With flexible exchange rates, perfect asset substitutability, and perfect capital mobility, expansionary monetary policy will cause
A) income to rise, interest rates to fall, and the domestic currency to depreciate.
B) income to fall, interest rates to rise, and the domestic currency to appreciate.
C) income to rise, interest rates to remain unchanged, and the domestic currency to appreciate.
D) income to rise, interest rates to remain unchanged, and the domestic currency to depreciate.
Question 2
Intra-industry trade is most common in the trade patterns of
A) the industrial countries of Western Europe.
B) the developing countries of Asia and Africa.
C) raw material producers.
D) China with the rest of the world.
E) labor-intensive products.
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Flexible exchange rates are supposed to prevent long-term trade deficits.