1. A US Dollar (USD) appreciation with respect to the Canadian Dollar (CAD) refers to the fact that (a) inflation is higher in the U.S. compared to Canada (b) fewer USD are needed to purchase one CAD (c) more USD are needed to purchase one CAD (d) inflation is lower in the U.S. compared to Canada 2. The U.S. and Canada are major trading partners. If GDP growth in the U.S. was smaller than GDP growth in Canada we should expect NX to (a) stay the same, since they are only driven by the exchange rate (b) increase since exports will grow more than imports (c) decrease since exports will grow less than imports (d) become equal to zero 3. As seen in class, U.S. net exports (NX) display a negative value. Suppose the Euro Area (European countries using the Euro as currency) and China were the only two trading partners of the U.S. Consider the following scenario: the USD appreciates (gets stronger) with respect to the Euro, but depreciates (gets weaker) with respect to the Chinese Yuan, Which of the following statements is correct? (a) NX will surely increase (b) NX will surely decline (c) NX will surely remain unchanged (d) It is hard to tell what will happen to NX since it will depend on the relative magnitude of trade with Europe compared to China4. An increase in the marginal propensity to consume (MPC) will (a) make the consumption function steeper (b) make the consumption function flatter (c) not change the slope of the consumption function, which, on the other hand, will shift up in a parallel way (d) eventually make the consumption function slope negatively 5. Let Y' be the level of output (national income) such that national income equals total spending, An increase in the price level (hence, positive inflation) will make y* I (a) increase (b) decrease (c) stay the same since price changes do not matter for total spending (d) equal to consumption