A Parallel Downward Shift in the Net Export (NX)function Can

question 10

Multiple Choice

A parallel downward shift in the net export (NX) function can be caused by

• A)an increase in the Canadian- dollar price of foreign currency.
• B)a decrease in domestic prices.
• C)a decrease in foreign national income.
• D)a decrease in foreign prices.
• E)an increase in domestic national income.

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Definitions:

Currency

A system of money in general use in a particular country, facilitating the exchange of goods and services.

Interest Rate Parity

A theory which says that the difference between the interest rates of two countries is equal to the differential between the forward exchange rate and the spot exchange rate of their currencies.

Forward Rates

The predetermined interest rates or currency exchange rates agreed upon for transactions that will be executed at a future date.

Spot Rate

The existing market cost at which a certain asset is offered for buy or sell, ensuring immediate delivery.