Multiple Choice
In a small open economy with perfect capital mobility,if the exchange rate is flexible,which of the following would be the effect of an expansionary monetary policy?
A) It would cause the domestic interest rate to increase permanently.
B) It would cause the domestic interest rate to decrease permanently.
C) It would cause the domestic interest rate to increase temporarily.
D) It would cause the domestic interest rate to decrease temporarily.
Correct Answer:
Verified
Correct Answer:
Verified
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