Question 1

If Greece suffers from capital flight, Grecian domestic investment will fall and Grecian net exports will increase.

Accepted Answer

A) True 
 B)False

Question 2

Which statement is consistent with a depreciation of the dollar?

Accepted Answer

A)  Canadian goods become less expensive relative to foreign goods, which makes exports rise and imports fall. 
B)  Canadian goods become less expensive relative to foreign goods, which makes exports fall and imports rise. 
C)  Canadian goods become more expensive relative to foreign goods, which makes exports rise and imports fall. 
D)  Canadian goods become more expensive relative to foreign goods, which makes exports fall and imports rise. 
A)  Canadian goods become less expensive relative to foreign goods, which makes exports rise and imports fall. 
B)  Canadian goods become less expensive relative to foreign goods, which makes exports fall and imports rise. 
C)  Canadian goods become more expensive relative to foreign goods, which makes exports rise and imports fall. 
D)  Canadian goods become more expensive relative to foreign goods, which makes exports fall and imports rise.

Question 3

In an open economy, the demand for loanable funds comes from both domestic investment and net capital outflow.

Accepted Answer

A) True 
 B)False

Question 4

What would cause the real exchange rate of the Canadian dollar to depreciate?

Accepted Answer

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

Question 5

What does a lower real interest rate decrease the quantity of?

Accepted Answer

A)  loanable funds demanded 
B)  loanable funds supplied 
C)  domestic investment 
D)  net capital outflow 
A)  loanable funds demanded 
B)  loanable funds supplied 
C)  domestic investment 
D)  net capital outflow

Question 6

In an open economy, what are the determinants of the prevailing real interest rate?

Accepted Answer

A)  domestic supply and domestic demand for loanable funds 
B)  world supply and domestic demand for loanable funds 
C)  world supply and world demand for loanable funds 
D)  domestic supply and world demand for loanable funds 
A)  domestic supply and domestic demand for loanable funds 
B)  world supply and domestic demand for loanable funds 
C)  world supply and world demand for loanable funds 
D)  domestic supply and world demand for loanable funds

Question 7

Suppose the Canadian government institutes a "Buy Canadian" campaign, in order to encourage spending on domestic goods. What effect will this have on the Canadian trade balance?

Accepted Answer

Such a campaign will increase the demand

Question 8

Suppose the market for loanable funds is described by the equations I = 180 - 16r and S = 8 + 24r. Suppose also that the world interest rate is 8 percent.
a) Calculate domestic investment, domestic saving, and net capital outflow.
b) If the net exports curve is given by NX = 142 - 2X, where X is the real exchange rate, calculate the equilibrium real exchange rate and net exports.
c) How does the real exchange rate change when the world interest rate decreases to 7 percent?
d) Discuss your results.

Accepted Answer

a)Domestic saving at the world interest

Question 9

Figure 13-2
  
-Refer to the FigurE13-2. Suppose that these diagrams refer to Canada. Which shift shows the effect of a voluntary export restriction by the Swiss government?

Accepted Answer

A)  a shift from D₁
To D₂ 
B)  a shift from D₀ to D₁ 
C)  a shift from D₀ to D₂ 
D)  a shift from D₁
To D₀ 
A)  a shift from D₁
To D₂ 
B)  a shift from D₀ to D₁ 
C)  a shift from D₀ to D₂ 
D)  a shift from D₁
To D₀

Question 10

In an open economy, the supply of loanable funds comes from national saving.

Accepted Answer

A) True 
 B)False

Question 11

If the world real interest rate is less than the real interest rate that would occur in Canada if there was no trade, what should we expect to happen in the supply and demand for loanable funds graph?

Accepted Answer

A)  the supply curve to shift to the left 
B)  the demand curve to shift to the right 
C)  net capital outflow to remain unchanged 
D)  net capital outflow to decrease 
A)  the supply curve to shift to the left 
B)  the demand curve to shift to the right 
C)  net capital outflow to remain unchanged 
D)  net capital outflow to decrease

Question 12

What macroeconomic measures are considered fixed in our open-economy model?

Accepted Answer

A)  the exchange rate, GDP, and the world real interest rate 
B)  the exchange rate, world real interest rate, and the inflation rate 
C)  net capital outflow, the inflation rate, and the price level 
D)  GDP, the price level, and the world real interest rate 
A)  the exchange rate, GDP, and the world real interest rate 
B)  the exchange rate, world real interest rate, and the inflation rate 
C)  net capital outflow, the inflation rate, and the price level 
D)  GDP, the price level, and the world real interest rate

Question 13

If the quantity of loanable funds supplied is greater than the quantity demanded, which statement best describes the difference?

Accepted Answer

A)  There is a deficit of loanable funds and the excess is net capital outflow. 
B)  There is a deficit of loanable funds and the shortage is net capital outflow. 
C)  There is a surplus of loanable funds and the excess is net capital outflow. 
D)  There is a surplus of loanable funds, and the shortage is net capital outflow. 
A)  There is a deficit of loanable funds and the excess is net capital outflow. 
B)  There is a deficit of loanable funds and the shortage is net capital outflow. 
C)  There is a surplus of loanable funds and the excess is net capital outflow. 
D)  There is a surplus of loanable funds, and the shortage is net capital outflow.

Question 14

Suppose that from 1980 to 1987, Canadian net capital outflows decreased. According to the open-economy macroeconomic model, what could have caused this?

Accepted Answer

A)  an increase in the demand for Canadian currency in the foreign-currency exchange 
B)  a decrease in the demand for Canadian currency in the foreign-currency exchange 
C)  an increase in the supply of loanable funds 
D)  a decrease in the supply of loanable funds 
A)  an increase in the demand for Canadian currency in the foreign-currency exchange 
B)  a decrease in the demand for Canadian currency in the foreign-currency exchange 
C)  an increase in the supply of loanable funds 
D)  a decrease in the supply of loanable funds

Question 15

An import quota imposed by Egypt would reduce Egyptian imports, but have no impact on Egyptian exports.

Accepted Answer

A) True 
 B)False

Question 16

What would make both the equilibrium interest rate and the equilibrium quantity of loanable funds increase?

Accepted Answer

A)  The demand for loanable funds shifts right. 
B)  The demand for loanable funds shifts left. 
C)  The supply of loanable funds shifts right. 
D)  The supply of loanable funds shifts left. 
A)  The demand for loanable funds shifts right. 
B)  The demand for loanable funds shifts left. 
C)  The supply of loanable funds shifts right. 
D)  The supply of loanable funds shifts left.

Question 17

If foreign investors believe that the Algerian government will default on their debt, what might happen?

Accepted Answer

A)  a decrease in Algerian interest rates and an increase in Algerian net capital outflow 
B)  an increase in both Algerian interest rates and net capital outflow 
C)  a decrease in both Algerian interest rates and net capital outflow 
D)  an increase in Algerian interest rates and a decrease in Algerian net capital outflow 
A)  a decrease in Algerian interest rates and an increase in Algerian net capital outflow 
B)  an increase in both Algerian interest rates and net capital outflow 
C)  a decrease in both Algerian interest rates and net capital outflow 
D)  an increase in Algerian interest rates and a decrease in Algerian net capital outflow

Question 18

Mexico suffered from capital flight in 1994. What happened to Mexico's real interest rate and the peso?

Accepted Answer

A)  The real interest rate fell, and the peso appreciated. 
B)  The real interest rate fell, and the peso depreciated. 
C)  The real interest rate rose, and the peso appreciated. 
D)  The real interest rate rose, and the peso depreciated. 
A)  The real interest rate fell, and the peso appreciated. 
B)  The real interest rate fell, and the peso depreciated. 
C)  The real interest rate rose, and the peso appreciated. 
D)  The real interest rate rose, and the peso depreciated.

Question 19

A drop in the Peruvian real interest rate reduces Peruvian net capital outflow.

Accepted Answer

A) True 
 B)False

Question 20

Explain why saving need not equal domestic investment in an open economy.

Accepted Answer

This is because saving equals

If Greece suffers from capital flight, Grecian domestic investment will fall and Grecian net exports will increase.

Which statement is consistent with a depreciation of the dollar?

In an open economy, the demand for loanable funds comes from both domestic investment and net capital outflow.

What would cause the real exchange rate of the Canadian dollar to depreciate?

What does a lower real interest rate decrease the quantity of?

In an open economy, what are the determinants of the prevailing real interest rate?

Suppose the Canadian government institutes a "Buy Canadian" campaign, in order to encourage spending on domestic goods. What effect will this have on the Canadian trade balance?

Figure 13-2 -Refer to the FigurE13-2. Suppose that these diagrams refer to Canada. Which shift shows the effect of a voluntary export restriction by the Swiss government?

In an open economy, the supply of loanable funds comes from national saving.

If the world real interest rate is less than the real interest rate that would occur in Canada if there was no trade, what should we expect to happen in the supply and demand for loanable funds graph?

What macroeconomic measures are considered fixed in our open-economy model?

If the quantity of loanable funds supplied is greater than the quantity demanded, which statement best describes the difference?

Suppose that from 1980 to 1987, Canadian net capital outflows decreased. According to the open-economy macroeconomic model, what could have caused this?

An import quota imposed by Egypt would reduce Egyptian imports, but have no impact on Egyptian exports.

What would make both the equilibrium interest rate and the equilibrium quantity of loanable funds increase?

If foreign investors believe that the Algerian government will default on their debt, what might happen?

Mexico suffered from capital flight in 1994. What happened to Mexico's real interest rate and the peso?

A drop in the Peruvian real interest rate reduces Peruvian net capital outflow.

Explain why saving need not equal domestic investment in an open economy.

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

If Greece suffers from capital flight, Grecian domestic investment will fall and Grecian net exports will increase.

Which statement is consistent with a depreciation of the dollar?

In an open economy, the demand for loanable funds comes from both domestic investment and net capital outflow.

What would cause the real exchange rate of the Canadian dollar to depreciate?

What does a lower real interest rate decrease the quantity of?

In an open economy, what are the determinants of the prevailing real interest rate?

Suppose the Canadian government institutes a "Buy Canadian" campaign, in order to encourage spending on domestic goods. What effect will this have on the Canadian trade balance?

Figure 13-2 -Refer to the FigurE13-2. Suppose that these diagrams refer to Canada. Which shift shows the effect of a voluntary export restriction by the Swiss government?

In an open economy, the supply of loanable funds comes from national saving.

If the world real interest rate is less than the real interest rate that would occur in Canada if there was no trade, what should we expect to happen in the supply and demand for loanable funds graph?

What macroeconomic measures are considered fixed in our open-economy model?

If the quantity of loanable funds supplied is greater than the quantity demanded, which statement best describes the difference?

Suppose that from 1980 to 1987, Canadian net capital outflows decreased. According to the open-economy macroeconomic model, what could have caused this?

An import quota imposed by Egypt would reduce Egyptian imports, but have no impact on Egyptian exports.

What would make both the equilibrium interest rate and the equilibrium quantity of loanable funds increase?

If foreign investors believe that the Algerian government will default on their debt, what might happen?

Mexico suffered from capital flight in 1994. What happened to Mexico's real interest rate and the peso?

A drop in the Peruvian real interest rate reduces Peruvian net capital outflow.

Explain why saving need not equal domestic investment in an open economy.

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