Question 1

The "savings glut" refers to

Accepted Answer

A)  the large decrease that has occurred in the world's savings. 
B)  the increased importance of running a current account surplus. 
C)  a decrease in investment demand worldwide. 
D)  the large increase that has occurred in world's savings. 
E)  the stagnation of the world's savings. 
A)  the large decrease that has occurred in the world's savings. 
B)  the increased importance of running a current account surplus. 
C)  a decrease in investment demand worldwide. 
D)  the large increase that has occurred in world's savings. 
E)  the stagnation of the world's savings. D

Question 2

In an open,two-good economy in a two-good world,the relative price of one good in terms of the other is called the

Accepted Answer

A)  relative advantage. 
B)  absolute advantage. 
C)  terms of trade. 
D)  international purchasing price index. 
E)  nominal exchange rates. 
A)  relative advantage. 
B)  absolute advantage. 
C)  terms of trade. 
D)  international purchasing price index. 
E)  nominal exchange rates. C

Question 3

When the terms of trade increase,the

Accepted Answer

A)  substitution effect is to increase consumption of good a. 
B)  income effect is unambiguously positive. 
C)  income effect is unambiguously negative. 
D)  substitution effect is to decrease consumption of good b. 
E)  subsitution effect is to decrease consumption of good a. 
A)  substitution effect is to increase consumption of good a. 
B)  income effect is unambiguously positive. 
C)  income effect is unambiguously negative. 
D)  substitution effect is to decrease consumption of good b. 
E)  subsitution effect is to decrease consumption of good a. E

Question 4

Lack of evidence of a pattern of international consumption smoothing is best explained by

Accepted Answer

A)  government policies to fight trade deficits. 
B)  failure of consumers in less advanced economies to act rational. 
C)  a tendency for business cycles to be a worldwide phenomenon. 
D)  Ricardian equivalence. 
E)  very different levels of aggregate economic activity. 
A)  government policies to fight trade deficits. 
B)  failure of consumers in less advanced economies to act rational. 
C)  a tendency for business cycles to be a worldwide phenomenon. 
D)  Ricardian equivalence. 
E)  very different levels of aggregate economic activity.

Question 5

In a two-good,one-period model,when the terms of trade move in your favour,the

Accepted Answer

A)  current account surplus unambiguously increases. 
B)  current account balance unambiguously decreases. 
C)  effect on the trade balance is uncertain. 
D)  trade balance is unchanged. 
E)  trade balance improves. 
A)  current account surplus unambiguously increases. 
B)  current account balance unambiguously decreases. 
C)  effect on the trade balance is uncertain. 
D)  trade balance is unchanged. 
E)  trade balance improves.

Question 6

The terms of trade move in favour of a country when the

Accepted Answer

A)  absolute price of imports decreases. 
B)  absolute price of exports increases. 
C)  relative price of imports increases. 
D)  relative price of imports decreases. 
E)  price of exports and imports decrease. 
A)  absolute price of imports decreases. 
B)  absolute price of exports increases. 
C)  relative price of imports increases. 
D)  relative price of imports decreases. 
E)  price of exports and imports decrease.

Question 7

In a two-good economy,competitive equilibrium is

Accepted Answer

A)  minus the slope of the tangent to the PPF. 
B)  anywhere where the PPF is concave. 
C)  where the marginal rate of substitution equals the marginal rate of transformation. 
D)  minus the slope of the indifference curve. 
E)  where the inflation rate and aggregate output are equal. 
A)  minus the slope of the tangent to the PPF. 
B)  anywhere where the PPF is concave. 
C)  where the marginal rate of substitution equals the marginal rate of transformation. 
D)  minus the slope of the indifference curve. 
E)  where the inflation rate and aggregate output are equal.

Question 8

In a two-good,one-period model,the representative consumer will always be better off

Accepted Answer

A)  with more consumption than less. 
B)  with trade than without it. 
C)  no comparative advantages. 
D)  with a lower indifference curve than with a higher one. 
E)  a flatter PPF. 
A)  with more consumption than less. 
B)  with trade than without it. 
C)  no comparative advantages. 
D)  with a lower indifference curve than with a higher one. 
E)  a flatter PPF.

Question 9

The net effect on welfare from eliminating trade barriers is

Accepted Answer

A)  indeterminant. 
B)  positive. 
C)  negative. 
D)  positive only in the short run. 
E)  negative in the long run. 
A)  indeterminant. 
B)  positive. 
C)  negative. 
D)  positive only in the short run. 
E)  negative in the long run.

Question 10

If   >   then

Accepted Answer

A)  the firm can profit by producing more of good b. 
B)  the consumer can benefit by consuming more of good a. 
C)  the consumer can benefit by consuming more of good b. 
D)  the firm can profit by producing more of good a. 
E)  the firm can profit by producing more of goods a and b. 
A)  the firm can profit by producing more of good b. 
B)  the consumer can benefit by consuming more of good a. 
C)  the consumer can benefit by consuming more of good b. 
D)  the firm can profit by producing more of good a. 
E)  the firm can profit by producing more of goods a and b.

Question 11

Ricardian equivalence suggests that government budget deficits generated by decreases in current taxes

Accepted Answer

A)  increase the current account surplus. 
B)  decrease the current account surplus. 
C)  have no effect on the current account surplus. 
D)  have unpredictable effects on the current account surplus. 
E)  increase aggregate consumption and have no effect on the current account surplus. 
A)  increase the current account surplus. 
B)  decrease the current account surplus. 
C)  have no effect on the current account surplus. 
D)  have unpredictable effects on the current account surplus. 
E)  increase aggregate consumption and have no effect on the current account surplus.

Question 12

In Canada during the period 1961-2011,

Accepted Answer

A)  interest rates and inflation were positively correlated. 
B)  net exports and interest rates were positively correlated. 
C)  net exports and deviations from trend in real GDP were negatively correlated. 
D)  net exports and deviations from trend in real GDP were positively correlated. 
E)  deviations from trend in real GDP and interest rates were negatively correlated. 
A)  interest rates and inflation were positively correlated. 
B)  net exports and interest rates were positively correlated. 
C)  net exports and deviations from trend in real GDP were negatively correlated. 
D)  net exports and deviations from trend in real GDP were positively correlated. 
E)  deviations from trend in real GDP and interest rates were negatively correlated.

Question 13

In a two-good economy,the production possibilities frontier (PPF)is

Accepted Answer

A)  concave because the marginal rate of transformation increases as we move down the PPF. 
B)  concave because the marginal rate of transformation decreases as we move down the PPF. 
C)  convex because the marginal rate of transformation increases as we move down the PPF. 
D)  convex because the marginal rate of transformation decreases as we move down the PPF. 
E)  convex and the marginal rate of transformation is constant as move move down the PPF. 
A)  concave because the marginal rate of transformation increases as we move down the PPF. 
B)  concave because the marginal rate of transformation decreases as we move down the PPF. 
C)  convex because the marginal rate of transformation increases as we move down the PPF. 
D)  convex because the marginal rate of transformation decreases as we move down the PPF. 
E)  convex and the marginal rate of transformation is constant as move move down the PPF.

Question 14

In a two-good,one-period model,when the terms of trade move in your favour,

Accepted Answer

A)  exports unambiguously increase and imports unambiguously decrease. 
B)  the effect on exports is uncertain and imports unambiguously increase. 
C)  the effect on exports is uncertain and imports unambiguously decrease. 
D)  the effects on both exports and imports is uncertain. 
E)  exports and imports unambiguously increase. 
A)  exports unambiguously increase and imports unambiguously decrease. 
B)  the effect on exports is uncertain and imports unambiguously increase. 
C)  the effect on exports is uncertain and imports unambiguously decrease. 
D)  the effects on both exports and imports is uncertain. 
E)  exports and imports unambiguously increase.

Question 15

A small open economy is an economy

Accepted Answer

A)  in which both imports and exports are less than 5% of GDP. 
B)  whose firms and consumers are individually, but not collectively price takers. 
C)  whose firms and consumers are collectively, but not individually price takers. 
D)  whose firms and consumers are individually and collectively price takers. 
E)  whose economic activity affects the world prices of goods. 
A)  in which both imports and exports are less than 5% of GDP. 
B)  whose firms and consumers are individually, but not collectively price takers. 
C)  whose firms and consumers are collectively, but not individually price takers. 
D)  whose firms and consumers are individually and collectively price takers. 
E)  whose economic activity affects the world prices of goods.

Question 16

Theory predicts that current account surpluses should be ________; the Canadian experience since 1961 suggests that current account surpluses have been ________.

Accepted Answer

A)  procyclical; procyclical 
B)  procyclical; countercyclical 
C)  countercyclical; procyclical 
D)  countercyclical; countercyclical 
E)  countercyclical; acyclical 
A)  procyclical; procyclical 
B)  procyclical; countercyclical 
C)  countercyclical; procyclical 
D)  countercyclical; countercyclical 
E)  countercyclical; acyclical

Question 17

The pattern of trade is determined by

Accepted Answer

A)  both comparative advantage and consumer preferences. 
B)  only comparative advantage. 
C)  both absolute advantage and comparative advantage. 
D)  both absolute advantage and consumer preferences. 
E)  only consumer preferences. 
A)  both comparative advantage and consumer preferences. 
B)  only comparative advantage. 
C)  both absolute advantage and comparative advantage. 
D)  both absolute advantage and consumer preferences. 
E)  only consumer preferences.

Question 18

In a two-good,two-period model,holding everything else constant,an increase in current-period income

Accepted Answer

A)  unambiguously increases the current account surplus. 
B)  unambiguously decreases the current account surplus. 
C)  has an uncertain effect on the current account surplus. 
D)  has no effect on the current account surplus. 
E)  only marginally increases the current account surplus. 
A)  unambiguously increases the current account surplus. 
B)  unambiguously decreases the current account surplus. 
C)  has an uncertain effect on the current account surplus. 
D)  has no effect on the current account surplus. 
E)  only marginally increases the current account surplus.

Question 19

In a two-good,two-period model,holding everything else constant,an increase in current taxes

Accepted Answer

A)  unambiguously increases the current account surplus. 
B)  unambiguously decreases the current account surplus. 
C)  has an uncertain effect on the current account surplus. 
D)  has no effect on the current account surplus, as long as Ricardian equivalence holds. 
E)  only marginally increases the current account surplus. 
A)  unambiguously increases the current account surplus. 
B)  unambiguously decreases the current account surplus. 
C)  has an uncertain effect on the current account surplus. 
D)  has no effect on the current account surplus, as long as Ricardian equivalence holds. 
E)  only marginally increases the current account surplus.

Question 20

Absorption refers to

Accepted Answer

A)  the quantity of imports that is absorbed into the domestic economy. 
B)  the amount of government spending that is absorbed into the domestic economy. 
C)  the amount of transfer payments from the federal government that is absorbed into the domestic economy. 
D)  the quantity of aggregate output that is absorbed into the domestic economy. 
E)  the amount of current period income that is used to purchase domestic aggregate output. 
A)  the quantity of imports that is absorbed into the domestic economy. 
B)  the amount of government spending that is absorbed into the domestic economy. 
C)  the amount of transfer payments from the federal government that is absorbed into the domestic economy. 
D)  the quantity of aggregate output that is absorbed into the domestic economy. 
E)  the amount of current period income that is used to purchase domestic aggregate output.

The "savings glut" refers to

In an open,two-good economy in a two-good world,the relative price of one good in terms of the other is called the

When the terms of trade increase,the

Lack of evidence of a pattern of international consumption smoothing is best explained by

In a two-good,one-period model,when the terms of trade move in your favour,the

The terms of trade move in favour of a country when the

In a two-good economy,competitive equilibrium is

In a two-good,one-period model,the representative consumer will always be better off

The net effect on welfare from eliminating trade barriers is

If > then

Ricardian equivalence suggests that government budget deficits generated by decreases in current taxes

In Canada during the period 1961-2011,

In a two-good economy,the production possibilities frontier (PPF)is

In a two-good,one-period model,when the terms of trade move in your favour,

A small open economy is an economy

Theory predicts that current account surpluses should be ; the Canadian experience since 1961 suggests that current account surpluses have been .

The pattern of trade is determined by

In a two-good,two-period model,holding everything else constant,an increase in current-period income

In a two-good,two-period model,holding everything else constant,an increase in current taxes

Absorption refers to

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behavior: The Work–Leisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

A Two-Period Model: The Consumption–Savings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

Money, Banking, Prices, and Monetary Policy

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: A Deeper Look

Filters

Exam 15: Inflation: Phillips Curves and Neo-Fisherism

The "savings glut" refers to

In an open,two-good economy in a two-good world,the relative price of one good in terms of the other is called the

When the terms of trade increase,the

Lack of evidence of a pattern of international consumption smoothing is best explained by

In a two-good,one-period model,when the terms of trade move in your favour,the

The terms of trade move in favour of a country when the

In a two-good economy,competitive equilibrium is

In a two-good,one-period model,the representative consumer will always be better off

The net effect on welfare from eliminating trade barriers is

If > then

Ricardian equivalence suggests that government budget deficits generated by decreases in current taxes

In Canada during the period 1961-2011,

In a two-good economy,the production possibilities frontier (PPF)is

In a two-good,one-period model,when the terms of trade move in your favour,

A small open economy is an economy

Theory predicts that current account surpluses should be ________; the Canadian experience since 1961 suggests that current account surpluses have been ________.

The pattern of trade is determined by

In a two-good,two-period model,holding everything else constant,an increase in current-period income

In a two-good,two-period model,holding everything else constant,an increase in current taxes

Absorption refers to

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behavior: The Work–Leisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Search and Unemployment

Economic Growth: Malthus and Solow

Income Disparity Among Countries and Endogenous Growth

A Two-Period Model: The Consumption–Savings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

Money, Banking, Prices, and Monetary Policy

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: A Deeper Look

Filters

Theory predicts that current account surpluses should be ; the Canadian experience since 1961 suggests that current account surpluses have been .