Question

What is the short-run effect of expansionary fiscal policy under a flexible exchange rate regime with perfect capital mobility?

A Increase in output and income, decrease in interest rates, depreciation of domestic currency, and increase in net exports

B Increase in output and income, increase in interest rates, appreciation of domestic currency, and decrease in net exports

C Decrease in output and income, decrease in interest rates, depreciation of domestic currency, and increase in net exports

D Increase in output and income, decrease in interest rates, appreciation of domestic currency, and increase in net exports

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