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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