Exam 14: Macroeconomics in an Open Economy

Assume Canada is the "domestic" country and China is the "foreign" country.Which of the following might increase the real exchange rate between Canada and China?

How does an increase in government purchases financed by an increase in the deficit affect exchange rates? Support your answer with graphs of the loanable funds market and the foreign exchange market.

If net exports are equal to net foreign investment,

Holding all else constant, a rise in interest rates in Canada will cause the dollar to appreciate in international exchange markets.

If the balance of the current account in Canada is -$90 billion, which of the following is most likely to be true?

The balance of payments includes which three accounts?

Canada has a closed economy.

Why is the multiplier for contractionary fiscal policy smaller in an open economy?

The price of ________ in terms of ________ is referred to as the real exchange rate.

Expansionary fiscal policy should raise the exchange rate of the dollar.

What is the difference between net exports and the current account balance?

In international exchange markets, a rise in interest rates in Canada will cause the demand for Canadian dollars to ________ and the supply of dollars to ________.

The capital account records

What is the relationship among the current account, the financial account, and the balance of payments?

If you know that a country's net foreign investment is negative, what does that tell you about the relationship between the country's national saving and private investment?

If the exchange rate changes from $0.05 = 1 Mexican peso to $0.10 = 1 Mexican peso, then

If national saving increases, ________.(Assume that the capital account is zero and net transfers are zero.)

National saving equals

Which of the following is true about the occurrence of the twin deficits?

Explain and show graphically how an increase in incomes in Canada will affect equilibrium in the foreign exchange market.