Question 1

Which of the following would increase net exports in Canada?

Accepted Answer

A) A Canadian purchases 500 silver necklaces from Mexico. 
B) The government of Mexico purchases 500 Bombardier C Series aircraft from the Canada. 
C) A Mexican citizen purchases 25 shares of stock in Bombardier. 
D) The Canadian government donates $5 million to Mexico to help victims of drought in Mexico. 
E) Blackberry sells several of its patents to Apple. 
A) A Canadian purchases 500 silver necklaces from Mexico. 
B) The government of Mexico purchases 500 Bombardier C Series aircraft from the Canada. 
C) A Mexican citizen purchases 25 shares of stock in Bombardier. 
D) The Canadian government donates $5 million to Mexico to help victims of drought in Mexico. 
E) Blackberry sells several of its patents to Apple.

Question 2

If there is currently a shortage of dollars, which of the following would you expect to see in the foreign exchange market?

Accepted Answer

A) The dollar will appreciate. 
B) The dollar will depreciate. 
C) There will be an increase in the demand for dollars. 
D) There will be an increase in the supply of dollars. 
E) The quantity of dollars demanded will increase. 
A) The dollar will appreciate. 
B) The dollar will depreciate. 
C) There will be an increase in the demand for dollars. 
D) There will be an increase in the supply of dollars. 
E) The quantity of dollars demanded will increase.

Question 3

If net foreign investment is positive, which of the following must be true? (Assume that the capital account is zero and net transfers are zero.)

Accepted Answer

A) Capital outflows are less than capital inflows. 
B) Domestic investment must be less than national saving. 
C) Net exports are negative. 
D) The country will owe more to foreigners in the future. 
E) None of the above is true when net foreign investment is positive. 
A) Capital outflows are less than capital inflows. 
B) Domestic investment must be less than national saving. 
C) Net exports are negative. 
D) The country will owe more to foreigners in the future. 
E) None of the above is true when net foreign investment is positive.

Question 4

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

Accepted Answer

No.In an open economy, the sav

Question 5

The Canadian ________ account records relatively minor transactions, such as migrants' transfers; and sales and purchases of nonproduced, nonfinancial assets.

Accepted Answer

A) current 
B) capital 
C) financial 
D) balance of trade 
E) official settlements 
A) current 
B) capital 
C) financial 
D) balance of trade 
E) official settlements

Question 6

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.The appreciation of the euro is represented as a movement from

Accepted Answer

A) D to A. 
B) D to C. 
C) B to C. 
D) A to C. 
E) A to B. 
A) D to A. 
B) D to C. 
C) B to C. 
D) A to C. 
E) A to B.

Question 7

Which of the following would decrease the balance on the current account?

Accepted Answer

A) a decrease in foreign direct investment 
B) a decrease in the amount of aid money the government sends abroad 
C) a decrease in imports 
D) a sale of Canadian natural resource rights 
E) None of the above will increase the balance on the current account. 
A) a decrease in foreign direct investment 
B) a decrease in the amount of aid money the government sends abroad 
C) a decrease in imports 
D) a sale of Canadian natural resource rights 
E) None of the above will increase the balance on the current account.

Question 8

If net foreign investment in Canada is negative, how must national saving and domestic investment be related?

Accepted Answer

A) Domestic investment and national saving must also be negative. 
B) Domestic investment must be greater than national saving. 
C) Domestic investment must be less than national saving. 
D) Domestic investment can be greater than or less than national saving. 
E) Domestic investment is always unrelated to national saving. 
A) Domestic investment and national saving must also be negative. 
B) Domestic investment must be greater than national saving. 
C) Domestic investment must be less than national saving. 
D) Domestic investment can be greater than or less than national saving. 
E) Domestic investment is always unrelated to national saving.

Question 9

According to the saving and investment equation, if net foreign investment rises by $60 million,

Accepted Answer

A) national saving will increase by $60 million. 
B) national saving will fall by $60 million. 
C) domestic investment will rise by $60 million. 
D) private saving will fall by $60 million. 
E) public saving will rise by $60 million. 
A) national saving will increase by $60 million. 
B) national saving will fall by $60 million. 
C) domestic investment will rise by $60 million. 
D) private saving will fall by $60 million. 
E) public saving will rise by $60 million.

Question 10

The price of domestic goods in terms of foreign goods is referred to as

Accepted Answer

A) the nominal exchange rate. 
B) the relative inflation rate. 
C) the current account balance. 
D) the real exchange rate. 
E) the relative exchange rate. 
A) the nominal exchange rate. 
B) the relative inflation rate. 
C) the current account balance. 
D) the real exchange rate. 
E) the relative exchange rate.

Question 11

Monetary policy has a ________ effect on aggregate demand in a(n)________ economy, and fiscal policy has a ________ effect on aggregate demand in a(n)________ economy.

Accepted Answer

A) weaker; open; weaker; open 
B) weaker; closed; weaker; closed 
C) stronger; open; weaker; open 
D) stronger; closed; weaker; open 
E) weaker; closed; stronger; closed 
A) weaker; open; weaker; open 
B) weaker; closed; weaker; closed 
C) stronger; open; weaker; open 
D) stronger; closed; weaker; open 
E) weaker; closed; stronger; closed

Question 12

If the exchange rate between the Mexican peso and dollar expressed in terms of pesos per dollar is 13.5 pesos = 1 dollar, what is the exchange rate when expressed in terms of dollars per peso?

Accepted Answer

If 13.5 pesos = 1 do

Question 13

Which of the following would decrease the current account balance of Canada?

Accepted Answer

A) a decrease in imports 
B) a decrease in the amount of money the Canadian government sends in foreign aid to other countries 
C) a decrease in the balance of trade 
D) a decrease in the amount of income Canadian companies pay out to foreigners who own investments in Canada 
E) a decrease in the amount of aid Canadians send to foreign countries 
A) a decrease in imports 
B) a decrease in the amount of money the Canadian government sends in foreign aid to other countries 
C) a decrease in the balance of trade 
D) a decrease in the amount of income Canadian companies pay out to foreigners who own investments in Canada 
E) a decrease in the amount of aid Canadians send to foreign countries

Question 14

Figure 14.4   Alt text for Figure 14.4: In figure 14.4, a graph illustrates the quantity of dollars traded against the exchange rate.
Long description for Figure 14.4: 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 2 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 right corner.It passes through points A and B.Supply curve S2 is a straight line with the same slope as curve S1, but is plotted to the right.Curve 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 has the same slope as curve D1, but is plotted to the right Curve D2 intersects curve S1 at point B, and curve S2 at point C.
-Refer to Figure 14.4.Italians cut back on smoking and cut their demand for Canadian cigarettes in half.Assuming all else remains constant, this would be represented as a movement from

Accepted Answer

A) B to A. 
B) D to C. 
C) B to C. 
D) A to D. 
A) B to A. 
B) D to C. 
C) B to C. 
D) A to D.

Question 15

Net foreign investment is equal to

Accepted Answer

A) capital inflows minus capital outflows. 
B) foreign direct investment. 
C) the balance of trade. 
D) net foreign portfolio investment plus net foreign direct investment. 
E) the current account balance. 
A) capital inflows minus capital outflows. 
B) foreign direct investment. 
C) the balance of trade. 
D) net foreign portfolio investment plus net foreign direct investment. 
E) the current account balance.

Question 16

The balance of payments can only be zero if Canada has incurred overall balance of payments deficits.

Accepted Answer

A) True 
 B)False

Question 17

Expansionary fiscal policy crowds out both domestic investment and net exports.

Accepted Answer

A) True 
 B)False

Question 18

If the Bank of Canada does not take into account the additional policy channels available in an open economy, then ________ when conducting contractionary monetary policy.

Accepted Answer

A) it is likely to decrease GDP too much and cause a recession 
B) it is likely to decrease GDP too little and inflation will persist 
C) it is likely to increase GDP too much and inflation will persist 
D) it is likely to increase GDP too little and cause a recession 
E) it is likely to decrease GDP too little and cause deflation 
A) it is likely to decrease GDP too much and cause a recession 
B) it is likely to decrease GDP too little and inflation will persist 
C) it is likely to increase GDP too much and inflation will persist 
D) it is likely to increase GDP too little and cause a recession 
E) it is likely to decrease GDP too little and cause deflation

Question 19

Which of the following is an example of foreign direct investment in China?

Accepted Answer

A) Canadian entrepreneur Kevin O'Leary buys stock in the Chinese auto company, Cherry Automobile Company. 
B) Chinese Shenzen Airlines company buys a small Canadian airline company, Porter. 
C) The Canadian company George Weston Ltd buys a warehouse in Shanghai. 
D) The Bank of China purchases Canadian government bonds. 
E) A Canadian foreign exchange speculator buys $200,000 worth of the Chinese currency, the yuan. 
A) Canadian entrepreneur Kevin O'Leary buys stock in the Chinese auto company, Cherry Automobile Company. 
B) Chinese Shenzen Airlines company buys a small Canadian airline company, Porter. 
C) The Canadian company George Weston Ltd buys a warehouse in Shanghai. 
D) The Bank of China purchases Canadian government bonds. 
E) A Canadian foreign exchange speculator buys $200,000 worth of the Chinese currency, the yuan.

Question 20

How might a Canadian federal budget surplus affect the balance of trade? (Assume exchange rates are stated in terms of foreign currency per Canadian dollar.)

Accepted Answer

A) A federal budget surplus raises interest rates, which raises exchange rates and increases the balance of trade. 
B) A federal budget surplus raises interest rates, which raises exchange rates and reduces the balance of trade. 
C) A federal budget surplus reduces interest rates, which raises exchange rates and reduces the balance of trade. 
D) A federal budget surplus reduces interest rates, which reduces exchange rates and increases the balance of trade. 
E) A federal budget surplus reduces interest rates, which raises exchange rates and increases the balance of trade. 
A) A federal budget surplus raises interest rates, which raises exchange rates and increases the balance of trade. 
B) A federal budget surplus raises interest rates, which raises exchange rates and reduces the balance of trade. 
C) A federal budget surplus reduces interest rates, which raises exchange rates and reduces the balance of trade. 
D) A federal budget surplus reduces interest rates, which reduces exchange rates and increases the balance of trade. 
E) A federal budget surplus reduces interest rates, which raises exchange rates and increases the balance of trade.

Which of the following would increase net exports in Canada?

If there is currently a shortage of dollars, which of the following would you expect to see in the foreign exchange market?

If net foreign investment is positive, which of the following must be true? (Assume that the capital account is zero and net transfers are zero.)

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

The Canadian ________ account records relatively minor transactions, such as migrants' transfers; and sales and purchases of nonproduced, nonfinancial assets.

Which of the following would decrease the balance on the current account?

If net foreign investment in Canada is negative, how must national saving and domestic investment be related?

According to the saving and investment equation, if net foreign investment rises by $60 million,

The price of domestic goods in terms of foreign goods is referred to as

Monetary policy has a effect on aggregate demand in a(n) economy, and fiscal policy has a effect on aggregate demand in a(n) economy.

If the exchange rate between the Mexican peso and dollar expressed in terms of pesos per dollar is 13.5 pesos = 1 dollar, what is the exchange rate when expressed in terms of dollars per peso?

Which of the following would decrease the current account balance of Canada?

Net foreign investment is equal to

The balance of payments can only be zero if Canada has incurred overall balance of payments deficits.

Expansionary fiscal policy crowds out both domestic investment and net exports.

If the Bank of Canada does not take into account the additional policy channels available in an open economy, then ________ when conducting contractionary monetary policy.

Which of the following is an example of foreign direct investment in China?

How might a Canadian federal budget surplus affect the balance of trade? (Assume exchange rates are stated in terms of foreign currency per Canadian dollar.)

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Supply and Demand

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Bank of Canada

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Bank of Canada Policy

The International Financial System

Filters

Exam 14: Macroeconomics in an Open Economy

Which of the following would increase net exports in Canada?

If there is currently a shortage of dollars, which of the following would you expect to see in the foreign exchange market?

If net foreign investment is positive, which of the following must be true? (Assume that the capital account is zero and net transfers are zero.)

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

The Canadian ________ account records relatively minor transactions, such as migrants' transfers; and sales and purchases of nonproduced, nonfinancial assets.

Which of the following would decrease the balance on the current account?

If net foreign investment in Canada is negative, how must national saving and domestic investment be related?

According to the saving and investment equation, if net foreign investment rises by $60 million,

The price of domestic goods in terms of foreign goods is referred to as

Monetary policy has a ________ effect on aggregate demand in a(n)________ economy, and fiscal policy has a ________ effect on aggregate demand in a(n)________ economy.

If the exchange rate between the Mexican peso and dollar expressed in terms of pesos per dollar is 13.5 pesos = 1 dollar, what is the exchange rate when expressed in terms of dollars per peso?

Which of the following would decrease the current account balance of Canada?

Net foreign investment is equal to

The balance of payments can only be zero if Canada has incurred overall balance of payments deficits.

Expansionary fiscal policy crowds out both domestic investment and net exports.

If the Bank of Canada does not take into account the additional policy channels available in an open economy, then ________ when conducting contractionary monetary policy.

Which of the following is an example of foreign direct investment in China?

How might a Canadian federal budget surplus affect the balance of trade? (Assume exchange rates are stated in terms of foreign currency per Canadian dollar.)

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Supply and Demand

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Bank of Canada

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Bank of Canada Policy

The International Financial System

Filters

Monetary policy has a effect on aggregate demand in a(n) economy, and fiscal policy has a effect on aggregate demand in a(n) economy.