Figure 13.4.Canadian Economy Under a Fixed Exchange Rate System

-Refer to Figure 13.4.Starting at equilibrium income $100 billion,where (S - I)0 intersects (X - M)0,an autonomous decrease in Canadian imports of $10 billion leads to a $20 billion decrease in income and a trade deficit of $5 billion.

Question

Figure 13.4.Canadian Economy Under a Fixed Exchange Rate System
 
-Refer to Figure 13.4.Starting at equilibrium income $100 billion,where (S - I)0 intersects (X - M)0,an autonomous decrease in Canadian imports of $10 billion leads to a $20 billion decrease in income and a trade deficit of $5 billion.

Quizplus · Accepted Answer

The statement describes a scenario where a decrease in imports would typically lead to an increase in net exports, potentially increasing income, not decreasing it. Additionally, a decrease in imports would not directly cause a trade deficit.

Figure 134