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Assume that there is a balance of payments deficit caused by a high rate of domestic inflation. ...

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Assume that there is a balance of payments deficit caused by a high rate of domestic inflation. ...

Assume that there is a balance of payments deficit caused by a high rate of domestic inflation. (Choose correct answer in each case.)
a) What effect will a deflationary monetary policy (a reduction in money supply) have on interest rates?
Raise/Lower them.
b) What effect will this have on the financial account?
Cause an inflow/outflow of finance
c) What effect will this have on the money supply?
Increase it/Reduce it
d) What effect will this have on inflation?
Help to reduce it/increase it
e) What effect will a deflationary fiscal policy have on interest rates?
Raise/Lower them
f) What effect will this have on the capital account?
Cause an inflow/outflow of capital
g) What effect will this have on the money supply?
Increase/Reduce it
h) What effect will this have on inflation?
Help to reduce it/increase it
i) Which will be more effective under fixed exchange rates: fiscal or monetary policy?
Fiscal/Monetary

Textbook

Essential Economics for Business

Edition: 5^th

Authors: Sloman, Jones

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RNIPP

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More solutions for this book are available here

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msouthern Author

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This helped my grade so much Perfect

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I appreciate what you did here, answered it right Smiling Face with Open Mouth

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