An increase in the Canadian money supply would cause Canadian output to ________ and the Canadian net exports to ________ in the short run using a Keynesian model.

Question

Quizplus · Accepted Answer

According to the Keynesian model, an increase in the money supply would stimulate aggregate demand, resulting in a rise in Canadian output. However, as the demand for Canadian goods increases, the value of the Canadian dollar would appreciate, making imports relatively cheaper and exports more expensive, leading to a fall in Canadian net exports. Therefore, the correct answer is C: rise in Canadian output and a fall in Canadian net exports.

An Increase in the Canadian Money Supply Would Cause Canadian