Under a fixed exchange rate and perfect capital mobility the effect of an internal shock from a change in investment:
A) is moderated by a change in the exchange rate.
B) has no effect on domestic AD because net exports move in an offsetting way.
C) causes a change in the domestic inflation rate and the real exchange rate.
D) changes domestic interest rates.

Question

Quizplus · Accepted Answer

The Answer of Under a fixed exchange rate and perfect capital mobility the effect of an internal shock from a change in investment:
A) is moderated by a change in the exchange rate.
B) has no effect on domestic AD because net exports move in an offsetting way.
C) causes a change in the domestic inflation rate and the real exchange rate.
D) changes domestic interest rates.

Under a Fixed Exchange Rate and Perfect Capital Mobility the Effect