Under a fixed exchange rate system, a contractionary fiscal policy leads to a worsening in a nation’s balance-of-payments position if the resulting:

Ram Sharma • 193.84K Points
Coach Economic

Q. Under a fixed exchange rate system, a contractionary fiscal policy leads to a worsening in a nation’s balance-of-payments position if the resulting:

(A) Trade-account deficit more than offsets the capital-account surplus
(B) Trade-account deficit more than offsets the capital-account deficit
(C) Capital-account deficit more than offsets the trade-account surplus
(D) Capital-account deficit more than offsets the trade-account deficit

Correct Answer - Option(C)

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