In a long-run model of a small open economy,deficit reduction
I: leads to higher living standards.
II: leads to a fall in the country's real exchange rate once the new full-equilibrium level of foreign debt is reached.
A) I is true; II is not.
B) II is true; I is not.
C) Both I and II are true.
D) Neither I nor II is true.

Question

In a long-run model of a small open economy,deficit reduction 
I: leads to higher living standards.
II: leads to a fall in the country's real exchange rate once the new full-equilibrium level of foreign debt is reached.
A) I is true; II is not.
B) II is true; I is not.
C) Both I and II are true.
D) Neither I nor II is true.

Quizplus · Accepted Answer

The Answer of In a long-run model of a small open economy,deficit reduction 
I: leads to higher living standards.
II: leads to a fall in the country's real exchange rate once the new full-equilibrium level of foreign debt is reached.
A) I is true; II is not.
B) II is true; I is not.
C) Both I and II are true.
D) Neither I nor II is true.

In a Long-Run Model of a Small Open Economy,deficit Reduction