Answer to Question #74174 in Macroeconomics for Namo
A) an increase in the interest rate.
B) a reduction in the price level
C) an increase in output.
D) all of the above
E) none of the above
Can you explain your answer as well?
Increase in price of imports will fall to a certain level. Then the percentage fall in the quantity of imports will be much lower than the percentage rise in the price. The total expenditure on imports will rise sharply in the short run. This will lead to large negative balance of payments including fall in interest rates (Amann, 2011).
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