Exam 13: A Macroeconomic Theory of the Small Open Economy

In an open economy, what does net capital outflow equal?

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

Other things the same, when the real exchange rate of the dollar depreciates, Canadian goods become more attractive to Canadian residents, but less attractive to foreign residents.

Suppose Canada imposes an import quota on beer. Which statement best describes the most likely effects of this quota?

If the quantity of loanable funds supplied is greater than the quantity demanded, what does the excess measure?

In the open-economy macroeconomic model, net capital outflow links the markets for loanable funds and foreign-currency exchange.

What is consistent with capital flight from Great Britain?

Which list contains only things that decrease when the budget deficit of the Canadian government increases?

In the open-economy macroeconomic model, what does the quantity of dollars demanded in the foreign-currency exchange market depend on?

Suppose the Canadian government institutes a "Buy Canadian" campaign, in order to encourage spending on domestic goods. What effect will this have on the Canadian trade balance?

What is the supply and demand for loanable funds equation in an open economy?

What does a higher real interest rate lower the quantity of?

Figure 13-1 -Refer to Figure 13-1. If the world interest rate equals 3 percent, what is the net capital outflow?

What does the open-economy macroeconomic model examine?

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?

Explain why saving need not equal domestic investment in an open economy.

In an open economy, what does the market for loanable funds take as given?

How does a change in government budget affect national saving?

Which statement is consistent with negative net exports?

What macroeconomic measures are considered fixed in our open-economy model?