Question Details

Because Canadian inflation will continue to accelerate 



1. "Economists and important figures in the U.S. government have been debating whether it is government spending deficits, restrictive monetary policy, capital inflows, or anticipated inflation that is the real culprit for interest-rate increases in the U.S." Which of these could definitely not have caused high interest rates? 
a) capital inflows b) anticipated inflation 
c) restrictive monetary policy d) government spending deficits 108 
2. "The central bank isn't ready to lay down its main weapon - high interest rates - in the fight against inflation despite signs that prices have stabilized and that exporters are being hurt by this policy." Exporters are hurt because 
a) foreigners buy our bonds instead of our exports 
b) high interest rates attract capital inflows which bids up the exchange rate 
c) a high interest rate policy requires open market bond sales which reduces financing for exports 
d) high interest rates directly decrease all forms of aggregate demand for goods and services, including export demand 
3. "Because Canadian inflation will continue to accelerate while inflation in the U.S. starts to decline, the Canadian dollar will probably ______ this year. This will force the Bank of Canada to ____ interest rates." The blanks are best filled with 
a) rise; increase b) rise; decrease c) fall; increase d) fall; decrease 
4. Suppose a U.S. Toyota dealer imports 100 cars worth $10,000 each and the Japanese manufacturer buys a U.S. bond with the $1 million proceeds. Then the U.S. current account moves 
a) toward deficit and the balance of payments is unaffected 
b) toward surplus and balance of payments moves toward surplus 
c) toward deficit and balance of payments moves toward deficit 
d) toward deficit and the balance of payments moves toward surplus 
5. If the exchange rate is 6 francs per dollar and 1.5 marks per dollar, what should be the exchange rate between francs and marks? 
a) 4 marks per franc b) 9 marks per franc c) 4 francs per mark d) 9 francs per mark



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