Question 1

If there is currently a surplus 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 a decrease in the demand for dollars. 
D) There will be a decrease in the supply of dollars. 
E) The will be an increase in the quantity of dollars supplied. 
A) The dollar will appreciate. 
B) The dollar will depreciate. 
C) There will be a decrease in the demand for dollars. 
D) There will be a decrease in the supply of dollars. 
E) The will be an increase in the quantity of dollars supplied.

Question 2

Figure 14.2   Alt text for Figure 14.2: In figure 14.2, a graph illustrates the quantity of dollars traded against the exchange rate.
Long description for Figure 14.2: The x-axis is labelled, quantity of dollars traded in millions per day, and the y-axis is labelled, exchange rate, British pound against Canadian dollars, with points 0.46 and British pound 0.50 marked.2 straight line supply curves, S1 and S2, slope up from the bottom left corner to the top right corner.Curve S2 is plotted to the right of curve S1.Demand curves D1 and D2 are straight line curves which slope down from the top left corner to the bottom left corner, with curve D2 plotted to the left of curve D1.Curves S1 and S2 intersect demand curves D1 and D2.The intersection point of curves S1 and D1 is connected to its corresponding y-axis value of British pound 0.50 with a dotted line.The intersection point of curves S2 and D2 is connected to its corresponding y-axis value of 0.46 with a dotted line.The intersection point of curves S1 and D1 is connected to its corresponding y-axis value of British pound 0.50 with a dotted line.A down pointing arrow indicates the difference between these values on the y-axis.arrow is shown between the 2 dotted lines.A right pointing arrow indicates the change from curve S1 to curve S2, and a left pointing arrow indicates the change from curve D1 to curve D2.
-Refer to Figure 14.2.Which of the events below would cause the shifts in the supply and demand curves in the market for Canadian dollars against the British pound shown in the graph above?

Accepted Answer

A) Interest rates rise in England. 
B) Interest rates rise in Canada. 
C) Real income rises in Canada. 
D) Real income falls in England. 
E) The imposition of a tariff on English goods by Canada. 
A) Interest rates rise in England. 
B) Interest rates rise in Canada. 
C) Real income rises in Canada. 
D) Real income falls in England. 
E) The imposition of a tariff on English goods by Canada.

Question 3

In an open economy, expansionary monetary policy will cause

Accepted Answer

A) consumption, investment, and net exports to rise. 
B) consumption and investment to rise, but net exports will fall. 
C) consumption to rise, but investment and net exports will fall. 
D) consumption to fall, but investment and net exports will rise. 
E) consumption and investment to fall, but net exports will rise. 
A) consumption, investment, and net exports to rise. 
B) consumption and investment to rise, but net exports will fall. 
C) consumption to rise, but investment and net exports will fall. 
D) consumption to fall, but investment and net exports will rise. 
E) consumption and investment to fall, but net exports will rise.

Question 4

Assuming Canada is the "domestic" country, if the real exchange rate between Canada and Russia decreases from 28 to 23,

Accepted Answer

A) the prices of Canadian goods and services have decreased by 5 percent relative to Russia. 
B) the prices of Canadian goods and services have increased by 25.5 percent relative to Russia. 
C) the prices of Canadian goods and services have decreased by 18 percent relative to Russia. 
D) the prices of Canadian goods and services have increased by 22 percent relative to Russia. 
E) the prices of Canadian goods and services have increased by 4 percent relative to Russia. 
A) the prices of Canadian goods and services have decreased by 5 percent relative to Russia. 
B) the prices of Canadian goods and services have increased by 25.5 percent relative to Russia. 
C) the prices of Canadian goods and services have decreased by 18 percent relative to Russia. 
D) the prices of Canadian goods and services have increased by 22 percent relative to Russia. 
E) the prices of Canadian goods and services have increased by 4 percent relative to Russia.

Question 5

The balance of trade is defined as

Accepted Answer

A) the difference between the balance of the current account and the balance of the capital account. 
B) the difference between the value of the goods and services a country exports and the value of the goods and services a country imports. 
C) the difference between the value of the goods a country exports and the value of the goods a country imports. 
D) the difference between the balance of the current account and the balance of the financial account. 
E) the difference between the volume of goods sold to other countries and the volume of goods bought from other countries. 
A) the difference between the balance of the current account and the balance of the capital account. 
B) the difference between the value of the goods and services a country exports and the value of the goods and services a country imports. 
C) the difference between the value of the goods a country exports and the value of the goods a country imports. 
D) the difference between the balance of the current account and the balance of the financial account. 
E) the difference between the volume of goods sold to other countries and the volume of goods bought from other countries.

Question 6

If net exports are negative,

Accepted Answer

A) net foreign investment is also negative. 
B) capital inflows must be less than capital outflows. 
C) net foreign investment must be greater than public saving. 
D) net foreign investment is positive. 
E) Both A and B are correct. 
A) net foreign investment is also negative. 
B) capital inflows must be less than capital outflows. 
C) net foreign investment must be greater than public saving. 
D) net foreign investment is positive. 
E) Both A and B are correct.

Question 7

An expansionary monetary policy in Canada should

Accepted Answer

A) decrease the foreign currency price of Canadian exports. 
B) cause the dollar to appreciate. 
C) decrease the dollar price of imports. 
D) decrease net exports. 
E) raise Canadian interest rates. 
A) decrease the foreign currency price of Canadian exports. 
B) cause the dollar to appreciate. 
C) decrease the dollar price of imports. 
D) decrease net exports. 
E) raise Canadian interest rates.

Question 8

If Canada has a net export surplus, which of the following must be true?

Accepted Answer

A) The balance on the financial account must equal the balance on the current account. 
B) Net foreign investment must be positive as well. 
C) Domestic private saving must be greater than net foreign investment. 
D) Domestic public saving must be greater than net foreign investment. 
E) Investment equals domestic savings. 
A) The balance on the financial account must equal the balance on the current account. 
B) Net foreign investment must be positive as well. 
C) Domestic private saving must be greater than net foreign investment. 
D) Domestic public saving must be greater than net foreign investment. 
E) Investment equals domestic savings.

Question 9

Based on the following information, what is the balance on the financial account? Exports of goods and services = $5 billion
Imports of goods and services = $3 billion
Net income on investments = -$2 billion
Net transfers = -$2 billion
Increase in foreign holdings of assets in Canada = $4 billion
Increase in Canadian holdings of assets in foreign countries = -$1 billion

Accepted Answer

A) $3 billion 
B) $2 billion 
C) $1 billion 
D) -$1 billion 
E) -$3 billion 
A) $3 billion 
B) $2 billion 
C) $1 billion 
D) -$1 billion 
E) -$3 billion

Question 10

How does contractionary monetary policy affect net exports in the short run?

Accepted Answer

A) Contractionary monetary policy increases exports and reduces imports. 
B) Contractionary monetary policy reduces exports and increases imports. 
C) Contractionary monetary policy increases exports and increases imports. 
D) Contractionary monetary policy reduces exports and reduces imports. 
A) Contractionary monetary policy increases exports and reduces imports. 
B) Contractionary monetary policy reduces exports and increases imports. 
C) Contractionary monetary policy increases exports and increases imports. 
D) Contractionary monetary policy reduces exports and reduces imports.

Question 11

How is the impact of contractionary monetary policy different in an open economy than in a closed economy?

Accepted Answer

In an open economy, the higher interest

Question 12

Which of the groups below would benefit from a "strong" Canadian dollar?

Accepted Answer

A) Canadian consumers of imports. 
B) Canadian firms selling to other countries. 
C) Foreign companies with operations in Canada. 
D) Canadians who hold foreign assets. 
E) Canadian firms offering tours to foreign tourists. 
A) Canadian consumers of imports. 
B) Canadian firms selling to other countries. 
C) Foreign companies with operations in Canada. 
D) Canadians who hold foreign assets. 
E) Canadian firms offering tours to foreign tourists.

Question 13

Suppose that domestic investment in Canada is 10.7% of GDP, and Canada's national savings is 13% of GDP.What is Canada's foreign investment as a percentage of GDP?

Accepted Answer

A) 0.82% 
B) 1.15% 
C) 2.3% 
D) 15.3% 
E) 23.7% 
A) 0.82% 
B) 1.15% 
C) 2.3% 
D) 15.3% 
E) 23.7%

Question 14

Explain the relationship between net exports and net foreign investment.

Accepted Answer

Net exports equal net foreign investment

Question 15

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

Accepted Answer

A) the balance on the Canadian financial account will decrease. 
B) the balance on the Canadian current account will decrease. 
C) the balance on the Canadian capital account will decrease. 
D) the Canadian balance of trade will decrease. 
E) the statistical discrepancy will increase. 
A) the balance on the Canadian financial account will decrease. 
B) the balance on the Canadian current account will decrease. 
C) the balance on the Canadian capital account will decrease. 
D) the Canadian balance of trade will decrease. 
E) the statistical discrepancy will increase.

Question 16

The current account deficits incurred by the United States in the 1990s and early 2000s were caused, in the opinion of many economists, by

Accepted Answer

A) federal budget deficits. 
B) "flight to quality" as foreign investors favoured U.S.investments. 
C) a sharp decline in private saving. 
D) the US economy enjoying the fastest growth in its history. 
E) both B and C. 
A) federal budget deficits. 
B) "flight to quality" as foreign investors favoured U.S.investments. 
C) a sharp decline in private saving. 
D) the US economy enjoying the fastest growth in its history. 
E) both B and C.

Question 17

Expansionary monetary policy lowers interest rates and forces a real appreciation of the dollar in international currency markets.

Accepted Answer

A) True 
 B)False

Question 18

Japan has a fairly high saving rate and the level of saving in Japan is above domestic investment.Use the saving and investment equation to explain what Japan is doing with this excess of saving above domestic investment.

Accepted Answer

In an open economy, the saving and inves

Question 19

Public saving equals taxes minus government spending minus transfer payments.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following transactions would be included in Japan's current account?

Accepted Answer

A) A Japanese citizen purchases 50 shares of Google stock. 
B) An American citizen purchases 50 shares of Toshiba stock. 
C) A Japanese citizen purchases a new Toyota made in Japan. 
D) An American citizen purchases a new Toyota made in Japan. 
E) Ford Motors purchases a patent from Toyota. 
A) A Japanese citizen purchases 50 shares of Google stock. 
B) An American citizen purchases 50 shares of Toshiba stock. 
C) A Japanese citizen purchases a new Toyota made in Japan. 
D) An American citizen purchases a new Toyota made in Japan. 
E) Ford Motors purchases a patent from Toyota.

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

In an open economy, expansionary monetary policy will cause

Assuming Canada is the "domestic" country, if the real exchange rate between Canada and Russia decreases from 28 to 23,

The balance of trade is defined as

If net exports are negative,

An expansionary monetary policy in Canada should

If Canada has a net export surplus, which of the following must be true?

How does contractionary monetary policy affect net exports in the short run?

How is the impact of contractionary monetary policy different in an open economy than in a closed economy?

Which of the groups below would benefit from a "strong" Canadian dollar?

Suppose that domestic investment in Canada is 10.7% of GDP, and Canada's national savings is 13% of GDP.What is Canada's foreign investment as a percentage of GDP?

Explain the relationship between net exports and net foreign investment.

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

The current account deficits incurred by the United States in the 1990s and early 2000s were caused, in the opinion of many economists, by

Expansionary monetary policy lowers interest rates and forces a real appreciation of the dollar in international currency markets.

Japan has a fairly high saving rate and the level of saving in Japan is above domestic investment.Use the saving and investment equation to explain what Japan is doing with this excess of saving above domestic investment.

Public saving equals taxes minus government spending minus transfer payments.

Which of the following transactions would be included in Japan's current account?

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

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Exam 14: Macroeconomics in an Open Economy

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

In an open economy, expansionary monetary policy will cause

Assuming Canada is the "domestic" country, if the real exchange rate between Canada and Russia decreases from 28 to 23,

The balance of trade is defined as

If net exports are negative,

An expansionary monetary policy in Canada should

If Canada has a net export surplus, which of the following must be true?

How does contractionary monetary policy affect net exports in the short run?

How is the impact of contractionary monetary policy different in an open economy than in a closed economy?

Which of the groups below would benefit from a "strong" Canadian dollar?

Suppose that domestic investment in Canada is 10.7% of GDP, and Canada's national savings is 13% of GDP.What is Canada's foreign investment as a percentage of GDP?

Explain the relationship between net exports and net foreign investment.

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

The current account deficits incurred by the United States in the 1990s and early 2000s were caused, in the opinion of many economists, by

Expansionary monetary policy lowers interest rates and forces a real appreciation of the dollar in international currency markets.

Japan has a fairly high saving rate and the level of saving in Japan is above domestic investment.Use the saving and investment equation to explain what Japan is doing with this excess of saving above domestic investment.

Public saving equals taxes minus government spending minus transfer payments.

Which of the following transactions would be included in Japan's current account?

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