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 increase in Canadian investment of $10 billion leads to a $20 billion increase in income and no change in the country's trade account.

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 increase in Canadian investment of $10 billion leads to a $20 billion increase in income and no change in the country's trade account.

Quizplus · Accepted Answer

An autonomous increase in investment typically leads to a multiplier effect, increasing income by more than the initial investment. However, it can also affect the trade account by changing imports and exports, so the trade account is unlikely to remain unchanged.

Figure 134