Canada Is a Small Open Economy with a Flexible Exchange

question 184

Multiple Choice

Canada is a small open economy with a flexible exchange rate.Which of the following effects will a contractionary fiscal policy have?

• A)It will cause the Canadian interest rate to fall below the world interest rate for a short period of time, which in turn will cause the dollar to depreciate and net exports to increase.
• B)It will cause the Canadian interest rate to rise above the world interest rate for a short period of time, which in turn will cause the dollar to appreciate and net exports to decrease.
• C)It will cause the Canadian interest rate to fall below the world interest rate for a short period of time, which in turn will cause the dollar to appreciate and net exports to decrease.
• D)It will cause the Canadian interest rate to rise above the world interest rate for a short period of time, which in turn will cause the dollar to depreciate and net exports to increase.

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Definitions:

Ignore Differences

The deliberate or unintentional refusal to recognize or acknowledge variations between entities or pieces of information.

Common Ingroup Identity

A recategorizing of members of two or more distinct groups into a single, overarching group.

Different Races

refers to distinct groups of humans classified based on shared physical or social qualities into categories generally viewed as distinct by society.

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Members of the species Homo sapiens, characterized by their ability to think, communicate, and create culture.