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)? intersects (X - M)?,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)? intersects (X - M)?,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 multiplied increase in income, but it can also affect the trade account by changing imports and exports, depending on the marginal propensity to import and other factors.

Figure 134