Assume Perfect Capital Mobility and Floating Exchange Rates

question 38

Multiple Choice

Assume perfect capital mobility and floating exchange rates.If the government runs a budget deficit,the domestic currency will _______ and cause the IS curve to ________.

• A) Appreciate, shift to the right
• B) Appreciate, shift to the left
• C) Depreciate, shift to the right
• D) Depreciate, shift to the left

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Definitions:

Transportation Cost

The expenses involved in moving goods or individuals from one location to another.

Income Mobility Studies

Research focused on analyzing the movement of individuals or groups within the income distribution over time, assessing the ability to change economic status.

Privately Sponsored

Funded or supported primarily by private individuals, companies, or organizations rather than by the government or public entities.

Government Sponsored

Refers to initiatives, programs, or enterprises financially supported or backed by government entities.