sexual drive as a component of the life instinct.

Freudian Theory

A set of psychoanalytic theories developed by Sigmund Freud that emphasize unconscious motivations and conflicts as the drivers of human behavior.