If a Government Started with a Deficit and Moved to a Surplus

question 1

Multiple Choice

If a government started with a deficit and moved to a surplus, which statement would best describe the effects of these changes?

• A) Domestic investment and the real exchange rate would rise.
• B) Domestic investment and the real exchange rate would fall.
• C) Domestic investment would rise, and the real exchange rate would fall.
• D) Domestic investment would fall, and the real exchange rate would rise.

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