Which of the following does NOT occur if Home starts a policy of permanent fiscal expansion:

Question

Quizplus · Accepted Answer

A policy of permanent fiscal expansion typically leads to an increase in domestic demand, which can cause an appreciation of the home currency (A), potentially affect foreign interest rates by altering capital flows (B), and increase home output due to higher spending (C). It might also affect foreign output depending on the economic linkages and the scale of the fiscal expansion (D). However, a fiscal expansion usually leads to a deterioration of the current account balance (E), not an increase, because it often results in higher imports due to increased domestic demand.

Which of the Following Does NOT Occur If Home Starts