I. TruefFalserncertain - Briey explain. No credit without an explanation (5 marks each]. 1. Higher real interest rates reduce current consumption. 2. For a large open economy running a current account deficit, the real interest rate is lower than if it me a closed economy. 3. 1f the usnfcan real exchange rate is e = g- : 0.91, then Canada is cheaper. 4. n increase in the price of oil for a net oil importer 1will result in real currency depreciation. 5. Iii 1:: 1'" and F {2 E, the Covered Interest Rate Parity predicts a domestic nominal currency deprecia- tion. '5. Real money demand is aEected by nominal1 not real interest rates. T. P; country with downward wage rigidity and xed exchange rate has no adjustment mechanism to a Sudden Stop. 8. Twin Deficits can he explained by tax cuts