How would an innovation like credit card affect an economy that operates under a flexible exchange r

An economy operates under a flexible exchange rate. The government budget and trade account are currently balanced. Credit cards, a fairly recent innovation in the banking sector, allow consumers to mak epurchases without holding cash. How would this innovation will affect equilibrium GDP, consumption spending, the budget balance and the exchange rate. How would the impact differ under a fixed exchange rate.

How would an innovation like credit card affect an economy that operates under a flexible exchange rate?

It depends on how the credit cards are used.

When credit cards were first introduced in the U.S. they had little effect - people used them for convenience, rather than a sway to live in debt.

Then the credit card companies ran ad campaigns that convinced people to spend money they didn%26#039;t have and succeeded in changing consumer behavior. That had a major effect - equivalent to a major influx of money.