Consider an economy that begins with both internal and external balance. What would happen if the value of its currency were to increase while holding constant government saving? It would develop an excessively large current account deficit with excessive unemployment. It would develop excessive unemployment with no effect on the current account balance. It would develop an excessively large current account surplus with no effect on inflation or unemployment. OIt would develop an excessively large current account surplus combined with inflationary pressure.

Consider an economy that begins with both internal and external balance. What would happen if the value of its currency were to increase while holding constant government saving? It would develop an excessively large current account deficit with excessive unemployment. It would develop excessive unemployment with no effect on the current account balance. It would develop an excessively large current account surplus with no effect on inflation or unemployment. OIt would develop an excessively large current account surplus combined with inflationary pressure.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter23: The International Trade And Capital Flows

Section: Chapter Questions

Problem 46P: Imagine that the economy of Germany finds itself in the following situation: the government budget...

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