Which of the Following Will Occur in a Small Country

question 78

Multiple Choice

Which of the following will occur in a small country with a high marginal propensity to import?

• A)changes in government spending will cause large changes in output.
• B)changes in government spending will cause large changes in the trade balance.
• C)a depreciation will cause only small changes in the trade balance.
• D)there is no combination of policies that can eliminate the trade deficit.
• E)all of the above

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Definitions:

Payment

The act of transferring money or other valuable items in exchange for goods, services, or to fulfill a contractual obligation.

Compounded Semi-annually

Refers to the process where the interest earned on an investment is calculated and added to the principal amount every six months.

GIC

A Guaranteed Investment Certificate, particular to the Canadian market, ensures investors a promised rate of return within a set duration.

Semi-annual Interest

Interest that is calculated and paid twice a year on an investment or loan.