In the Basic Model of a Small Open Economy,if Consumers

question 32

Multiple Choice

In the basic model of a small open economy,if consumers shift their preferences toward foreign cars,then net exports:

• A) fall and the real exchange rate falls.
• B) fall but the real exchange rate remains unchanged.
• C) remain unchanged but the real exchange rate falls.
• D) and the real exchange rate remain unchanged.

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Definitions:

Shares

Financial instruments that represent ownership in a company or financial asset, often entitling the shareholder to a portion of the profits.

Control

The power to govern the financial and operating policies of an entity so as to obtain benefits from its activities, often through ownership of a majority of voting rights.

IFRS 3

An international financial reporting standard that provides guidance on accounting for business combinations, requiring acquired assets and liabilities to be recorded at fair value.

Business Combinations

Transactions or events in which one entity gains control over one or more other entities, often involving mergers and acquisitions.