Suppose Interest Rates Fall Sharply in Canada but Are Unchanged

question 14

Multiple Choice

Suppose interest rates fall sharply in Canada but are unchanged in Great Britain.Ceteris paribus,under a system of flexible exchange rates,we can expect the British demand for Canadian dollars to:

• A)increase, the supply of Canadian dollars for pounds to decrease, and the dollar to appreciate vis-a-vis the pound
• B)decrease, the supply of Canadian dollars for pounds to decrease, and the dollar to either appreciate or depreciate vis-a-vis the pound
• C)decrease, the supply of Canadian dollars for pounds to increase, and the dollar to depreciate vis-a-vis the pound
• D)increase, the supply of Canadian dollars for pounds to decrease, and the dollar to depreciate vis-a-vis the pound
• E)increase, the supply of Canadian dollars for pounds to decrease, and a Canadian balance of payments surplus to develop

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Definitions:

Gynecomastia

The enlargement of the gland tissue of the male breast, which can result from a hormonal imbalance or certain medications.

Gonorrhea

A sexually transmitted infection caused by the Neisseria gonorrhoeae bacterium.

Heterosexual

Attraction to and sexual relations between individuals of the opposite sex.

Gamete

A mature haploid male or female germ cell that is able to unite with another of the opposite sex in sexual reproduction to form a zygote.