Exam 14: Macroeconomics in an Open Economy

Ceteris paribus, a decrease in the government's budget deficit will increase domestic investment and net foreign investment.

Is fiscal policy more or less effective in manipulating aggregate demand in an open economy?

If currency speculators decide that the value of the dollar should rise in the future relative to the yen, this will increase the demand for dollars and decrease the supply of dollars.

Suppose the majority of the shares of British Airways stock were sold to a firm in Canada.Assuming all else remains constant, this will

Suppose the government cuts taxes.We would expect interest rates to ________ and the dollar to ________ in foreign exchange markets.

Suppose the Bank of Canada purchases government securities.Interest rates in Canada will ________, and the Canadian dollar will ________ against foreign currencies.

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

How might a budget deficit affect the balance of trade?

China runs a current account surplus with the United States.Which of the following must be true about China's balance of payments with the United States?

An increase in Canadian net foreign direct investment would occur if

Based on the following information, calculate public saving, net foreign investment, and national income. Private saving = $83 billion Exports = $125 billion Imports = $130 billion Consumption = $200 billion Private investment = $56 billion Government purchases = $38 billion

What impact might an increase in the budget deficit have on interest rates and exchange rates?

Which of the following would you expect to decrease both interest rates and exchange rates? (Assume exchange rates are stated in terms of foreign currency per domestic currency.)

Suppose that Bank of Canada policy leads to higher interest rates in Canada.How will this policy affect real GDP in the short run if Canada is a closed economy, and how will it affect real GDP in the short run if Canada is an open economy?

In 2015, the value of IBM's global profits ________, because the US dollar ________ in value relative to most other currencies.

What are the three main sets of factors that cause the supply and demand curves in the foreign exchange market to shift?

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

All else equal, a depreciation of the British pound relative to currencies such as the euro and the Canadian dollar should ________ the current account balance in Great Britain and therefore ________ the financial account balance in Great Britain.

The relative price of a country's goods and services in terms of foreign goods and services is the real exchange rate.

If the exchange rate changes from $2.00 = 1 euro to $1.98 = 1 euro, then