If the exchange rate is allowed to have a direct effect on the consumer price index, then a drop in government spending leads to:
A)a larger fall in the level of output under a flexible exchange rate than under a fixed exchange rate regime.
B)a larger fall in the level of output under a fixed exchange rate than under a flexible exchange rate regime.
C)an increase in the level of output under a flexible exchange rate regime.
D)an increase in the level of output under a fixed exchange rate regime.

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The Answer of If the exchange rate is allowed to have a direct effect on the consumer price index, then a drop in government spending leads to:
A)a larger fall in the level of output under a flexible exchange rate than under a fixed exchange rate regime.
B)a larger fall in the level of output under a fixed exchange rate than under a flexible exchange rate regime.
C)an increase in the level of output under a flexible exchange rate regime.
D)an increase in the level of output under a fixed exchange rate regime.

If the Exchange Rate Is Allowed to Have a Direct