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AP® Macroeconomics

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Expansionary Fiscal Policy Effects on International Trade

APMACR-EJYSOG

Assume the United States government has a balanced budget, but then the United States economy enters a recession. To help combat this recession, the United States government then implements expansionary fiscal policy. When the United States government enacts an expansionary fiscal policy, which of the following will occur to real interest rates in the United States, the international value of the dollar, and United States exports?

A

Interest rates increase; dollar value increase; exports increase.

B

Interest rates increase; dollar value increase; exports decrease.

C

Interest rates decrease; dollar value decrease; exports decrease.

D

Interest rates decrease; dollar value decrease; exports increase.

E

Interest rates decrease; dollar value increase; exports increase.