27.Suppose Turkey has a fixed exchange rate against the dollar. Taxes rise in Canada, reducing Canadian aggregate expenditure. The Bank of Canada adjusts the Canadian interest rate to keep output constant, and Turkey's central bank adjusts its interest rate to keep the exchange rate constant. What happens to Turkey's output and interest rate Output decreases, the interest rate decreases. a) b) None of the answers are correct Output increases, the interest rate decreases. c) Output decreases, the interest rate increases. d) e) Output increases, the interest rate increases.
27.Suppose Turkey has a fixed exchange rate against the dollar. Taxes rise in Canada, reducing Canadian aggregate expenditure. The Bank of Canada adjusts the Canadian interest rate to keep output constant, and Turkey's central bank adjusts its interest rate to keep the exchange rate constant. What happens to Turkey's output and interest rate Output decreases, the interest rate decreases. a) b) None of the answers are correct Output increases, the interest rate decreases. c) Output decreases, the interest rate increases. d) e) Output increases, the interest rate increases.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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