Without Considering the Effect That a Change in the Value

Multiple Choice

Without considering the effect that a change in the value of a currency might have on trade, the net effect of a contractionary fiscal policy is:

A) ambiguous with respect to the exchange rate, but positive with respect to the trade balance.
B) ambiguous with respect to the trade balance, but positive with respect to the exchange rate.
C) negative with respect to the exchange rate and positive with respect to the trade balance.
D) positive with respect to the exchange rate and negative with respect to the trade balance.