Assume that the government wishes to pursue a deflationary policy.
a. What will happen to the exchange rate if it uses deflationary monetary policy?
b. What effect will this exchange rate movement have on aggregate demand?
c. What will happen to the exchange rate if it uses deflationary fiscal policy?
d. What effect will this exchange rate movement have on aggregate demand?

Question

Quizplus · Accepted Answer

The Answer of Assume that the government wishes to pursue a deflationary policy.
a. What will happen to the exchange rate if it uses deflationary monetary policy?
b. What effect will this exchange rate movement have on aggregate demand?
c. What will happen to the exchange rate if it uses deflationary fiscal policy?
d. What effect will this exchange rate movement have on aggregate demand?

Assume That the Government Wishes to Pursue a Deflationary Policy