In a Small Open Economy with a Floating Exchange Rate

question 57

Multiple Choice

In a small open economy with a floating exchange rate, if the government imposes a tariff on foreign goods, then in the new short-run equilibrium:

• A) imports will decrease while exports remain constant, leading to a rise in net exports.
• B) imports will decrease and exports will increase, leading to a rise in net exports.
• C) imports will decrease and exports will decrease by an equal amount.
• D) both imports and exports will remain unchanged.

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Definitions:

Deed of Trust

A document used in real estate that secures a loan by transferring the legal title of a property to a trustee until the loan is paid off.

Warranty Deed

A document in real estate transactions that guarantees a property is free from liens or claims and assures the buyer of clear title.

Security Interest

A lien or legal claim on assets that have been offered as security to ensure the repayment of borrowed money.

Real Property

Land and anything permanently affixed to it, such as buildings and improvements; distinguished from personal property.