1. a. Discuss three tools government can use to influence imports. (5 marks)
b. Discuss and evaluate the two classical arguments for trade protection and restriction. (5 marks)

2. In 2003 to 2004, the Canadian dollar appreciated against the US dollar. Explain the effects of this appreciation on each of the following.

a. Canadian exporters of goods to the US
b. Canadian firms that buy machinery and equipment from US suppliers
c. cross border shoppers from Canada who shop for goods in the US
d. retired Canadians who live in Arizona and Florida during the winter months.

3. Consider Republic of Netflex's Balance of Payments in 2009:

Foreign investment into Netflex + 22
Imports of goods and services - 378
Netflex investment abroad - 35
Exports of goods and services + 411
Net transfers + 3
Statistical discrepancy + 10
Net interest payments - 34

Organize the above data into the appropriate categories for the current and capital accounts; determine the current account balance, the capital account balance, and the official settlements account balance.

4. Elucidate the concept of the multiplier, and explain the role of the marginal propensity to consume in determining the size of the multiplier.

b. Explain how the size of the multiplier will change when one brings in the role of the marginal tax rate.

c. Using the concepts in parts a and b above, calculate the slope of the AE curve and the size of the multiplier if MPC = 0.75. Then, calculate the revised slope of the AE curve and the multiplier when you know that the imports and the marginal tax rate will reduce the slope of the AE curve by another 0.30.