Exam 13: A Macroeconomic Theory of the Small Open Economy

Suppose that the world consists of only two countries,A and B,of relatively equal sizes.The world interest rate in such a model is some average of the autarkic (no trade)interest rates in each of the two countries. a. Draw "parallel" loanable funds markets for the two countries and show the position of the world interest rate. (Hint: What relationship must exist between the NCOs of the two countries?) b. Suppose country A enacts laws that induce people to save more. Show the effects of such laws on each country's domestic amounts saved and invested. c. In the currency-exchange diagrams for both countries, show the effect of country A's savings policies on both countries' exchange rates and net exports.

If the Canadian government imposes an import quota on French wine,which of the following best predicts the consequences?

Which of the following would make both the equilibrium interest rate and the equilibrium quantity of loanable funds increase?

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

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

In the open-economy macroeconomic model,we focus on the determination of GDP and the price level.

What is the term for a tax on imported goods?

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?

Because depreciation of the real exchange rate of the dollar increases Canadian net exports,the demand curve for dollars in the foreign-currency exchange market is downward sloping.

In 2002,it looked like the Argentinean government might default on its debt (which eventually it did).Which of the following is consistent with what the open-economy macroeconomic model predicts?

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

If Kenya experienced capital flight,which of the following best explains the effects?

Which of the following is consistent with a below-the-equilibrium exchange rate of the dollar?

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

Suppose that Canada imposed an import quota on beef.Which of the following identifies the most likely results?

Which of the following is consistent with an appreciation of the dollar?

Which of the following is most likely to increase exports in the country of Turania?

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 would tend to shift the supply of dollars in the foreign-currency exchange market model to the right?

If the quantity of loanable funds supplied is greater than the quantity demanded,which of the following best describes the consequences?