Exam 13: A Macroeconomic Theory of the Small Open Economy

Suppose that the Turkish government budget deficit increases.What curves in the open-economy macroeconomic model shift? Explain why each curve shifts the direction it does.

Following an increase in the Canadian budget deficit,it has been observed that the trade deficit has increased,the Canadian real exchange rate has appreciated,the net capital outflow has decreased,and the interest rate has decreased.Which one of these events is contrary to what the open-economy macroeconomic model predicts concerning the effects of an increase in the budget deficit?

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

Which of the following best defines a trade policy?

If Canadian citizens decide to save a larger fraction of their incomes,which of the following best identifies the effects?

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

Which of the following are the main elements of our open-economy macroeconomic model?

When a country suffers from capital flight,which of the following best explains the effects?

State what,if anything,each of the following does to the supply or demand of loanable funds. a.Net capital outflow increases at each interest rate. b.Domestic investment increases at each interest rate. c.The government deficit increases. d.Private saving increases.

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

Figure 13-2 -Refer to the FigurE₁3-2.Suppose that these diagrams refer to Canada.Which of the following shifts show the effect of a voluntary export restriction by the government of China?

Which of the following best predicts the effects of an increase in the supply of loanable funds?

Which of the following will decrease Canadian net capital outflow?

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

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

If Argentina suffers from capital flight,Argentinean domestic investment will fall and Argentinean net exports will increase.

The law of one price assumes that trade take place at no cost,so that prices across borders equalize.The result of this assumption is that the real interest rate is always constant. a)Draw a graph to show the demand for dollars in the foreign-currency exchange market under the assumption that purchasing-power parity holds. b)On the other hand,our model of real exchange rate determination shows a downward sloping demand-for-dollars curve.What could determine how steep or flat the demand for dollars is?

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

How does the supply or demand for loanable funds shift when a country increases its budget deficit?

Which of the following does the open-economy macroeconomic model take as given?