Author Question: Suppose there are two countries that are identical in every way with the following exception. ... (Read 64 times)

Alygatorr01285 · **on:** Jun 30, 2018

Suppose there are two countries that are identical in every way with the following exception. Country A is pursuing a fixed exchange rate regime and country B is pursuing a flexible exchange rate regime. Suppose taxes are increased in both countries rises by the same amount. Given this information, we know that

A) the change in output in A will be greater than in B.
B) the change in output in B will be greater than in A.
C) the change in output will be the same in both countries.
D) the relative output effects are ambiguous.

Question 2

Suppose the stock of capital increases by 2 and employment increases by 2. Given this information, we know that

A) output per capita will increase by 6.
B) output will increase by 4.
C) output per capita will increase by less than 4 and more than 2.
D) none of the above