In a Small Open Economy with a Flexible Exchange Rate

question 29

Multiple Choice

In a small open economy with a flexible exchange rate, a monetary injection by the Bank of Canada causes which of the following?

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

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