Question

15. Which of the following is most likely to cause the depreciation of the Canadian dollar? a. an American-owned company buys Canadian oil b. a Canadian farmer relies on exports c. a Canadian businessman on an extended trip through Africa d. a German family on vacation in Quebec

16. If policy makers wanted to use both monetary and fiscal policy to stimulate demand and reduce a high rate of unemployment, which of the following would be most appropriate? a. a larger government surplus and a reduction in the bank rate b. a government surplus and the sale of securities in the open market by the Bank of Canada c. a larger government deficit and an increase in the bank rate d. a larger budget deficit and the purchase of securities in the open market by the Bank of Canada

Answer 1

15.) Option 'A' is more likely to be correct.

Since an export of Canadian oil to American company is there, Canadian dollars is expected to depriciate. This is because as currency value depriciates export increase and import becomes costly. Option B says the farmer relies on export which means there's uncertainty if export is there or not but option for indicates the American company is buying which means there's export from Canada to America which is more likely to depriciate the Canadian dollars.

Option 'C' could also be correct because if a Canadian businessman is on an extended your, that could mean he has gone to increase it's export which is likely to depriciate Canadian dollar but since nothing is mentioned of export of exchange we cannot consider this for solution.

So, Option'A' is most likely.

16.) Option 'D'is correct. Government deficit means government is spending too much and taxes are lower to infuse money in the market to generate demand. Also, if Bank purchase securities in the open market,it would mean bank is infusing money in the market and it will create demand which is required to stimulate demand and reduce high rate of unemployment. So, Option 'D' is correct.