In a Small Open Economy with a Flexible Exchange Rate

question 93

Multiple Choice

In a small open economy with a flexible exchange rate, what does a monetary injection cause?

• A) It causes the dollar to appreciate.
• B) It causes net exports to decline.
• C) It causes an additional decrease in demand for Canadian-produced goods that is not realized in a closed economy.
• D) It causes a shift of the aggregate demand curve farther to the right than in a closed economy.

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Definitions:

Debt Restrictions

Clauses or covenants in a loan agreement that limit or restrict the borrower's actions to protect the lender’s interests.

Restructuring Debt

The process of renegotiating the terms of existing loans to improve financial stability.

Composition

The makeup or structure of something, in finance it might refer to the mix of assets in a portfolio or ingredients of a financial product.

Creditors

Entities or individuals to whom money is owed by a person or company.