Suppose That the Canadian Budget Deficit Rises

question 129

Multiple Choice

Suppose that the Canadian budget deficit rises. At the same time the Canadian trade deficit grows larger, the real exchange rate of the dollar appreciates, and Canadian net capital outflow decreases. Which of these events is contrary to what the open-economy macroeconomic model predicts concerning the effects of an increase in the budget deficit?

• A)The Canadian trade deficit grew.
• B)The real exchange rate of the dollar appreciated.
• C)Canadian net capital outflow fell.
• D)The supply of dollars in the foreign exchange market increased.

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Definitions:

Annelids

A phylum of invertebrate worms characterized by their segmented bodies, including earthworms, leeches, and polychaetes.

Cnidarians

A phylum of aquatic invertebrates known for their distinctive body plan featuring a single, central cavity and stinging cells.

Coelom

A body cavity in certain animals, including humans, that is lined by an epithelial layer derived from mesoderm, providing space for the development of internal organs.

Bilateral Animals

Animals that possess bilateral symmetry, having a body plan in which the left and right sides mirror each other.