If the exchange rate is allowed to have a direct effect on the consumer price index, under a flexible exchange rate a fall in government spending causes:
A)a fall in the level of output and an increase in the consumer price index.
B)a fall in the level of output and a decrease in the consumer price index.
C)an increase in the level of output and a decrease in the consumer price index.
D)an increase in the level of output and an increase in the consumer price index.

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The Answer of If the exchange rate is allowed to have a direct effect on the consumer price index, under a flexible exchange rate a fall in government spending causes:
A)a fall in the level of output and an increase in the consumer price index.
B)a fall in the level of output and a decrease in the consumer price index.
C)an increase in the level of output and a decrease in the consumer price index.
D)an increase in the level of output and an increase in the consumer price index.

If the Exchange Rate Is Allowed to Have a Direct