During a recession:
a. Government spending automatically rises and taxes automatically rise.
b. Government spending automatically falls and taxes automatically rise.
c. Government spending rises automatically and taxes fall automatically.
d. Government spending and taxes do not tend to change.
e. None of the above.
Question 2
If a nation has flexible exchange rates and its current and captial accounts equal zero, then the:
a. Financial account must be positive
b. Financial account must be zero.
c. Reserves account can be positive or negative depending on the size of the budget deficit and exchange rate.
d. Financial account plus reserves account must equal zero.
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