Question 1

An increase in net foreign investment is possible through a decrease in national saving or a decrease in domestic investment.

Accepted Answer

A) True 
 B)False

Question 2

A Canadian oil company hires geological survey services from the United States.If all else remains equal, this will

Accepted Answer

A) decrease net exports. 
B) decrease the balance of trade. 
C) increase the current account balance. 
D) decrease the financial account. 
E) decrease the capital account balance. 
A) decrease net exports. 
B) decrease the balance of trade. 
C) increase the current account balance. 
D) decrease the financial account. 
E) decrease the capital account balance.

Question 3

How does an increase in a country's exchange rate affect its balance of trade?

Accepted Answer

A) An increase in the exchange rate raises imports, reduces exports, and reduces the balance of trade. 
B) An increase in the exchange rate reduces imports, raises exports, and reduces the balance of trade. 
C) An increase in the exchange rate reduces imports, raises exports, and increases the balance of trade. 
D) An increase in the exchange rate raises imports, reduces exports, and increases the balance of trade. 
E) A country's exchange rate has no affect on its balance of trade. 
A) An increase in the exchange rate raises imports, reduces exports, and reduces the balance of trade. 
B) An increase in the exchange rate reduces imports, raises exports, and reduces the balance of trade. 
C) An increase in the exchange rate reduces imports, raises exports, and increases the balance of trade. 
D) An increase in the exchange rate raises imports, reduces exports, and increases the balance of trade. 
E) A country's exchange rate has no affect on its balance of trade.

Question 4

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

Accepted Answer

A) The demand for the yen will fall, and the supply of the yen will increase. 
B) The demand for the yen will increase, and the supply of the yen will fall. 
C) The demand for the yen will fall, and the supply of the yen will fall. 
D) The demand for the yen will increase, and the supply of the yen will increase. 
A) The demand for the yen will fall, and the supply of the yen will increase. 
B) The demand for the yen will increase, and the supply of the yen will fall. 
C) The demand for the yen will fall, and the supply of the yen will fall. 
D) The demand for the yen will increase, and the supply of the yen will increase.

Question 5

If net exports are positive for China, it must be true that China is experiencing net outflows of capital.

Accepted Answer

A) True 
 B)False

Question 6

The current account deficits incurred by the United States in the 1980s 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) accelerating economic growth in the US economy. 
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) accelerating economic growth in the US economy. 
E) both B and C.

Question 7

A rise in the Canadian dollar price of the Chinese yuan signals an appreciation of the yuan and a depreciation of the Canadian dollar.

Accepted Answer

A) True 
 B)False

Question 8

If the nominal exchange rate between the Canadian dollar and the New Zealand dollar is 1.36 New Zealand dollars per Canadian dollar, how many Canadian dollars are required to buy a product that costs 3.50 New Zealand dollars?

Accepted Answer

A) $1.26 
B) $2.14 
C) $2.24 
D) $2.57 
E) $4.76 
A) $1.26 
B) $2.14 
C) $2.24 
D) $2.57 
E) $4.76

Question 9

The saving and investment equation holds only when the federal budget is balanced.

Accepted Answer

A) True 
 B)False

Question 10

If a country has a fixed exchange rate,

Accepted Answer

A) the equilibrium exchange rate in that market does not respond to changes in supply and demand for currency. 
B) central banks have more control over real GDP in the economy. 
C) central banks must buy and sell their holdings of currencies to maintain a given exchange rate. 
D) the exchange rate is allowed to fluctuate in response to changes in the supply and demand for currency. 
E) the central bank sets a fixed amount of domestic currency that may be exchanged. 
A) the equilibrium exchange rate in that market does not respond to changes in supply and demand for currency. 
B) central banks have more control over real GDP in the economy. 
C) central banks must buy and sell their holdings of currencies to maintain a given exchange rate. 
D) the exchange rate is allowed to fluctuate in response to changes in the supply and demand for currency. 
E) the central bank sets a fixed amount of domestic currency that may be exchanged.

Question 11

Explain why economies with financial account surpluses usually have current account deficits.

Accepted Answer

An economy will have a current account d

Question 12

The current account includes records of a country's

Accepted Answer

A) exports. 
B) net investment income. 
C) net transfers. 
D) imports. 
E) All of the above are included in an economy's current account. 
A) exports. 
B) net investment income. 
C) net transfers. 
D) imports. 
E) All of the above are included in an economy's current account.

Question 13

If Canadian demand for purchases of Mexican goods has increased, how would you expect the equilibrium exchange rate in the market for dollars to respond? Support your answer graphically.

Accepted Answer

If Canadians are demanding more Mexican

Question 14

How would an increase in the Canadian federal budget deficit affect the exchange rate in the market for Canadian dollars?

Accepted Answer

A) The exchange rate will increase. 
B) The exchange rate will decrease. 
C) The exchange rate will not be affected by a change in the federal budget deficit. 
D) The impact of the increase in the federal budget deficit on the exchange rate cannot be predicted. 
A) The exchange rate will increase. 
B) The exchange rate will decrease. 
C) The exchange rate will not be affected by a change in the federal budget deficit. 
D) The impact of the increase in the federal budget deficit on the exchange rate cannot be predicted.

Question 15

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

Accepted Answer

A) Demand for dollars will increase, and supply of dollars will decrease. 
B) Demand for dollars will increase, and supply of dollars will increase. 
C) Demand for dollars will decrease, and supply of dollars will increase. 
D) Demand for dollars will decrease, and supply of dollars will decrease. 
A) Demand for dollars will increase, and supply of dollars will decrease. 
B) Demand for dollars will increase, and supply of dollars will increase. 
C) Demand for dollars will decrease, and supply of dollars will increase. 
D) Demand for dollars will decrease, and supply of dollars will decrease.

Question 16

How does expansionary monetary policy affect net exports?

Accepted Answer

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

Question 17

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.Suppose that the Canadian government deficit decreases, causing interest rates in Canada to fall relative to those in the European Union.Assuming all else remains constant, how would this be represented?

Accepted Answer

A) Supply would decrease, demand would decrease and the economy would move from B to C to D. 
B) Supply would increase, demand would decrease and the economy would move from C to B to A. 
C) Supply would decrease, demand would increase and the economy would move from A to D to C. 
D) Supply would increase, demand would increase and the economy would move from D to A to B. 
A) Supply would decrease, demand would decrease and the economy would move from B to C to D. 
B) Supply would increase, demand would decrease and the economy would move from C to B to A. 
C) Supply would decrease, demand would increase and the economy would move from A to D to C. 
D) Supply would increase, demand would increase and the economy would move from D to A to B.

Question 18

Canada has had negative net exports since 2009.This means that Canada has ________ since 2009.

Accepted Answer

A) had a financial account surplus 
B) had a net capital outflow 
C) had positive net foreign investment 
D) had a current account surplus 
E) has been building up assets in the rest of the world 
A) had a financial account surplus 
B) had a net capital outflow 
C) had positive net foreign investment 
D) had a current account surplus 
E) has been building up assets in the rest of the world

Question 19

Ceteris paribus, a real depreciation of the Canadian dollar will decrease net exports in Canada.

Accepted Answer

A) True 
 B)False

Question 20

When a Canadian investor buys a bond issued in a foreign country,

Accepted Answer

A) the balance on the capital account decreases. 
B) the balance on the current account decreases. 
C) the balance on the financial account decreases. 
D) the balance of trade decreases. 
E) the statistical discrepancy decreases. 
A) the balance on the capital account decreases. 
B) the balance on the current account decreases. 
C) the balance on the financial account decreases. 
D) the balance of trade decreases. 
E) the statistical discrepancy decreases.

An increase in net foreign investment is possible through a decrease in national saving or a decrease in domestic investment.

A Canadian oil company hires geological survey services from the United States.If all else remains equal, this will

How does an increase in a country's exchange rate affect its balance of trade?

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

If net exports are positive for China, it must be true that China is experiencing net outflows of capital.

The current account deficits incurred by the United States in the 1980s were caused, in the opinion of many economists, by

A rise in the Canadian dollar price of the Chinese yuan signals an appreciation of the yuan and a depreciation of the Canadian dollar.

If the nominal exchange rate between the Canadian dollar and the New Zealand dollar is 1.36 New Zealand dollars per Canadian dollar, how many Canadian dollars are required to buy a product that costs 3.50 New Zealand dollars?

The saving and investment equation holds only when the federal budget is balanced.

If a country has a fixed exchange rate,

Explain why economies with financial account surpluses usually have current account deficits.

The current account includes records of a country's

If Canadian demand for purchases of Mexican goods has increased, how would you expect the equilibrium exchange rate in the market for dollars to respond? Support your answer graphically.

How would an increase in the Canadian federal budget deficit affect the exchange rate in the market for Canadian dollars?

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

How does expansionary monetary policy affect net exports?

Canada has had negative net exports since 2009.This means that Canada has ________ since 2009.

Ceteris paribus, a real depreciation of the Canadian dollar will decrease net exports in Canada.

When a Canadian investor buys a bond issued in a foreign country,

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

An increase in net foreign investment is possible through a decrease in national saving or a decrease in domestic investment.

A Canadian oil company hires geological survey services from the United States.If all else remains equal, this will

How does an increase in a country's exchange rate affect its balance of trade?

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

If net exports are positive for China, it must be true that China is experiencing net outflows of capital.

The current account deficits incurred by the United States in the 1980s were caused, in the opinion of many economists, by

A rise in the Canadian dollar price of the Chinese yuan signals an appreciation of the yuan and a depreciation of the Canadian dollar.

If the nominal exchange rate between the Canadian dollar and the New Zealand dollar is 1.36 New Zealand dollars per Canadian dollar, how many Canadian dollars are required to buy a product that costs 3.50 New Zealand dollars?

The saving and investment equation holds only when the federal budget is balanced.

If a country has a fixed exchange rate,

Explain why economies with financial account surpluses usually have current account deficits.

The current account includes records of a country's

If Canadian demand for purchases of Mexican goods has increased, how would you expect the equilibrium exchange rate in the market for dollars to respond? Support your answer graphically.

How would an increase in the Canadian federal budget deficit affect the exchange rate in the market for Canadian dollars?

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

How does expansionary monetary policy affect net exports?

Canada has had negative net exports since 2009.This means that Canada has ________ since 2009.

Ceteris paribus, a real depreciation of the Canadian dollar will decrease net exports in Canada.

When a Canadian investor buys a bond issued in a foreign country,

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