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:

Sunk Cost Fallacy

The misconception that future decisions should be influenced by previously incurred costs that cannot be recovered.

Marginal Cost-Benefit Calculations

The process of evaluating whether the additional benefits of an action or investment outweigh its additional costs.

Average Fixed Costs

The total fixed costs of production divided by the quantity of output produced, representing how fixed costs spread out over units of output as production increases.

Total Costs

Total costs are the sum of all expenses incurred in the production of goods or services, including both fixed and variable costs.