The Philips Curve - (Tut) A - Quiz A and B
5 important questions on The Philips Curve - (Tut) A - Quiz A and B
Changes in exchange rates affect real GDP and inflation through:
- The low of supply for Canadian dollars
- The international transmission mechanism
- Car transmission mechanism
- Purchasing power party
A fall in the Canadian Interest rate differential:
- Increases demand for, and decreases the supply of, Canadian dollars, causing the Canadian dollar to depreciate
- Decreases demand for and increases the supply of, Canadian dollars, causing the Canadian dollar to depreciate
Other things being equal, a rise in the average level of prices in Canada:
- Will result in a depreciation of the Canadian currency
- Will result in an appreciation of the Canadian currency
- Will cause Canadian residents to switch to domestic goods and services from relatively more expensive U.S. Imports
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A depreciating Canadian dollar:
- Decreases net exports
- Increases exports and decreases imports
- Pushes the economy into a contraction
- Is a negative aggregate demand shock
The following would be an example of the Canadian exchange rate expressed in U.S. Dollars:
- C$1 is worth US $0.90
- US$1 = C $1.11
- A cup of coffee costs C$1.80
- A cup of coffee costs US$1.80
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