Exam 14: Macroeconomics in an Open Economy

In Canada, domestic investment is greater than national saving.

How does an increase in the relative price of a country's goods in terms of foreign goods, or real exchange rate, affect its balance of trade?

Suppose Norway decides to sell its large holdings of Canada bonds.If you are thinking of financing your new car, how would Norway's action affect your decision to refinance?

Expansionary monetary policy will have what effect on the components of aggregate demand?

If foreign holdings of Canadian dollars increase, holding all else constant,

Canada's strong economic performance in the wake of the global financial crisis

Assuming Canada is the "domestic" country, if the real exchange rate between Canada and France increases from 1.5 to 1.8

If the Bank of Canada is using policy to combat inflation, what is likely to happen in the foreign exchange market and to the foreign exchange value of the dollar?

How will contractionary monetary policy in Japan affect the demand for yen and the supply of yen in the foreign exchange market?

How will an increase in federal government spending without an increase in taxes affect real GDP and the price level in the short run in a closed economy and in an open economy?

A decrease in Canadian net foreign direct investment would occur if

Currency traders expect the value of the Canadian dollar to rise.What effect will this have on the demand for Canadian dollars and the supply of Canadian dollars in the foreign exchange market?

Assuming no change in the nominal exchange rate, how will a lower rate of inflation in the United States relative to Canada affect the real exchange rate between the two countries? (Assume Canada is the "domestic" country.)

Ceteris paribus, an increase in the government's budget deficit will increase the current account deficit.

In 2016 Venezuela was expected to experience inflation of up to 700%. Given that central bank loss of independence tends to lead to inflation, we should expect this event to cause inflation to ________ and the real exchange rate to ________ between the two counties.(Assume the nominal exchange does not change, and that Canada is the "domestic" country).

If Canada has a current account deficit and the capital account is zero, which of the following must be true?

A decrease in the demand for Canadian-made goods will

Suppose the federal government is successful in enacting tariffs large enough to eliminate the current account deficit.What would happen to the level of domestic investment?

When exchange rates are not determined in the market but are instead set by a country's central bank, we say that the country's exchange rate is

Figure 14.1 Alt text for Figure 14.1: In figure 14.1, a graph illustrates the quantity of dollars traded against the exchange rate. Long description for Figure 14.1: The x-axis is labelled, quantity of dollars traded, and the y-axis is labelled, exchange rate, euros against dollars.2 supply curves; S1 and S2, and two demand curves; D1 and D2 are plotted.Supply curve S1 is a straight line which slopes up from the bottom left corner to the top left corner, and passes through points A and B.Supply curve S2 is a straight line with the same slope as S1, but plotted above.S2 passes through points D and C.Demand curve D1 is a straight line, which slopes down from the top left corner to the bottom right corner.Curve D1 intersects curve S1 at point A, and curve S2 at point D.Demand curve D2 is a straight line with the same slope as D1, but plotted above.Curve D2 intersects curve S1 at point B, and curve S2 at point C. -Refer to Figure 14.1.Suppose that Canadian government deficits cause interest rates in Canada to rise relative to those in the European Union.Assuming all else remains constant, how would this be represented?