Exam 14: Macroeconomics in an Open Economy

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. Consider the market for Canadian Dollars against the British pound shown in the graph above.From this graph we can conclude that the dollar price of a British pound has ________ to ________ dollars per pound

If Canada is a "net borrower" from abroad,

Many Canadian natural resource companies run mines in other countries. What impact would an expansionary monetary policy undertaken by the Bank of Canada have on these companies?

A real appreciation of the Canadian dollar is caused by either a nominal appreciation of the Canadian dollar, a rise in the foreign price level, or a fall in the Canadian price level.

When net capital flows are negative,

If the balance on the current account is $346 billion and the balance on the financial account is -$204 billion, what is the balance on the capital account, assuming no statistical discrepancy?

Why is the balance of payments always zero?

An increase in the demand for Canadian-made goods will

If Québecers decrease their purchases of French champagne, assuming all else remains constant, this will

When the market value of the Canadian dollar falls relative to other currencies around the world, we say that

Which of the following would cause the dollar to appreciate?

Which of the following would result in a trade surplus for Canada?

How does an increase in the budget deficit affect the demand for dollars and the supply of dollars on the foreign exchange market?

The impact of crowding out

If the Canadian dollar depreciates against the Indian rupee,

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

If the current account is in surplus and the capital account is zero, then

Suppose the Bank of Canada pursues a policy that leads to higher interest rates in Canada.How will this policy affect real GDP in the short run given that Canada is an open economy? This policy

You're traveling in Ireland and are thinking about buying a new digital camera.You've decided you'd be willing to pay $125 for a new camera, but cameras in Ireland are all priced in euros.If the camera you're looking at costs 115 euros, under which of the following exchange rates would you be willing to purchase the camera? (Assume no taxes or duties are associated with the purchase.)

If the Canadian dollar appreciates, how will aggregate demand in Canada be affected?