For this question, assume that there is a simultaneous increase ...

[karen]

For this question, assume that there is a simultaneous increase in government spending and monetary contraction. In a flexible exchange rate regime, we know with certainty that such a policy mix will cause which of the following?
 
  A) an increase in the domestic interest rate
  B) an increase in the exchange rate
  C) a reduction in net exports
  D) all of the above
  E) only A and C

Question 2

Assume that employment increases by 3. Holding all other factors constant, we know with certainty that which of the following will occur?
 
  A) output will increase by 3
  B) output per capita will increase by 3
  C) output will increase by less than 3
  D) the capital labor ratio will increase
  E) none of the above

[ally]

Answer to Question 1

D

Answer to Question 2

C