Explain and discuss whether the following statements are True or False.

?

a.If nominal exchange rate is increasing (i.e. domestic currency depreciation) while the real exchange rate is decreasing, rate of foreign inflation must be lower than the rate of domestic inflation.

b.The use of expansionary or "easy" fiscal policy by a country's government in a situation of fixed exchange rates will, other things equal, initially lead to an improvement of the country's current account balance; if short-term financial capital is relatively mobile between countries, the policy initially leads to a deterioration (or worsening) of the country's capital/financial account balance.

c.If domestic demand for imported goods is perfectly inelastic with respect to price changes, the Marshall-Lerner condition may not hold.

d.The dynamics of the effect over time of real appreciation on trade balance of a country that initially has a trade surplus and shown by a J curve is as follows: