Question 1

If Ricardian equivalence proposition is true,a budget deficit resulting from a tax cut will have

Accepted Answer

A) no effect on government expenditures. 
B) no effect on current account because it does not affect national saving. 
C) no effect on current account because people expect to pay lower taxes in the future. 
D) no effect on current account because people expect to increase their consumption. 
A) no effect on government expenditures. 
B) no effect on current account because it does not affect national saving. 
C) no effect on current account because people expect to pay lower taxes in the future. 
D) no effect on current account because people expect to increase their consumption.

Question 2

The current account balance consists of

Accepted Answer

A) the trade balance plus the services balance. 
B) net exports of goods and services,minus net unilateral transfers. 
C) net exports of goods and services,plus investment income from abroad,plus net unilateral transfers. 
D) net exports of goods and services,plus investment income from abroad,plus net unilateral transfers,minus the capital account balance. 
A) the trade balance plus the services balance. 
B) net exports of goods and services,minus net unilateral transfers. 
C) net exports of goods and services,plus investment income from abroad,plus net unilateral transfers. 
D) net exports of goods and services,plus investment income from abroad,plus net unilateral transfers,minus the capital account balance.

Question 3

Suppose desired consumption is $10 billion and desired investment is $3 billion.If GDP is $25 billion and government purchases are $2 billion,the desired foreign lending is

Accepted Answer

A) $10 billion. 
B) $12 billion. 
C) $13 billion. 
D) $15 billion. 
A) $10 billion. 
B) $12 billion. 
C) $13 billion. 
D) $15 billion.

Question 4

Assume that Costa Rica,a small open economy,has increased the government budget deficit by 10 million colon,reducing the current account balance in the process.All else being equal,you would expect this action to cause

Accepted Answer

A) an increase in desired saving in Costa Rica. 
B) an increase in the real world interest rate. 
C) an increase in exports by Costa Rica. 
D) an increase in Costa Rica's absorption. 
A) an increase in desired saving in Costa Rica. 
B) an increase in the real world interest rate. 
C) an increase in exports by Costa Rica. 
D) an increase in Costa Rica's absorption.

Question 5

An economy in which output exceeds absorption

Accepted Answer

A) will send goods abroad and have a current account surplus. 
B) is a net importer with a current account deficit. 
C) is a net borrower in the international market. 
D) will have a capital account deficit. 
A) will send goods abroad and have a current account surplus. 
B) is a net importer with a current account deficit. 
C) is a net borrower in the international market. 
D) will have a capital account deficit.

Question 6

Which of the following statement is true?

Accepted Answer

A) In each period,except for measurement errors,the current account balance and the capital account balance must sum to zero. 
B) In each period,except for measurement errors,the sum of the current account balance and the capital account balance must be positive. 
C) In each period,except for measurement errors,the sum of the current account balance and the capital account balance must be negative. 
D) In each period,except for measurement errors,the sum of the current account balance and the capital account balance may be positive or negative. 
A) In each period,except for measurement errors,the current account balance and the capital account balance must sum to zero. 
B) In each period,except for measurement errors,the sum of the current account balance and the capital account balance must be positive. 
C) In each period,except for measurement errors,the sum of the current account balance and the capital account balance must be negative. 
D) In each period,except for measurement errors,the sum of the current account balance and the capital account balance may be positive or negative.

Question 7

A capital account surplus necessarily implies

Accepted Answer

A) a balance of payments surplus. 
B) a current account surplus. 
C) a current account deficit. 
D) an increase in the nation's official reserve assets. 
A) a balance of payments surplus. 
B) a current account surplus. 
C) a current account deficit. 
D) an increase in the nation's official reserve assets.

Question 8

Which of the following statements is true?

Accepted Answer

A) The world as a whole has a current account surplus. 
B) The world as a whole has a current account balance. 
C) The world as a whole has a balance of payment surplus. 
D) The world as a whole has a current account deficit. 
A) The world as a whole has a current account surplus. 
B) The world as a whole has a current account balance. 
C) The world as a whole has a balance of payment surplus. 
D) The world as a whole has a current account deficit.

Question 9

Suppose output is $35 billion,government purchases are $10 billion,desired consumption is $15 billion,and desired investment is $6 billion.Net foreign lending would be equal to

Accepted Answer

A) -$4 billion. 
B) -$2 billion. 
C) $2 billion. 
D) $4 billion. 
A) -$4 billion. 
B) -$2 billion. 
C) $2 billion. 
D) $4 billion.

Question 10

If there are no factor payments from abroad and no unilateral transfers,net exports of $10 billion is the same as

Accepted Answer

A) a current account deficit of $10 billion. 
B) a capital account surplus of $10 billion. 
C) net acquisition of foreign assets of $10 billion. 
D) net foreign borrowing of $10 billion. 
A) a current account deficit of $10 billion. 
B) a capital account surplus of $10 billion. 
C) net acquisition of foreign assets of $10 billion. 
D) net foreign borrowing of $10 billion.

Question 11

For a small open economy,an increase in the world real interest rate would necessarily

Accepted Answer

A) increase net foreign lending. 
B) decrease net exports. 
C) decrease the current account balance. 
D) worsen the balance of payments. 
A) increase net foreign lending. 
B) decrease net exports. 
C) decrease the current account balance. 
D) worsen the balance of payments.

Question 12

When future labour income falls in a small open economy,it causes the current account to ________ and investment to ________.

Accepted Answer

A) fall;rise 
B) rise;remain unchanged 
C) fall;remain unchanged 
D) rise;rise 
A) fall;rise 
B) rise;remain unchanged 
C) fall;remain unchanged 
D) rise;rise

Question 13

Suppose a wealthy Saudi Arabian prince donates 2000 camels to the San Diego Zoo.The Canadian trade balance ________ and the current account balance ________.

Accepted Answer

A) falls;rises 
B) rises;rises 
C) is unchanged;is unchanged 
D) falls;is unchanged 
A) falls;rises 
B) rises;rises 
C) is unchanged;is unchanged 
D) falls;is unchanged

Question 14

A small open economy has a current account balance of zero.A rise in its investment demand causes

Accepted Answer

A) a current account surplus. 
B) a capital account deficit. 
C) income to exceed absorption. 
D) net borrowing from abroad. 
A) a current account surplus. 
B) a capital account deficit. 
C) income to exceed absorption. 
D) net borrowing from abroad.

Question 15

A group of Japanese tourists visits Banff National Park in Alberta and spends $20,000 on goods and services in Canada.This will

Accepted Answer

A) reduce the Canadian current account by $20,000. 
B) increase the Canadian current account by $20,000. 
C) have no change in the Canadian current account. 
D) increase Canadian imports. 
A) reduce the Canadian current account by $20,000. 
B) increase the Canadian current account by $20,000. 
C) have no change in the Canadian current account. 
D) increase Canadian imports.

Question 16

Consider a small open economy in equilibrium with a zero current account balance.What happens to national saving,investment,and the current account balance in equilibrium if
a.future income rises?
b.business taxes rise?
c.government expenditures decline temporarily?
d.the future marginal product of capital rises?

Accepted Answer

a.Saving curve shifts left,so S falls,I

Question 17

The world as a whole has a current account deficit because

Accepted Answer

A) some countries export less than they import. 
B) there are statistical discrepancies. 
C) the United States and China have current account deficit. 
D) income from assets held abroad is misreported. 
A) some countries export less than they import. 
B) there are statistical discrepancies. 
C) the United States and China have current account deficit. 
D) income from assets held abroad is misreported.

Question 18

Discuss the main differences between the small and large open economies in the impacts of a decrease in domestic saving on the interest rate and the domestic investment.

Accepted Answer

Unlike the situation in a small open eco

Question 19

A small open economy has a current account balance of zero.A rise in the world real interest rate causes

Accepted Answer

A) a current account surplus. 
B) a capital account surplus. 
C) net borrowing from abroad. 
D) absorption to exceed income. 
A) a current account surplus. 
B) a capital account surplus. 
C) net borrowing from abroad. 
D) absorption to exceed income.

Question 20

When there are two large open economies,if desired international lending by the domestic country exceeds desired international borrowing by the foreign country,then

Accepted Answer

A) domestic saving must rise. 
B) domestic saving must fall. 
C) the world real interest rate must fall. 
D) the world real interest rate must rise. 
A) domestic saving must rise. 
B) domestic saving must fall. 
C) the world real interest rate must fall. 
D) the world real interest rate must rise.

If Ricardian equivalence proposition is true,a budget deficit resulting from a tax cut will have

The current account balance consists of

Suppose desired consumption is $10 billion and desired investment is $3 billion.If GDP is $25 billion and government purchases are $2 billion,the desired foreign lending is

Assume that Costa Rica,a small open economy,has increased the government budget deficit by 10 million colon,reducing the current account balance in the process.All else being equal,you would expect this action to cause

An economy in which output exceeds absorption

Which of the following statement is true?

A capital account surplus necessarily implies

Which of the following statements is true?

Suppose output is $35 billion,government purchases are $10 billion,desired consumption is $15 billion,and desired investment is $6 billion.Net foreign lending would be equal to

If there are no factor payments from abroad and no unilateral transfers,net exports of $10 billion is the same as

For a small open economy,an increase in the world real interest rate would necessarily

When future labour income falls in a small open economy,it causes the current account to and investment to .

Suppose a wealthy Saudi Arabian prince donates 2000 camels to the San Diego Zoo.The Canadian trade balance and the current account balance .

A small open economy has a current account balance of zero.A rise in its investment demand causes

A group of Japanese tourists visits Banff National Park in Alberta and spends $20,000 on goods and services in Canada.This will

The world as a whole has a current account deficit because

Discuss the main differences between the small and large open economies in the impacts of a decrease in domestic saving on the interest rate and the domestic investment.

A small open economy has a current account balance of zero.A rise in the world real interest rate causes

When there are two large open economies,if desired international lending by the domestic country exceeds desired international borrowing by the foreign country,then

Introduction to Macroeconomics

The Measurement and Structure of the Canadian Economy

Productivity, output, and Employment

Consumption, saving, and Investment

Long-Run Economic Growth

The Asset Market, money, and Prices

Business Cycles

The Is-Lm-Fe Model: a General Framework for Macroeconomic Analysis

Exchange Rates, business Cycles, and Macroeconomic Policy

Classical Business Cycle Analysis: Market-Clearing Macroeconomics

Keynesian Business Cycle Analysis: Non Market Clearing Macroeconomics

Unemployment and Inflation

Monetary Policy and the Bank of Canada

Government Spending and Its Financing

Filters

Exam 5: Saving and Investment in the Open Economy

If Ricardian equivalence proposition is true,a budget deficit resulting from a tax cut will have

The current account balance consists of

Suppose desired consumption is $10 billion and desired investment is $3 billion.If GDP is $25 billion and government purchases are $2 billion,the desired foreign lending is

Assume that Costa Rica,a small open economy,has increased the government budget deficit by 10 million colon,reducing the current account balance in the process.All else being equal,you would expect this action to cause

An economy in which output exceeds absorption

Which of the following statement is true?

A capital account surplus necessarily implies

Which of the following statements is true?

Suppose output is $35 billion,government purchases are $10 billion,desired consumption is $15 billion,and desired investment is $6 billion.Net foreign lending would be equal to

If there are no factor payments from abroad and no unilateral transfers,net exports of $10 billion is the same as

For a small open economy,an increase in the world real interest rate would necessarily

When future labour income falls in a small open economy,it causes the current account to ________ and investment to ________.

Suppose a wealthy Saudi Arabian prince donates 2000 camels to the San Diego Zoo.The Canadian trade balance ________ and the current account balance ________.

A small open economy has a current account balance of zero.A rise in its investment demand causes

A group of Japanese tourists visits Banff National Park in Alberta and spends $20,000 on goods and services in Canada.This will

The world as a whole has a current account deficit because

Discuss the main differences between the small and large open economies in the impacts of a decrease in domestic saving on the interest rate and the domestic investment.

A small open economy has a current account balance of zero.A rise in the world real interest rate causes

When there are two large open economies,if desired international lending by the domestic country exceeds desired international borrowing by the foreign country,then

Introduction to Macroeconomics

The Measurement and Structure of the Canadian Economy

Productivity, output, and Employment

Consumption, saving, and Investment

Long-Run Economic Growth

The Asset Market, money, and Prices

Business Cycles

The Is-Lm-Fe Model: a General Framework for Macroeconomic Analysis

Exchange Rates, business Cycles, and Macroeconomic Policy

Classical Business Cycle Analysis: Market-Clearing Macroeconomics

Keynesian Business Cycle Analysis: Non Market Clearing Macroeconomics

Unemployment and Inflation

Monetary Policy and the Bank of Canada

Government Spending and Its Financing

Filters

When future labour income falls in a small open economy,it causes the current account to and investment to .

Suppose a wealthy Saudi Arabian prince donates 2000 camels to the San Diego Zoo.The Canadian trade balance and the current account balance .