In a Short-Run Model of a Large Open Economy with a Floating

Multiple Choice

In a short-run model of a large open economy with a floating exchange rate, a fiscal expansion causes an increase in:

A) the exchange rate and a fall in net exports but has no effect on income.
B) the money supply and an increase in income but has no effect on the exchange rate.
C) income, the interest rate, and net exports, but a decrease in investment and in the exchange rate.
D) income, the interest rate, and the exchange rate, but a decrease in investment and net exports.