Use the following to answer questions :
Exhibit: Policies Influence Real Exchange Rate A)

B)

C)

D)

-(Exhibit: Policies Influence Real Exchange Rate) Which of the panels illustrates the impact on the real exchange rate of contractionary fiscal policies abroad?
A) (B) (
C) (
D) (

Question

Use the following to answer questions :
Exhibit: Policies Influence Real Exchange Rate A)

B)

C)

D)

-(Exhibit: Policies Influence Real Exchange Rate) Which of the panels illustrates the impact on the real exchange rate of contractionary fiscal policies abroad?
A) (B) (
C) (
D) (

Quizplus · Accepted Answer

Panel (B) shows a decrease in the real exchange rate, which would be the expected impact of contractionary fiscal policies abroad. Panels (A) and (C) show an increase in the real exchange rate, which would not be expected from contractionary fiscal policies. Panel (D) shows a slight decrease in the real exchange rate, but it is not as clear as the decrease shown in Panel (B).

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