Suppose the Federal Reserve, Which Is the Central Bank in the United

question 120

Essay

Suppose the Federal Reserve, which is the central bank in the United States, decided to lower the bank interest rate. Use the macroeconomic model studied in this chapter to analyze the possible effects of this event on Canada's net capital outflow, net exports, and exchange rate. (Hint: Consider the United States a large economy, which is able to influence the world interest rate.)

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Definitions:

Income Summary Account

A temporary account used in accounting to transfer revenues and expenses at the end of an accounting period; its balance is ultimately transferred to retained earnings.

Owner's Capital Account

A line item in a firm's balance sheet that shows the value of the proprietor's invested capital and the accumulated profits retained within the company.

Credited

An accounting entry that increases a liability or equity account, or decreases an asset or expense account.

Permanent Accounts

Accounts in the general ledger that are not closed at the end of the accounting period, including asset, liability, and equity accounts.