exam book 2, exam 1 afternoon session question 76. Why is the answer B and not C. The answer that is given is a direct contradiction to what is written in the schweser notes on page 85 of book 4. Unanticipated monetary expansion causes inflation, real rates to decrease, dollar depreciates but the economy is stimulated and imports will exceed exports causing a deficit in the current account. The answer to problem 76 states that imports would be discouraged due to the low buying power of the $. I can see how that could be possible as well but which one is more accurate and why the discrepancy. Maybe a different reaction due to Expected vs. Unexpected… Any insight would greatly appreciated.
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