Under a floating exchange rate regime with a high degree of capital mobility, international crowding out of expansionary fiscal policy occurs when:
A)the foreign money supply increases.
B)foreign interest rates increase.
C)the country's currency appreciates.
D)domestic interest rates increase.

Question

Quizplus · Accepted Answer

Under a floating exchange rate regime with high capital mobility, expansionary fiscal policy can lead to an appreciation of the country's currency. This appreciation makes domestic goods more expensive relative to foreign goods, potentially reducing exports and offsetting the expansionary fiscal policy's effects on domestic economic activity.

Under a Floating Exchange Rate Regime with a High Degree