Multiple Choice
If the Bank of Canada allows the exchange rate to vary freely, which effect will an expansionary fiscal policy have?
A) It will cause a large and permanent rightward shift of the AD curve.
B) It will cause a large and permanent leftward shift of the AD curve.
C) It will have no permanent effect on the position of the AD curve, but it will cause interest rates to permanently increase.
D) It will have no permanent effect on either the position of the AD curve or the interest rate.
Correct Answer:
Verified
Correct Answer:
Verified
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