In a Small Open Economy with a Flexible Exchange Rate

question 57

Multiple Choice

In 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.

Identify the significance and effects of dividend yield and price-earnings ratio on stock valuation.

Comprehend the process of stock issuance and the valuation of non-cash assets received in exchange for stock.

Understand the concept of retained earnings, including restricted retained earnings and retained earnings deficit.

Grasp the accounting and financial implications of declaring and paying dividends on stockholders’ equity and retained earnings.