In a Small Open Economy with a Floating Exchange Rate

question 130

Multiple Choice

In a small open economy with a floating exchange rate, if the government imposes an import quota, then in the new short-run equilibrium the IS^* curve shifts to the right, raising the exchange rate:

• A) but not raising net exports or income.
• B) and net exports but not income.
• C) and income but not net exports.
• D) net exports and income.

---

Definitions:

Narcolepsy

A chronic sleep disorder characterized by overwhelming daytime drowsiness and sudden attacks of sleep.

REM Paralysis

A phenomenon during the REM (Rapid Eye Movement) sleep phase where the body is temporarily paralyzed, preventing the sleeper from acting out dreams.

Memory

The faculty by which the mind stores and remembers information.

Sleep

A naturally recurring state of mind and body characterized by altered consciousness, relatively inhibited sensory activity, and inhibition of nearly all voluntary muscles.