Question

Suppose the U.S. economy is producing at the natural rate of output. A depreciation of the U.S. dollar will cause ________ in real GDP in the short run and ________ in inflation in the short run, everything else held constant. (Assume the depreciation causes no effects in the supply side of the economy.)

A) an increase; an increase

B) a decrease; a decrease

C) no change; an increase

D) no change; a decrease

Answer

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