3. Suppose that Canada decides to peg its dollar (SC, or the loonie) to the U.S. dollar at an exchange rate of SC1= SUSI. a. What is likely to happen to U.S. GDP following the leftward shift of its IS curve? b. Will there be pressure for the Canadian dollar to change in value against the U.S. dollar as a result of the leftward shift of the U.S. IS curve?

3. Suppose that Canada decides to peg its dollar (SC, or the loonie) to the U.S. dollar at an exchange rate of SC1= SUSI. a. What is likely to happen to U.S. GDP following the leftward shift of its IS curve? b. Will there be pressure for the Canadian dollar to change in value against the U.S. dollar as a result of the leftward shift of the U.S. IS curve?

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter14: A Macroeconomic Theory Of The Open Economy

Section: Chapter Questions

Problem 5PA

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