Exam 13: A Macroeconomic Theory of the Small Open Economy

If the real exchange rate of the Canadian dollar were above its equilibrium level, the real exchange rate of the Canadian dollar would appreciate.

What is the term for a tax on imported goods?

If Canadian citizens decide to save a larger fraction of their incomes, which statement would best identify the effects?

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

Suppose a prime ministerial candidate promises to increase the government budget surplus and claims that doing so will stop Canadian citizens from investing in foreign companies and increase the value of the dollar. Evaluate this promise.

What does the identity "net capital outflow = net exports" imply?

According to the open-economy macroeconomic model, an increase in the Canadian government budget surplus increases Canadian net capital outflow, causes the real exchange rate of the dollar to depreciate, and increases Canadian net exports.

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

In the open-economy macroeconomic model, the supply curve of currency is vertical because the quantity of currency supplied does not depend on the real exchange rate.

Which statement best describes the effects of an increase in real interest rates in Canada?

Suppose Canada imposes an import quota on wine. Which statement best describes the most likely effects of this quota?

The key determinant of net capital outflow is the real exchange rate.

Net capital outflow represents the quantity of dollars supplied in the foreign-currency exchange market.

What is net capital outflow equal to?

What is the term for a limit on the quantity of an imported good?

Why do higher real interest rates lead to lower net capital outflow?

Which statement best predicts the effects of a fall in the Canadian real interest rate?

If the government of India made policy changes that increased national saving, which statement would best predict the consequences?

In the open-economy macroeconomic model, what is net capital outflow equal to?

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