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In a Small Open Economy with a Flexible Exchange Rate

Question 77

Multiple Choice

In a small open economy with a flexible exchange rate, what does a monetary injection by the Bank of Canada cause?


A) the dollar to depreciate
B) net exports to fall
C) an additional decrease in demand for Canadian-produced goods that is not realized in a closed economy
D) a shift of the aggregate demand curve to the right but less than in a closed economy

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