Exam 13: A Macroeconomic Theory of the Small Open Economy

What is the most likely result from an increase in the government's budget surplus?

In the open-economy macroeconomic model, what does the quantity of dollars demanded in the foreign-currency exchange market depend on?

Figure 13-2 -Refer to the FigurE13-2. Suppose that these diagrams refer to Canada. If the interest rate was initially at r0 and Japan voluntarily restricted its exports to Canada, what would happen to the interest rate?

Figure 13-1 -Refer to the Figure 13-1. In the figure shown, if the world real interest rate went from 6 to 7 percent, what changes would occur?

In the open-economy macroeconomic model, how can the market for loanable funds identity be written?

If the real interest rate were above the equilibrium rate, there would be a shortage of loanable funds.

What does the open-economy macroeconomic model examine?

Which of the following would NOT be a consequence of an increase in the Canadian government's budget deficit?

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

If a government started with a deficit and moved to a surplus, which statement would best describe the effects of these changes?

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

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

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.

Suppose the Federal Reserve, which is the central bank of the U.S., decided to lower the monetary policy interest rate. Use the macroeconomic model studied in thisChapter to analyze the possible effects of this event on Canada's net capital outflow, net exports, and exchange rate. (Hint: Consider the United States a large economy, which is able to influence the world interest rate.)

What is most likely to result if foreigners decide to withdraw the funds that they have loaned to Canada over the past two decades?

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

Which statement is consistent with an above-the-equilibrium exchange rate of the dollar?

Which statement best describes the effects of trade policies?

Suppose that Canadian investors decide that investment opportunities in African countries have improved. What happens to Canadian net capital outflow? What happens to the Canadian real interest rate?

Fill in the table below with the direction of the variables that change in response to the events in the first column.