In a Small Open Economy with Perfect Capital Mobility, If

question 33

Multiple Choice

In a small open economy with perfect capital mobility, if the Bank of Canada chooses to fix the value of the Canadian dollar, what will a contractionary monetary policy do?

• A) It will have no effect.
• B) It will shift the AD curve to the left.
• C) It will shift the AD curve to the right.
• D) It will shift both the AD curve and the short-run AS curve to the left.

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