An economy is operating with unemployed resources and a flexible exchange rate. It reduces interest rates to a level below that in other countries. What is likely to happen to the level of domestic demand for goods and services and to the demand for the country’s exports?
- Adomestic demand: increase; export demand: increase
- Bdomestic demand: increase; export demand: decrease
- Cdomestic demand: decrease; export demand: decrease
- Ddomestic demand: decrease; export demand: increase