Question 39

Suppose inflation is higher in Canada over the next few months than in foreign countries, and exchange rates are given in terms of how much foreign currency a dollar buys or how many foreign goods Canadian goods buy. According to purchasing-power parity, what should we expect to see?

A. Only the nominal exchange rate depreciates.

B. Both the real and nominal exchange rates appreciate.

C. Only the real exchange rate appreciates.

D. Both the real and nominal exchange rates depreciate.

Question 60

When a country experiences capital flight, which statement best explains the effects?

A. The interest rate falls because the supply for loanable funds shifts right.

B. The interest rate rises because the demand for loanable funds shifts right.

C. The interest rate falls because the demand for loanable funds shifts left.

D. The interest rate rises because the supply for loanable funds shifts left.

Question 56

Suppose Canada imposes an import quota on wine. Which statement best describes the most likely effects of this quota?

A. Canadian exports increase, and the dollar depreciates.

B. Canadian exports decrease, and the dollar appreciates.

C. Canadian exports increase, and the dollar appreciates.

D. Canadian exports decrease, and the dollar depreciates.

Question 54

Which of the following would NOT be a consequence of an increase in Canada's government expenditure?

A. Canadian net capital outflow falls.

B. The real exchange rate of the Canadian dollar depreciates.

C. Canadian interest rates (that would prevail in absence of trade) would rise.

D. The Canadian supply of loanable funds shifts left.