Suppose Canada has a reduction in inflation of 2 percent while the nominal interest rate is increasing by 3 percentage points. How is the real interest rate changing?

Select one:

a. it is rising by 5 percentage points

b. it is rising by 1 percentage point

c. it is falling by 1 percentage point

d. it is falling by 5 percentage points

Suppose Canada produces two goods, beer and donuts. What would be the most likely result if Canada imposed a tariff on imported beer?

Select one:

a. imports of beer would fall, exports of donuts would rise, and net exports would rise

b. imports of beer would fall, imports of donuts would fall, and net exports would rise

c. imports of beer would fall, exports of donuts would fall, and net exports would be unchanged

d. exports of beer would rise, imports of donuts would rise, and net exports would be unchanged

Bob's Brewery is located in Canada and starts to export beer to the United States. What are the effects of these sales?

Select one:

a. U.S. Net Exports decrease, and U.S. Net Capital Outflows decrease

b. U.S. Net Exports increase, and U.S. Net Capital Outflows decrease

c. U.S. Net Exports increase, and U.S. Net Capital Outflows increase

d. U.S. Net Exports decrease, and U.S. Net Capital Outflows increase

If Canada raised the HST in order to promote national saving, which statement would best predict the consequences?

Select one:

a. the real exchange rate would rise, and net exports would fall

b. the real exchange rate would rise, and net exports would rise

c. the real exchange rate would fall, and net exports would fall

d. the real exchange rate would fall, and net exports would rise

What happens when there is excess Money Supply?

Select one:

a. people will try to sell interest-bearing assets such as bonds, and the interest rate will rise

b. people will try to sell interest-bearing assets such as bonds, and the interest rate will fall

c. people will try to buy interest-bearing assets such as bonds, and the interest rate will fall

d. people will try to buy interest-bearing assets such as bonds, and the interest rate will rise