Suppose we were analyzing the Turkish lira per euro foreign exchange market. If the Euro-Area's price level falls relative to Turkey and nothing else changes, then the:
a. The supply of euros in the foreign exchange market falls, and the demand for euros in the foreign exchange market rises, causing an appreciation of the euro.
b. The supply of euros in the foreign exchange market rises, and the demand for euros in the foreign exchange market falls, causing an appreciation of the euro.
c. The supply of euros in the foreign exchange market rises, and the demand for euros in the foreign exchange market rises, causing an uncertain change in the value of the euro.
d. The supply of euros in the foreign exchange market rises, and the demand for euros in the foreign exchange market falls, causing a depreciation of the euro.
e. Neither supply nor demand in the foreign exchange market change because relative international prices influence trade flows and not the exchange rate.
.A
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Suppose the economy is on the classical range of the aggregate supply curve and has a problem with inflation. According to Keynesian theory, which of the following is an appropriate discretionary fiscal policy to use in this situation?
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