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How effective would expansionary fiscal policy be in country

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Reference no: EM133717397

Problem

Suppose country A engages in international trade with country B. Suppose further there is a fall in the free-market exchange rate of the domestic currency of country A. What is to happen to country A' s volume of import and why? What is likely to happen to the competitiveness of country A' s import-competing industries and why? What do you predict will happen to the general price level of country A, and why? How effective would expansionary fiscal policy be in a country with flexible (floating) exchange rates, and why?

Reference no: EM133717397

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