Following an Increase in the Canadian Budget Deficit, It Has

question 159

Multiple Choice

Following an increase in the Canadian budget deficit, it has been observed that the trade deficit has increased, the Canadian real exchange rate has appreciated, the net capital outflow has decreased, and the interest rate has decreased. Which event is contrary to what the open-economy macroeconomic model predicts concerning the effects of an increase in the budget deficit?

• A) The trade deficit has increased.
• B) The real exchange rate has appreciated.
• C) The net capital outflow has decreased.
• D) The interest rate has decreased.

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Definitions:

Experiments

Research methods employed to explore, verify a hypothesis, or prove an established truth.

Model

A representation, either physical, mathematical, or conceptual, used to describe, explain, or predict phenomena in the real world.

Exposed

Being subject to something or made vulnerable to its effects.

Groupthink

A phenomenon where the desire for harmony or conformity in a group leads to irrational or dysfunctional decision-making outcomes.