Question 1

Which statement could be prompted by an interest rate that is temporarily higher in Canada than in the rest of the world?

Accepted Answer

A)  A Swiss bank purchases a Canadian bond instead of the German bond it had considered purchasing. 
B)  Canadian firms decide, because interest rates are higher, to do more investment spending. 
C)  Brad, a Canadian resident, decides to spend his savings on a trip to Hawaii. 
D)  Canadian net capital outflow increases. 
A)  A Swiss bank purchases a Canadian bond instead of the German bond it had considered purchasing. 
B)  Canadian firms decide, because interest rates are higher, to do more investment spending. 
C)  Brad, a Canadian resident, decides to spend his savings on a trip to Hawaii. 
D)  Canadian net capital outflow increases.

Question 2

Which statement best defines capital flight?

Accepted Answer

A)  The process of taking advantage of differences in prices in different markets 
B)  The movement of funds between financial intermediaries when interest rates change 
C)  The ability of investment expenditures to lift a country out of poverty 
D)  The large and sudden reduction in the demand for assets located in a country 
A)  The process of taking advantage of differences in prices in different markets 
B)  The movement of funds between financial intermediaries when interest rates change 
C)  The ability of investment expenditures to lift a country out of poverty 
D)  The large and sudden reduction in the demand for assets located in a country

Question 3

Which statement is consistent with negative net exports?

Accepted Answer

A)  Net capital outflow is positive, so foreign assets bought by Canadians are greater than Canadian assets bought by foreigners. 
B)  Net capital outflow is positive, so Canadian assets bought by foreigners are greater than foreign assets bought by Canadians. 
C)  Net capital outflow is negative, so foreign assets bought by Canadians are greater than Canadian assets bought by foreigners. 
D)  Net capital outflow is negative, so Canadian assets bought by foreigners are greater than foreign assets bought by Canadians. 
A)  Net capital outflow is positive, so foreign assets bought by Canadians are greater than Canadian assets bought by foreigners. 
B)  Net capital outflow is positive, so Canadian assets bought by foreigners are greater than foreign assets bought by Canadians. 
C)  Net capital outflow is negative, so foreign assets bought by Canadians are greater than Canadian assets bought by foreigners. 
D)  Net capital outflow is negative, so Canadian assets bought by foreigners are greater than foreign assets bought by Canadians.

Question 4

Which statement best explains the effect of trade policies on the trade balance?

Accepted Answer

A)  Trade policies alter the trade balance because they alter imports of the country that implemented them. 
B)  Trade policies alter the trade balance because they alter net capital outflow of the country that implemented them. 
C)  Trade policies do not alter the trade balance because they cannot alter the national saving or domestic investment of the country that implements them. 
D)  Trade policies do not alter the trade balance because they cannot alter the real exchange rate of the currency of the country that implements them. 
A)  Trade policies alter the trade balance because they alter imports of the country that implemented them. 
B)  Trade policies alter the trade balance because they alter net capital outflow of the country that implemented them. 
C)  Trade policies do not alter the trade balance because they cannot alter the national saving or domestic investment of the country that implements them. 
D)  Trade policies do not alter the trade balance because they cannot alter the real exchange rate of the currency of the country that implements them.

Question 5

What will NOT change Canadian net exports?

Accepted Answer

A)  capital flight from Canada 
B)  an increase in the government budget deficit 
C)  the imposition of Canadian import quotas 
D)  an increase in the world interest rate 
A)  capital flight from Canada 
B)  an increase in the government budget deficit 
C)  the imposition of Canadian import quotas 
D)  an increase in the world interest rate

Question 6

In an open economy, what does the market for loanable funds take as given?

Accepted Answer

A)  saving 
B)  investment 
C)  exchange rate 
D)  real interest rate 
A)  saving 
B)  investment 
C)  exchange rate 
D)  real interest rate

Question 7

According to the open-economy macroeconomic model, if the Canadian government decreased the government budget deficit, both Canadian domestic investment and Canadian net capital outflow would fall.

Accepted Answer

A) True 
 B)False

Question 8

How are the identities S = NCO + I and NCO = NX related to the foreign-currency exchange market and the loanable funds market?

Accepted Answer

S is national saving, which is the sourc

Question 9

In an open economy, where does the demand for loanable funds come from?

Accepted Answer

A)  from those who want to borrow funds to buy domestic capital goods 
B)  from those who want to borrow funds to buy foreign assets 
C)  from those who want to borrow funds to buy either domestic capital goods or foreign assets 
D)  from those who want to borrow funds to buy Canadian bonds or shares of stock in Canadian companies 
A)  from those who want to borrow funds to buy domestic capital goods 
B)  from those who want to borrow funds to buy foreign assets 
C)  from those who want to borrow funds to buy either domestic capital goods or foreign assets 
D)  from those who want to borrow funds to buy Canadian bonds or shares of stock in Canadian companies

Question 10

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

Accepted Answer

A)  The quantity of dollars supplied is less than the quantity demanded, and the dollar will appreciate. 
B)  The quantity of dollars supplied is less than the quantity demanded, and the dollar will depreciate. 
C)  The quantity of dollars supplied is greater than the quantity demanded, and the dollar will appreciate. 
D)  The quantity of dollars supplied is greater than the quantity demanded, and the dollar will depreciate. 
A)  The quantity of dollars supplied is less than the quantity demanded, and the dollar will appreciate. 
B)  The quantity of dollars supplied is less than the quantity demanded, and the dollar will depreciate. 
C)  The quantity of dollars supplied is greater than the quantity demanded, and the dollar will appreciate. 
D)  The quantity of dollars supplied is greater than the quantity demanded, and the dollar will depreciate.

Question 11

Which statement best defines a trade policy?

Accepted Answer

A)  It is a government policy directed toward the goal of improving the tradeoff between equity and efficiency. 
B)  It is a government policy that directly influences the quantity of goods and services that a country imports or exports. 
C)  It is a government policy directed toward the goal of increasing domestic trade. 
D)  It is a government policy designed to limit the power of trade unions. 
A)  It is a government policy directed toward the goal of improving the tradeoff between equity and efficiency. 
B)  It is a government policy that directly influences the quantity of goods and services that a country imports or exports. 
C)  It is a government policy directed toward the goal of increasing domestic trade. 
D)  It is a government policy designed to limit the power of trade unions.

Question 12

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

Accepted Answer

A)  It discourages people from saving and so increases the quantity of loanable funds demanded. 
B)  It discourages people from saving and so decreases the quantity of loanable funds demanded. 
C)  It encourages people to save and so increases the quantity of loanable funds supplied. 
D)  It encourages people to save and so decreases the quantity of loanable funds supplied. 
A)  It discourages people from saving and so increases the quantity of loanable funds demanded. 
B)  It discourages people from saving and so decreases the quantity of loanable funds demanded. 
C)  It encourages people to save and so increases the quantity of loanable funds supplied. 
D)  It encourages people to save and so decreases the quantity of loanable funds supplied.

Question 13

Suppose that Canada imposes an import quota on live turkeys. In the open-economy macroeconomic model, which curve would this quota shift?

Accepted Answer

A)  supply of loanable funds left 
B)  demand for loanable funds left 
C)  demand for Canadian dollars right 
D)  supply of Canadian dollars left 
A)  supply of loanable funds left 
B)  demand for loanable funds left 
C)  demand for Canadian dollars right 
D)  supply of Canadian dollars left

Question 14

If a country's exports are greater than its imports, what is the country said to have?

Accepted Answer

A)  a trade surplus 
B)  a trade deficit 
C)  a comparative advantage 
D)  an absolute advantage 
A)  a trade surplus 
B)  a trade deficit 
C)  a comparative advantage 
D)  an absolute advantage

Question 15

Other things the same, when a Canadian company imports wool from Australia, the open-economy macroeconomic model treats this transaction as a decrease in the quantity of dollars demanded in the Canadian foreign-currency exchange market.

Accepted Answer

A) True 
 B)False

Question 16

When the government increases the government budget deficit, national saving decreases.

Accepted Answer

A) True 
 B)False

Question 17

Figure 13-1
  
-Refer to the FigurE13-1. In the figure shown, if the real interest rate is 6 percent, what is the result?

Accepted Answer

A)  surplus of $4000 
B)  surplus of $2000 
C)  shortage of $4000 
D)  shortage of $2000 
A)  surplus of $4000 
B)  surplus of $2000 
C)  shortage of $4000 
D)  shortage of $2000

Question 18

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

Accepted Answer

A)  Interest rates rise, and the real exchange rate appreciates. 
B)  Interest rates fall, and the real exchange rate depreciates. 
C)  Interest rates rise, and the real exchange rate depreciates. 
D)  Interest rates fall, and the real exchange rate appreciates. 
A)  Interest rates rise, and the real exchange rate appreciates. 
B)  Interest rates fall, and the real exchange rate depreciates. 
C)  Interest rates rise, and the real exchange rate depreciates. 
D)  Interest rates fall, and the real exchange rate appreciates.

Question 19

The 1998 default by the Russian government had results that were predictable using the textbook model. Which statement best describes what happened?

Accepted Answer

A)  The event increased Russian interest rates and net exports. 
B)  The event reduced Russian interest rates and net exports. 
C)  The event increased Russian interest rates and reduced Russian net exports. 
D)  The event reduced Russian interest rates and increased Russian net exports. 
A)  The event increased Russian interest rates and net exports. 
B)  The event reduced Russian interest rates and net exports. 
C)  The event increased Russian interest rates and reduced Russian net exports. 
D)  The event reduced Russian interest rates and increased Russian net exports.

Question 20

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

Accepted Answer

A)  a reduction in political instability 
B)  ending investment tax credits 
C)  a reduction in the size of the government's budget surplus 
D)  an import quota 
A)  a reduction in political instability 
B)  ending investment tax credits 
C)  a reduction in the size of the government's budget surplus 
D)  an import quota

Which statement could be prompted by an interest rate that is temporarily higher in Canada than in the rest of the world?

Which statement best defines capital flight?

Which statement is consistent with negative net exports?

Which statement best explains the effect of trade policies on the trade balance?

What will NOT change Canadian net exports?

In an open economy, what does the market for loanable funds take as given?

According to the open-economy macroeconomic model, if the Canadian government decreased the government budget deficit, both Canadian domestic investment and Canadian net capital outflow would fall.

How are the identities S = NCO + I and NCO = NX related to the foreign-currency exchange market and the loanable funds market?

In an open economy, where does the demand for loanable funds come from?

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

Which statement best defines a trade policy?

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

Suppose that Canada imposes an import quota on live turkeys. In the open-economy macroeconomic model, which curve would this quota shift?

If a country's exports are greater than its imports, what is the country said to have?

Other things the same, when a Canadian company imports wool from Australia, the open-economy macroeconomic model treats this transaction as a decrease in the quantity of dollars demanded in the Canadian foreign-currency exchange market.

When the government increases the government budget deficit, national saving decreases.

Figure 13-1 -Refer to the FigurE13-1. In the figure shown, if the real interest rate is 6 percent, what is the result?

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

The 1998 default by the Russian government had results that were predictable using the textbook model. Which statement best describes what happened?

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

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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Exam 13: A Macroeconomic Theory of the Small Open Economy

Which statement could be prompted by an interest rate that is temporarily higher in Canada than in the rest of the world?

Which statement best defines capital flight?

Which statement is consistent with negative net exports?

Which statement best explains the effect of trade policies on the trade balance?

What will NOT change Canadian net exports?

In an open economy, what does the market for loanable funds take as given?

According to the open-economy macroeconomic model, if the Canadian government decreased the government budget deficit, both Canadian domestic investment and Canadian net capital outflow would fall.

How are the identities S = NCO + I and NCO = NX related to the foreign-currency exchange market and the loanable funds market?

In an open economy, where does the demand for loanable funds come from?

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

Which statement best defines a trade policy?

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

Suppose that Canada imposes an import quota on live turkeys. In the open-economy macroeconomic model, which curve would this quota shift?

If a country's exports are greater than its imports, what is the country said to have?

Other things the same, when a Canadian company imports wool from Australia, the open-economy macroeconomic model treats this transaction as a decrease in the quantity of dollars demanded in the Canadian foreign-currency exchange market.

When the government increases the government budget deficit, national saving decreases.

Figure 13-1 -Refer to the FigurE13-1. In the figure shown, if the real interest rate is 6 percent, what is the result?

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

The 1998 default by the Russian government had results that were predictable using the textbook model. Which statement best describes what happened?

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

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters