In a Small Open Economy with a Fixed Exchange Rate

question 47

Multiple Choice

In a small open economy with a fixed exchange rate, if the government imposes an import quota, then net exports:

• A) decrease but the money supply falls and income falls.
• B) increase, the money supply increases, and income increases.
• C) are unchanged but the money supply falls and income falls.
• D) are unchanged, the money supply is unchanged, and income is unchanged.

Understand and apply the concept of net present value in evaluating investment projects.

Calculate the income tax expense and net cash flows from capital budgeting projects.

Understand the treatment of working capital in net present value analysis.

Assess the tax implications of capital budgeting decisions.