When a temporary beneficial supply shock hits a small open economy,it causes the current account to ________ and investment to ________.
A)fall; fall
B)rise; remain unchanged
C)fall; remain unchanged
D)rise; fall

Question

Quizplus · Accepted Answer

A temporary beneficial supply shock increases output, which can lead to an increase in exports, improving the current account. Investment remains unchanged as the shock is temporary and does not affect long-term expectations.

When a Temporary Beneficial Supply Shock Hits a Small Open