A problem that economic policy makers confront when attempting to promote both internal and external balance for the nation is that monetary or fiscal policies aimed at the domestic sector also have impacts on
A) trade flows.
B) capital flows.
C) both trade flows and capital flows.
D) None of these are correct.

Question

Quizplus · Accepted Answer

Both trade flows and capital flows can be affected by monetary or fiscal policies aimed at the domestic sector. For example, an expansionary monetary policy that stimulates domestic demand may lead to higher imports and a current account deficit, while also attracting capital inflows due to higher interest rates.

A Problem That Economic Policy Makers Confront When Attempting to Promote