Question 1

Net capital outflow represents the quantity of dollars supplied in the foreign-currency exchange market.

Accepted Answer

A) True 
 B)False

Question 2

In the open-economy macroeconomic model, how can the market for loanable funds identity be written?

Accepted Answer

A)  S = I 
B)  S = NCO - I 
C)  S = I + NCO 
D)  S + I = NCO 
A)  S = I 
B)  S = NCO - I 
C)  S = I + NCO 
D)  S + I = NCO

Question 3

What will NOT change Canadian net exports?

Accepted Answer

A)  capital flight from Canada 
B)  an increase in the government budget deficit 
C)  the imposition of Canadian import quotas 
D)  an increase in the world interest rate 
A)  capital flight from Canada 
B)  an increase in the government budget deficit 
C)  the imposition of Canadian import quotas 
D)  an increase in the world interest rate

Question 4

Mexico suffered from capital flight in 1994. What happened to Mexico's real interest rate and the peso?

Accepted Answer

A)  The real interest rate fell, and the peso appreciated. 
B)  The real interest rate fell, and the peso depreciated. 
C)  The real interest rate rose, and the peso appreciated. 
D)  The real interest rate rose, and the peso depreciated. 
A)  The real interest rate fell, and the peso appreciated. 
B)  The real interest rate fell, and the peso depreciated. 
C)  The real interest rate rose, and the peso appreciated. 
D)  The real interest rate rose, and the peso depreciated.

Question 5

In the market for foreign-currency exchange in the open-economy macroeconomic model, what does the amount of net capital outflow represent?

Accepted Answer

A)  the quantity of dollars supplied for the purpose of selling assets domestically 
B)  the quantity of dollars supplied for the purpose of buying assets abroad 
C)  the quantity of dollars demanded for the purpose of buying Canadian exports of goods and services 
D)  the quantity of dollars demanded for the purpose of importing foreign goods and services 
A)  the quantity of dollars supplied for the purpose of selling assets domestically 
B)  the quantity of dollars supplied for the purpose of buying assets abroad 
C)  the quantity of dollars demanded for the purpose of buying Canadian exports of goods and services 
D)  the quantity of dollars demanded for the purpose of importing foreign goods and services

Question 6

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 saving 
A)  national saving minus the net exports 
B)  domestic investment plus national saving 
C)  national saving minus domestic investment 
D)  domestic investment minus national saving

Question 7

If a country's exports are greater than its imports, what is the country said to have?

Accepted Answer

A)  a trade surplus 
B)  a trade deficit 
C)  a comparative advantage 
D)  an absolute advantage 
A)  a trade surplus 
B)  a trade deficit 
C)  a comparative advantage 
D)  an absolute advantage

Question 8

In the open-economy macroeconomic model, where does the supply of loanable funds come from?

Accepted Answer

A)  national saving 
B)  private saving 
C)  public saving 
D)  the sum of domestic investment and net capital outflow 
A)  national saving 
B)  private saving 
C)  public saving 
D)  the sum of domestic investment and net capital outflow

Question 9

If the real exchange rate of the Canadian dollar were above its equilibrium level, the real exchange rate of the Canadian dollar would appreciate.

Accepted Answer

A) True 
 B)False

Question 10

In an open economy, what are the determinants of the prevailing real interest rate?

Accepted Answer

A)  domestic supply and domestic demand for loanable funds 
B)  world supply and domestic demand for loanable funds 
C)  world supply and world demand for loanable funds 
D)  domestic supply and world demand for loanable funds 
A)  domestic supply and domestic demand for loanable funds 
B)  world supply and domestic demand for loanable funds 
C)  world supply and world demand for loanable funds 
D)  domestic supply and world demand for loanable funds

Question 11

What changes will a shortage of loanable funds induce in a savings-investment diagram in a closed economy?

Accepted Answer

A)  The demand for loanable funds curve will shift right, so the interest rate will rise. 
B)  The supply of loanable funds curve will shift left, so the interest rate will fall. 
C)  There will be no shifts of the curves, but the interest rate will rise. 
D)  There will be no shifts of the curves, but the interest rate will fall. 
A)  The demand for loanable funds curve will shift right, so the interest rate will rise. 
B)  The supply of loanable funds curve will shift left, so the interest rate will fall. 
C)  There will be no shifts of the curves, but the interest rate will rise. 
D)  There will be no shifts of the curves, but the interest rate will fall.

Question 12

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

Accepted Answer

A)  The quota would cause the real exchange rate of Canadian dollars to appreciate, but it would not change the real interest rate in Canada. 
B)  The quota would cause the real exchange rate of Canadian dollars to appreciate and the real interest rate in Canada to increase. 
C)  The quota would cause the real exchange rate of Canadian dollars to depreciate and the real interest rate in Canada to decrease. 
D)  The quota would cause the real exchange rate of Canadian dollars to depreciate, but it would not change the real interest rate in Canada. 
A)  The quota would cause the real exchange rate of Canadian dollars to appreciate, but it would not change the real interest rate in Canada. 
B)  The quota would cause the real exchange rate of Canadian dollars to appreciate and the real interest rate in Canada to increase. 
C)  The quota would cause the real exchange rate of Canadian dollars to depreciate and the real interest rate in Canada to decrease. 
D)  The quota would cause the real exchange rate of Canadian dollars to depreciate, but it would not change the real interest rate in Canada.

Question 13

Which statement best describes the effects of trade policies?

Accepted Answer

A)  Trade policies affect the trade balance, plus all industries in the same ways. 
B)  Trade policies affect the trade balance, plus some industries differently than others. 
C)  Trade policies do not affect the trade balance, but they affect some industries differently than others. 
D)  Trade policies do not affect the trade balance, but they affect all industries in the same ways. 
A)  Trade policies affect the trade balance, plus all industries in the same ways. 
B)  Trade policies affect the trade balance, plus some industries differently than others. 
C)  Trade policies do not affect the trade balance, but they affect some industries differently than others. 
D)  Trade policies do not affect the trade balance, but they affect all industries in the same ways.

Question 14

Which statement is consistent with negative net exports?

Accepted Answer

A)  Net capital outflow is positive, so foreign assets bought by Canadians are greater than Canadian assets bought by foreigners. 
B)  Net capital outflow is positive, so Canadian assets bought by foreigners are greater than foreign assets bought by Canadians. 
C)  Net capital outflow is negative, so foreign assets bought by Canadians are greater than Canadian assets bought by foreigners. 
D)  Net capital outflow is negative, so Canadian assets bought by foreigners are greater than foreign assets bought by Canadians. 
A)  Net capital outflow is positive, so foreign assets bought by Canadians are greater than Canadian assets bought by foreigners. 
B)  Net capital outflow is positive, so Canadian assets bought by foreigners are greater than foreign assets bought by Canadians. 
C)  Net capital outflow is negative, so foreign assets bought by Canadians are greater than Canadian assets bought by foreigners. 
D)  Net capital outflow is negative, so Canadian assets bought by foreigners are greater than foreign assets bought by Canadians.

Question 15

According to the open-economy macroeconomic model, an increase in the Canadian government budget surplus increases Canadian net capital outflow, causes the real exchange rate of the dollar to depreciate, and increases Canadian net exports.

Accepted Answer

A) True 
 B)False

Question 16

If foreign investors believe that the Lebanese government will default on their debt, what might happen?

Accepted Answer

A)  a decrease in Lebanese interest rates and an increase in Lebanese net capital outflow 
B)  an increase in both Lebanese interest rates and net capital outflow 
C)  a decrease in both Lebanese interest rates and net capital outflow 
D)  an increase in Lebanese interest rates and a decrease in Lebanese net capital outflow 
A)  a decrease in Lebanese interest rates and an increase in Lebanese net capital outflow 
B)  an increase in both Lebanese interest rates and net capital outflow 
C)  a decrease in both Lebanese interest rates and net capital outflow 
D)  an increase in Lebanese interest rates and a decrease in Lebanese net capital outflow

Question 17

Since the mid-1990s, Canadian governments have tried to eliminate budget deficits. What was expected to happen?

Accepted Answer

A)  This would decrease national saving, appreciate the real exchange rate, and decrease net exports. 
B)  This would increase national saving, appreciate the real exchange rate, and increase net exports. 
C)  This would increase national saving, depreciate the real exchange rate, and increase net exports. 
D)  This would decrease national saving, depreciate the real exchange rate, and decrease net exports. 
A)  This would decrease national saving, appreciate the real exchange rate, and decrease net exports. 
B)  This would increase national saving, appreciate the real exchange rate, and increase net exports. 
C)  This would increase national saving, depreciate the real exchange rate, and increase net exports. 
D)  This would decrease national saving, depreciate the real exchange rate, and decrease net exports.

Question 18

What is most likely to increase exports in the country of Makena?

Accepted Answer

A)  a reduction in political instability 
B)  introduce a consumption tax 
C)  a reduction in the size of the government's budget surplus 
D)  an import quota 
A)  a reduction in political instability 
B)  introduce a consumption tax 
C)  a reduction in the size of the government's budget surplus 
D)  an import quota

Question 19

According to the open-economy macroeconomic model, what would NOT be a consequence of an increase in the Canadian government budget deficit?

Accepted Answer

A)  Canadian trade balance rises. 
B)  Canadian net capital outflow falls. 
C)  Canadian investment abroad decreases. 
D)  The real exchange rate of the Canadian dollar appreciates. 
A)  Canadian trade balance rises. 
B)  Canadian net capital outflow falls. 
C)  Canadian investment abroad decreases. 
D)  The real exchange rate of the Canadian dollar appreciates.

Question 20

What does the open-economy macroeconomic model take as given?

Accepted Answer

A)  GDP, but not the price level 
B)  the price level, but not GDP 
C)  both the price level and GDP 
D)  the exchange rate 
A)  GDP, but not the price level 
B)  the price level, but not GDP 
C)  both the price level and GDP 
D)  the exchange rate

Net capital outflow represents the quantity of dollars supplied in the foreign-currency exchange market.

In the open-economy macroeconomic model, how can the market for loanable funds identity be written?

What will NOT change Canadian net exports?

Mexico suffered from capital flight in 1994. What happened to Mexico's real interest rate and the peso?

In the market for foreign-currency exchange in the open-economy macroeconomic model, what does the amount of net capital outflow represent?

What is net capital outflow equal to?

If a country's exports are greater than its imports, what is the country said to have?

In the open-economy macroeconomic model, where does the supply of loanable funds come from?

If the real exchange rate of the Canadian dollar were above its equilibrium level, the real exchange rate of the Canadian dollar would appreciate.

In an open economy, what are the determinants of the prevailing real interest rate?

What changes will a shortage of loanable funds induce in a savings-investment diagram in a closed economy?

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

Which statement best describes the effects of trade policies?

Which statement is consistent with negative net exports?

According to the open-economy macroeconomic model, an increase in the Canadian government budget surplus increases Canadian net capital outflow, causes the real exchange rate of the dollar to depreciate, and increases Canadian net exports.

If foreign investors believe that the Lebanese government will default on their debt, what might happen?

Since the mid-1990s, Canadian governments have tried to eliminate budget deficits. What was expected to happen?

What is most likely to increase exports in the country of Makena?

According to the open-economy macroeconomic model, what would NOT be a consequence of an increase in the Canadian government budget deficit?

What does the open-economy macroeconomic model take as given?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

Aggregate Demand and Aggregate Supply

The Influence of Monetary Policy on Aggregate Demand

The Influence of Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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Exam 13: A Macroeconomic Theory of the Small Open Economy

Net capital outflow represents the quantity of dollars supplied in the foreign-currency exchange market.

In the open-economy macroeconomic model, how can the market for loanable funds identity be written?

What will NOT change Canadian net exports?

Mexico suffered from capital flight in 1994. What happened to Mexico's real interest rate and the peso?

In the market for foreign-currency exchange in the open-economy macroeconomic model, what does the amount of net capital outflow represent?

What is net capital outflow equal to?

If a country's exports are greater than its imports, what is the country said to have?

In the open-economy macroeconomic model, where does the supply of loanable funds come from?

If the real exchange rate of the Canadian dollar were above its equilibrium level, the real exchange rate of the Canadian dollar would appreciate.

In an open economy, what are the determinants of the prevailing real interest rate?

What changes will a shortage of loanable funds induce in a savings-investment diagram in a closed economy?

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

Which statement best describes the effects of trade policies?

Which statement is consistent with negative net exports?

According to the open-economy macroeconomic model, an increase in the Canadian government budget surplus increases Canadian net capital outflow, causes the real exchange rate of the dollar to depreciate, and increases Canadian net exports.

If foreign investors believe that the Lebanese government will default on their debt, what might happen?

Since the mid-1990s, Canadian governments have tried to eliminate budget deficits. What was expected to happen?

What is most likely to increase exports in the country of Makena?

According to the open-economy macroeconomic model, what would NOT be a consequence of an increase in the Canadian government budget deficit?

What does the open-economy macroeconomic model take as given?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

Aggregate Demand and Aggregate Supply

The Influence of Monetary Policy on Aggregate Demand

The Influence of Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters