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:

Sensory Stimulation

The process of activating one or more of the senses, such as sight, hearing, smell, taste, or touch.

Experimental Studies

Research methodologies that involve the manipulation of variables to determine cause-and-effect relationships.

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An internal, covert activity of the mind involving thinking, perception, memory, and reasoning.

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The way in which one acts or conducts oneself, especially towards others, influenced by the interplay of individual and environmental factors.