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If an Increase in National Income Has a Negative Effect

Question 21

Multiple Choice

If an increase in national income has a negative effect on the trade balance, we should expect that


A) domestic interest rates will rise, attracting foreign funds
B) domestic interest rates will fall, causing an outflow of funds
C) domestic assets will become more expensive
D) the central bank will expand money supply
E) the central bank will buy foreign currency thus increasing its reserves

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