Exam 32: A Macroeconomic Theory of the Open Economy

The current account is defined as that part of the balance of payments that records transactions leading to a change of ownership of commodities, or a direct flow of income or similar payment.

In the market for foreign-currency exchange, E₁ is:

If exports are greater than imports, the country is said to have a:

If the interest rate were below the equilibrium level, the quantity of loanable funds supplied would _____ the quantity demanded.

In the open economy:

Explain how net foreign investment is part of the demand for loanable funds and simultaneously part of the supply of dollars in the foreign exchange market.

Introducing tariffs will _____ exports, _____ imports, leaving _____ unaffected.

Suppose that the government imposes a quota on imports.Explain why the result is a fall in imports and an equal fall in exports.(Hint: Think about what happens to net exports, and about what happens to the exchange rate.)

Graph 13-2 -In Graph 13-2, an increase in the government budget deficit causes the equilibrium in the economy to move from:

If a country experienced a large and sudden movement of funds out of it, the interest rate would:

Net foreign investment must be equal to current balance.

The theory of purchasing-power parity implies that the demand curve for foreign-currency exchange is:

Suppose that foreign investors are worried about the political stability of Acadia.How would that fear affect the real interest rate and the real exchange rate?

In the macroeconomic model of the open economy developed in the text, if the central bank increases the money supply, the price level will:

In an open economy, an increase in national saving _______ the equilibrium domestic real interest rate and the quantity of net capital inflows _____ and the quantity of domestic investment ______.

In recent times China overtook Germany to become the world's biggest exporter.On one measure it now looks likely to become the world's biggest economy within 10 years.

Explain why the Australian dollar may appreciate owing to a change in interest rates?

In the market for foreign-currency exchange, the supply curve represents:

In an open economy, domestic investment equals:

A strong domestic dollar, ceteris paribus, may have minimal impact on export industries.