Question 1

What is net capital outflow equal to?

Accepted Answer

A)   national saving minus the net exports
B)   domestic investment plus national saving
C)   national saving minus domestic investment
D)   domestic investment minus national savingE) All of the above
F) A) and B)

Question 2

In the open-economy macroeconomic model,what is net capital outflow equal to?

Accepted Answer

A)   the quantity of dollars supplied in the foreign exchange market
B)   the quantity of dollars demanded in the foreign exchange market
C)   the quantity of funds supplied in the loanable funds market
D)   the quantity of funds demanded in the loanable funds marketE) B) and D)
F) A) and B)

Question 3

What is the term for a limit on the quantity of an imported good?

Accepted Answer

A)   a tariff
B)   an excise tax
C)   an import quota
D)   net importsE) B) and C)
F) B) and D)

Question 4

Which of the following would tend to shift the supply of dollars in the foreign-currency exchange market model to the right?

Accepted Answer

A)   The exchange rate rises.
B)   The exchange rate falls.
C)   The expected rate of return on Canadian assets rises.
D)   The expected rate of return on Canadian assets falls.E) B) and C)
F) C) and D)

Question 5

Explain how the relation between the real exchange rate and net exports explains the downward slope of the demand curve for foreign-currency exchange.

Accepted Answer

When the Canadian real exchange rate app...

Question 6

Suppose that Canada imposed an import quota on beef.Which statement identifies the most likely results?

Accepted Answer

A)   Sales of Canadian beef would rise; exports of other industries would increase.
B)   Sales of Canadian beef would rise; exports of other industries would decline.
C)   Sales of Canadian beef would not change; exports of other industries would increase.
D)   Sales of Canadian beef would not change; exports of other industries would decline.E) A) and B)
F) C) and D)

Question 7

Which statement is consistent with an appreciation of the dollar?

Accepted Answer

A)   Canadian goods become less expensive relative to foreign goods,which makes exports rise and imports fall.
B)   Canadian goods become less expensive relative to foreign goods,which makes exports fall and imports rise.
C)   Canadian goods become more expensive relative to foreign goods,which makes exports rise and imports fall.
D)   Canadian goods become more expensive relative to foreign goods,which makes exports fall and imports rise.E) B) and D)
F) B) and C)

Question 8

Figure 13-2 
-Refer to the Figure13-2.If the interest rate was initially at r0 and an import quota was imposed,what would happen to the real interest rate?

Accepted Answer

A)   It would not change because the world interest rate is not affected.
B)   It would decrease because supply would shift right.
C)   It would not change because both supply and demand would shift right.
D)   It would decrease because demand would shift left.E) B) and C)
F) None of the above

Question 9

Our macroeconomic model assumes that GDP is constant.However,the model could be used to analyze the effects of a one-time increase in GDP.What does the model predict about the real interest rate,net capital outflow,net exports,and the real exchange rate when GDP increases?

Accepted Answer

The next figure shows that the primary e...

Question 10

If a government started with a deficit and moved to a surplus,which statement would best describe the effects of these changes?

Accepted Answer

A)   Domestic investment and the real exchange rate would rise.
B)   Domestic investment and the real exchange rate would fall.
C)   Domestic investment would rise,and the real exchange rate would fall.
D)   Domestic investment would fall,and the real exchange rate would rise.E) B) and D)
F) C) and D)

Question 11

What effect does a fall in the real interest rate have on the quantity of loanable funds?

Accepted Answer

A)   It increases the quantity demanded and decreases the quantity supplied.
B)   It decreases both the quantity demanded and supplied.
C)   It increases both the quantity demanded and supplied.
D)   It decreases the quantity demanded and increases the quantity supplied.E) A) and B)
F) A) and C)

Question 12

In 2012 and again in 2015,citizens of Greece were reported to be withdrawing their savings from Greek banks because they feared that Greece would leave the European Union.What is consistent with what the open-economy macroeconomic model predicts?

Accepted Answer

A)   This event should have raised Grecian interest rates and caused the Grecian currency to appreciate.
B)   This event should have raised Grecian interest rates and caused the Grecian currency to depreciate.
C)   This event should have lowered Grecian interest rates and caused the Grecian currency to appreciate.
D)   This event should have lowered Grecian interest rates and caused the Grecian currency to depreciate.E) B) and D)
F) A) and D)

Question 13

Following an increase in the Canadian budget deficit,it has been observed that the trade deficit has increased,the Canadian real exchange rate has appreciated,the net capital outflow has decreased,and the interest rate has decreased.Which event is contrary to what the open-economy macroeconomic model predicts concerning the effects of an increase in the budget deficit?

Accepted Answer

A)   The trade deficit has increased.
B)   The real exchange rate has appreciated.
C)   The net capital outflow has decreased.
D)   The interest rate has decreased.E) A) and B)
F) A) and C)

Question 14

Where does the supply of dollars in the foreign-currency exchange market come from?

Accepted Answer

A)   from Canadian national saving
B)   from Canadian net capital outflow
C)   from domestic investment
D)   from foreign demand for Canadian goodsE) B) and D)
F) All of the above

Question 15

Suppose that in the 1990s,Canadian net capital outflow fell.Which of the following could explain this?

Accepted Answer

A)   an increase in the demand for Canadian currency in the foreign-currency exchange
B)   a decrease in the demand for Canadian currency in the foreign-currency exchange
C)   an increase in the demand for loanable funds
D)   a decrease in the demand for loanable fundsE) A) and B)
F) B) and C)

Question 16

If a government increases its budget deficit,which statement would best predict the effects?

Accepted Answer

A)   The real exchange rate appreciates,and the trade balance moves toward surplus.
B)   The real exchange rate appreciates,and the trade balance moves toward deficit.
C)   The real exchange rate depreciates,and the trade balance moves toward surplus.
D)   The real exchange rate depreciates,and the trade balance moves toward deficit.E) B) and C)
F) None of the above

Question 17

Although trade policies do not affect a country's overall trade balance,they do affect specific firms and industries.

Accepted Answer

A) True 
 B)False

Question 18

In the open-economy macroeconomic model,we focus on the determination of GDP and the price level.

Accepted Answer

A) True 
 B)False

Question 19

What happens in Canada when the Canadian government imposes an import quota on Gouda cheese?

Accepted Answer

A)   the real interest rate increases
B)   the real interest rate decreases
C)   the real exchange rate increases
D)   the real exchange rate decreasesE) B) and C)
F) A) and D)

Question 20

What is the price that balances supply and demand in the market for foreign-currency exchange in the open-economy macroeconomic model?

Accepted Answer

A)   the nominal exchange rate
B)   the nominal interest rate
C)   the real exchange rate
D)   the real interest rateE) A) and B)
F) C) and D)

Exam 13: A Macroeconomic Theory of the Small Open Economy

Correct Answer
verified

What is net capital outflow equal to?

Correct Answer
verified

What effect does a fall in the real interest rate have on the quantity of loanable funds?

Correct Answer
verified

What is the term for a limit on the quantity of an imported good?

Correct Answer
verified

In the open-economy macroeconomic model,we focus on the determination of GDP and the price level.

Correct Answer
verified

What is the price that balances supply and demand in the market for foreign-currency exchange in the open-economy macroeconomic model?

Correct Answer
verified

Although trade policies do not affect a country's overall trade balance,they do affect specific firms and industries.

Correct Answer
verified

In 2012 and again in 2015,citizens of Greece were reported to be withdrawing their savings from Greek banks because they feared that Greece would leave the European Union.What is consistent with what the open-economy macroeconomic model predicts?

Correct Answer
verified

If a government increases its budget deficit,which statement would best predict the effects?

Correct Answer
verified

Suppose that in the 1990s,Canadian net capital outflow fell.Which of the following could explain this?

Correct Answer
verified

Where does the supply of dollars in the foreign-currency exchange market come from?

Correct Answer
verified

Explain how the relation between the real exchange rate and net exports explains the downward slope of the demand curve for foreign-currency exchange.

Correct Answer
verified
When the Canadian real exchange rate app...
View Answer

If a government started with a deficit and moved to a surplus,which statement would best describe the effects of these changes?

Correct Answer
verified

Which of the following would tend to shift the supply of dollars in the foreign-currency exchange market model to the right?

Correct Answer
verified

In the open-economy macroeconomic model,what is net capital outflow equal to?

Correct Answer
verified

Which statement is consistent with an appreciation of the dollar?

Correct Answer
verified

Figure 13-2 -Refer to the Figure13-2.If the interest rate was initially at r0 and an import quota was imposed,what would happen to the real interest rate?

Correct Answer
verified

Suppose that Canada imposed an import quota on beef.Which statement identifies the most likely results?

Correct Answer
verified

What happens in Canada when the Canadian government imposes an import quota on Gouda cheese?

Correct Answer
verified

Our macroeconomic model assumes that GDP is constant.However,the model could be used to analyze the effects of a one-time increase in GDP.What does the model predict about the real interest rate,net capital outflow,net exports,and the real exchange rate when GDP increases?

Correct Answer
verified
The next figure shows that the primary e...
View Answer

Exam 13: A Macroeconomic Theory of the Small Open Economy

Correct AnswerverifiedShow Answer

What is net capital outflow equal to?

Correct AnswerverifiedShow Answer

What effect does a fall in the real interest rate have on the quantity of loanable funds?

Correct AnswerverifiedShow Answer

What is the term for a limit on the quantity of an imported good?

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model,we focus on the determination of GDP and the price level.

Correct AnswerverifiedShow Answer

What is the price that balances supply and demand in the market for foreign-currency exchange in the open-economy macroeconomic model?

Correct AnswerverifiedShow Answer

Although trade policies do not affect a country's overall trade balance,they do affect specific firms and industries.

Correct AnswerverifiedShow Answer

In 2012 and again in 2015,citizens of Greece were reported to be withdrawing their savings from Greek banks because they feared that Greece would leave the European Union.What is consistent with what the open-economy macroeconomic model predicts?

Correct AnswerverifiedShow Answer

If a government increases its budget deficit,which statement would best predict the effects?

Correct AnswerverifiedShow Answer

Suppose that in the 1990s,Canadian net capital outflow fell.Which of the following could explain this?

Correct AnswerverifiedShow Answer

Where does the supply of dollars in the foreign-currency exchange market come from?

Correct AnswerverifiedShow Answer

Explain how the relation between the real exchange rate and net exports explains the downward slope of the demand curve for foreign-currency exchange.

Correct AnswerverifiedWhen the Canadian real exchange rate app...View AnswerShow Answer

If a government started with a deficit and moved to a surplus,which statement would best describe the effects of these changes?

Correct AnswerverifiedShow Answer

Which of the following would tend to shift the supply of dollars in the foreign-currency exchange market model to the right?

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model,what is net capital outflow equal to?

Correct AnswerverifiedShow Answer

Which statement is consistent with an appreciation of the dollar?

Correct AnswerverifiedShow Answer

Figure 13-2 -Refer to the Figure13-2.If the interest rate was initially at r0 and an import quota was imposed,what would happen to the real interest rate?

Correct AnswerverifiedShow Answer

Suppose that Canada imposed an import quota on beef.Which statement identifies the most likely results?

Correct AnswerverifiedShow Answer

What happens in Canada when the Canadian government imposes an import quota on Gouda cheese?

Correct AnswerverifiedShow Answer

Our macroeconomic model assumes that GDP is constant.However,the model could be used to analyze the effects of a one-time increase in GDP.What does the model predict about the real interest rate,net capital outflow,net exports,and the real exchange rate when GDP increases?

Correct AnswerverifiedThe next figure shows that the primary e...View AnswerShow Answer

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Correct Answer
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verified
When the Canadian real exchange rate app...
View Answer

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verified

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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The next figure shows that the primary e...
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