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The Kobol government starts with fiscal and trade deficits equal to zero, with no fiscal debt. Kobol's central bank maintains a fixed exchange rate. Then,
The Kobol government starts with fiscal and trade deficits equal to zero, with no fiscal debt. Kobol's central bank maintains a fixed exchange rate. Then, the government starts running a fiscal surplus (cutting expenditures and/or raising taxes). This policy will:
Group of answer choices
A) Induce a recession and a trade surplus
B) Induce an economic expansion and a trade surplus
C) Induce a recession and a trade deficit
D) Induce an economic expansion and a trade deficit
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