In response to the COVID-19 pandemic, the U.S. fiscal stimulus
was among the largest ever implemented by any country in the world.
This expansionary fiscal policy is still working its way through
the economy while de Federal Reserve is shifting its stance to a
‘less accommodative’ monetary policy. Applying the model of a large
open economy with capital mobility and flexible exchange rates, one
can predict the combination of an expansionary fiscal policy with a
contractionary monetary policy to _________ real interest rates;
___________ net capital outflow; _______________real exchange
(defined as foreign currency per dollar); _____________ net
exports, in the short run.
increase; decrease; increase; decrease
decrease; increase; decrease; decrease
increase; decrease; increase; increase
decrease; increase; decrease; increase
In response to the COVID-19 pandemic, the U.S. fiscal stimulus was among the largest ever implemented by any country in
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