Suppose that Canada is a small open economy with a flexible

Suppose that Canada is a small open economy with a flexible exchange rate (as it is in reality) and… Show more Suppose that Canada is a small open economy with a flexible exchange rate (as it is in reality) and that the world interest rate is 2.50%. Because the Bank of Canada’s actions have made Canadian interest rates _____(higher/lower) than world interest rates, Canadian and foreign savers want to _______ (buy/sell) Canadian assets, thus increasing the ______(supply of/demand for) Canadian dollars in the market for foreign currency exchange. As a result, the Canadian dollar _______(appreciates/depreciates), causing net exports to _______(decrease/increase). This change in net exports results in the aggregate demand curve shifting ______(further to the left than/further to the right than/not as far right as/not as far left as) it would in a closed economy (that is, in the economy illustrated in the graph above). The _______ (decrease/increase) in output, in turn, causes money demand to _______(increase/decrease). This process continues until the interest rate in Canada is _______(what number?). At this interest rate, output is ________(above what/the same as/below what) it was before the Bank of Canada changed its target rate. Really need help with this question guys!! 3000 points is what I’m offering here. • Show less

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