Suppose That Counter-Cyclical Fiscal Policy Pushed Up Interest Rates and the Economy

question 45

Multiple Choice

Suppose that counter-cyclical fiscal policy pushed up interest rates and the economy had a flexible exchange rate.Which of the following would be true?

• A)The exchange rate would fall,and exports would rise.
• B)The exchange rate would fall,and exports would fall.
• C)The exchange rate would rise,and exports would rise.
• D)The exchange rate would rise,and exports would fall.

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Definitions:

Inelastic Demand Functions

Demand functions that represent situations where the quantity demanded of a good or service changes very little in response to changes in its price.

Monopolist

An individual or entity that is the sole provider of a particular product or service in a market, enabling control over prices.

Profits

The financial gain obtained when the revenues generated from business activities exceed the expenses, costs, and taxes involved in sustaining the activity.

Markets

Places or systems where buyers and sellers engage in exchange of goods, services, and information.