In a Large but Open Economy, When a Fiscal Expansion

Multiple Choice

In a large but open economy, when a fiscal expansion takes place, the interest rate goes up and some investment is crowded out; the expansion also causes a trade:

A) surplus and a fall in the real exchange rate.
B) deficit and a rise in the real exchange rate.
C) surplus and a rise in the real exchange rate.
D) deficit and a fall in the real exchange rate.