Suppose Canada is experiencing a 12 percent rate of unemployment with stable prices and a trade deficit.All else equal, the use of appropriate monetary policy to reduce unemployment would:
A)cause the dollar to appreciate in value.
B)have no impact upon our trade deficit.
C)decrease our trade deficit.
D)increase our trade deficit.

Question

Quizplus · Accepted Answer

Expansionary monetary policy would lower interest rates, making Canadian goods and services cheaper relative to foreign goods and services. This would increase exports and decrease imports, reducing the trade deficit.

Suppose Canada Is Experiencing a 12 Percent Rate of Unemployment