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Unformatted text preview: supply in both countries are unknown. (b) Answer: False Withdrawing fiscal stimulus can have serious impact on interest rate and supply of money if the timing is wrong. For example, this may affect income in a bad way such that people spend money so much which may also causing serious problem with interest rate, once the interest rate is affected, exchange rate will change. Nominal value of $C may not change since E C$/A$ may be stable, but since the price level changes a lot, real value of $C may suffer a fluctuation...
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This note was uploaded on 02/05/2011 for the course ECM 61 taught by Professor Jackparkinson during the Summer '10 term at University of Toronto- Toronto.
- Summer '10