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

An autonomous decrease in imports would typically lead to an increase in net exports, potentially increasing income rather than decreasing it, and reducing the trade deficit, not increasing it.

Figure 134