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In response to the COVID-19 pandemic, the U5. fiscal stimulus was among the largest ever implemented by any country in the world. This expansionary fiscal
In response to the COVID-19 pandemic, the U5. fiscal stimulus was among the largest ever implemented by any country in the world. This expansionary fiscal policy is still working its way through the economy while de Federal Reserve is shifting its stance to a 'less accommodative' monetary policy. Applying the model ofa large open economy with capital mobility and flexible exchange rates, one can predict the combination of an expansionary fiscal policy with a contractionary monetary policy to _________ real interest rates; ___________ net capital outflow; _______________real exchange (defined as foreign currency per dollar); _____________ net exports, in the short run. a. increase; decrease; increase; decrease b. decrease; increase; decrease; decrease c. increase; decrease; increase; increase d. decrease; increase; decrease; increase
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