Exam 14: Macroeconomics in an Open Economy

Compared to a closed economy, expansionary fiscal policy in an open economy has a smaller effect on aggregate demand because:

If S = national saving, I = private investment and NFI = net foreign investments, then:

Suppose that the European Union experiences a recession and this causes a decline in income in the European Union relative to Australia. Because of this, the dollar will, ceteris paribus:

'Private saving' is equal to:

Net foreign investment is a measure of net capital outflows, equal to capital outflows minus capital inflows in a given period of accounting.

Does the saving and investment equation imply that a country's national saving must always equal its domestic investment? Explain. _____________________________________________________________________________________________ _____________________________________________________________________________________________

If net primary income and net secondary income are $10 billion, and a country's purchases of foreign goods and services are $25 billion while its sales of goods and services overseas are $26 billion, it has a:

A country's balance of payments is best described as a system that records:

Any ________ by Australian residents from overseas are ________ additions to the current account.

The quantity supplied of dollars is likely to ________ when the exchange rate of yen per dollar ________.

If the _______________ for dollars ?????__________, the market value of the dollar will ________ relative to other currencies around the world.

If the capital account is in surplus and the current account is zero, then the:

Show what will happen in the market for yen if Japan's central bank sells yen for dollars. Explain what will happen to Australia's current account, ceteris paribus, because of this action. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Which of the following is a true statement describing expansionary fiscal policy's impact in open and closed economies?

The real exchange rate of Japanese yen to Australian dollars will increase if Australia's price level ________ and the nominal exchange rate of yen to the dollar ________.

The current account balance equals:

Australia's net foreign debt as a proportion of GDP has:

If the exchange rate between the dollar and the yen is ¥80 = $1 this week, and is ¥87 = $1 next week, we say that the dollar appreciated.

Refer to Figure 14.2 for the following questions. Figure 14.2 -Refer to Figure 14.2. Assume that Europe experiences an economic boom. Assuming all else remains constant, this would be represented as a movement from:

Explain where, in Australia's balance of payments, an entry would be made for each of the following: a.a financier from Singapore buys some Australian shares b.an Australian buys some Italian shoes in Milan, Italy _____________________________________________________________________________________________ _____________________________________________________________________________________________