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.

Differentiate between shifts in demand and supply versus movements along the demand and supply curves.

Analyze the effects of complementary and substitute goods on market dynamics.

Recognize the role of consumer expectations and preferences in shaping market demand.

Discern the distinction between normal goods and inferior goods in relation to income changes.

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