1.

In an open economy, if the Marshall-Lerner condition does NOT hold, an appreciation of the real exchange rate will tend to cause: O A. A decrease in net exports and a decrease in output O B. An increase in net exports and an increase in output O C. A decrease in net exports and an increase in output O D. An increase in net exports and a decrease in outputIn the goods market for a small open economy, assume that policy makers' goals are: (1) to achieve balanced trade (i.e., (X = 0); and (2) to achieve a target level' of output, say Y' . If at the initial level of equilibrium, output is equal to Y (1.o., Y = Y ) and a trade surplus exists at this initial level of output, which of the following policy actions would most likely enable the policy makers to achieve their two goals simultaneously? O A. an appreciation of the real exchange rate O B. a simultaneous decrease in government spending and reduction in the real exchange rate O C. an increase in government spending O D. an increase in taxes O E. convince the country's trading partners to pursue policies that will cause a decrease in foreign income (Y*) O F. none of the above