Exam 14: Macroeconomics in an Open Economy

If the price level in Canada is 110, the price level is 135 in Mexico, and the nominal exchange rate is 12.5 pesos per Canadian dollar, what is the real exchange rate from the Canadian perspective?

Which of the following equations is true in an open economy?

The Japanese recession of 2007-2009 decreased the demand for imports in Japan, which caused the ________ curve for the yen to shift ________, increasing the exchange rate and the value of the yen.

Which of the following would cause the Canadian dollar to depreciate?

When net capital flows are positive,

Explain why the budget deficit and the trade deficit are sometimes referred to as the "twin deficits."

An increase in capital outflows from Canada will

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.Currency speculators believe that the value of the euro will increase relative to the dollar.Assuming all else remains constant, how would this be represented?

Contractionary monetary policy and expansionary fiscal policy both reduce net exports in an open economy.

According to the saving and investment equation, if net foreign investment falls by $35 million,

Table 14.1 -Refer to Table 14.1.Use the information in the table to prepare a balance of payments account and find the value of the statistical discrepancy.Assume that the balance on the capital account is zero.

The United States is called a debtor nation because

Ceteris paribus, an increase in the government budget deficit increases interest rates in Canada and causes a real appreciation of the dollar.

If the government finances an increase in government purchases with an increase in taxes, which of the following would you not expect to see?

Currency traders expect the dollar to appreciate.What impact will this have on equilibrium in the foreign exchange market?

Canada has a trade ________ with the U.S.and the U.K.and a trade ________ with its other major trading partners.

The current account balance equals the value of net exports.

When Canada sends money to Syria to help refugees from the civil war, in what account is this transaction recorded?

An economy that has interactions in trade or finance with other economies is referred to as

Fiscal policy has a greater impact in a closed economy than it does in an open economy.