Exam 13: A Macroeconomic Theory of the Small Open Economy

Using the macroeconomic model of a foreign-currency exchange market, (a) analyze the situation in which a government imposes a fixed exchange rate, and (b) determine what that government should do in order to maintain the fixed exchange.

What does the value of net exports equal?

In 2002 and again in 2014, the Argentinean government defaulted on its debt. Which statement is consistent with what the open-economy macroeconomic model predicts?

Which of the following is an effect of capital flight in a small economy such as Panama?

Mexico suffered from capital flight in 1994. Which statement best describes the effects of this event on the Canadian economy?

If the government of Colombia implemented a policy that reduced national saving, which statement would best predict the consequences?

If a government increases its budget deficit, which statement would best predict the effects?

Which of the following would do the most to reduce a trade deficit?

If there is capital flight from Canada, how does the open-economy macroeconomic model change?

According to the open-economy macroeconomic model, what would NOT be a consequence of an increase in the Canadian government budget deficit?

If policymakers impose import restrictions on automobiles, the Canadian trade deficit would shrink.

If the world real interest rate exceeds the interest rate that would occur if the Canadian economy were closed, then what would the Canadian net capital outflow be?

In an open economy, what does net capital outflow equal?

What is most likely to increase exports in the country of Bardia?

In the open-economy macroeconomic model, where does the demand for loanable funds come from?

What is the correct way to show the effects of a new import quota?

When a country imposes a trade restriction, the real exchange rate of that country's currency appreciates.

Figure 13-2 -Refer to the FigurE13-2. Which of the following shifts shows the effects of an import quota?

In an open economy, what best identifies the sources of loanable funds?

In the market for foreign-currency exchange in the open-economy macroeconomic model, which of the following results from a higher real exchange rate?