Exam 13: A Macroeconomic Theory of the Small Open Economy

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

If Canadian citizens decide to purchase more foreign assets at each interest rate, which statement would best describe the effects?

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

Which of the following will decrease Canadian net capital outflow?

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

Which statement is consistent with an above-the-equilibrium exchange rate of the dollar?

An import quota imposed by Egypt would reduce Egyptian imports, but have no impact on Egyptian exports.

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

The 1998 default by the Russian government had results that were predictable using the textbook model. Which statement best describes what happened?

When the government increases the government budget deficit, national saving decreases.

Suppose the Canadian government imposed import quotas on agricultural products. According to the foreign-currency exchange market diagram, which outcome would most likely result?

Which statement best describes the effects of a decrease in the real interest rate?

According to the open-economy macroeconomic model, if the Canadian government decreased the government budget deficit, both Canadian domestic investment and Canadian net capital outflow would fall.

If the world real interest rate is less than the real interest rate that would occur in Canada if there was no trade, what should we expect to happen in the supply and demand for loanable funds graph?

Figure 13-2 -Refer to Figure 13-2. Which of the following shifts shows the effects of an import quota?

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

Which statement best describes the effects of an increase in real interest rates in Canada?

Mexico suffered from capital flight in 1994. What happened to Mexico's net exports?

Mexico suffered from capital flight in 1994. Which statement best describes the effects of this event on the Canadian economy?

Which statement is the most accurate description of trade policy?