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Macroeconomics

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Trading Partners and Recessions

MACRO-1L1YNE

Countries $A$ and $B$ are trading partners. Following a recession in country $B$, which of the following will occur?

A

There will be a reduction in aggregate income in country A which decreases the demand for money in country A.

B

There will be an increase in the demand for money in country B for increased transactions.

C

Interest rates in country A should increase with an increase in the demand for money in country A.

D

With higher interest rates in country B, bond prices should fall in country B.

E

A decrease in the money supply in country B will reinforce the upward pressure on interest rates following the recession.