Exam 13: A Macroeconomic Theory of the Open Economy

In an open economy, where does the demand for loanable funds come from?

Figure 32-1 -Refer to Figure 32-1. In the figure shown, if the real interest rate is 4 percent, there will be pressure for which of the following changes?

Which of the following is the effect of an increase in the Canadian real interest rate?

Using the macroeconomic model studied, analyze the impact of the following events on the Canadian economy. a.a voluntary export restraint (VER) by Japanese car producers b.an export subsidy by Canadian government for Canadian lumber producers c.an increase in U.S. GDP

Which of the following would tend to shift the supply of dollars in the foreign-currency exchange market model to the right?

Which of the following best predicts the effects of an increase in the Canadian real interest rate?

Suppose that from 1980 to 1987, Canadian net capital outflows decreased. According to the open-economy macroeconomic model, which of the following could have caused this?

What does a higher real interest rate lowers the quantity of?

What does the market for foreign-currency exchange coordinate?

In an open economy, which of the following best identifies the sources of loanable funds?

In the open-economy macroeconomic model, at the equilibrium real interest rate, the amount that people (including government) want to save exactly balances desired domestic investment.

If there is capital flight from Canada, how does the open economy macroeconomic model change?

In the open-economy macroeconomic model, other things the same, when a Canadian resident imports a foreign good, our model treats this as a decrease in the demand for dollars in the foreign-currency exchange market.

In the open-economy macroeconomic model, what does the quantity of dollars demanded in the foreign-currency exchange market depend on?

If Canadian citizens decide to save a larger fraction of their incomes, which of the following best identifies the effects?

Which of the following best predicts the effects of an increase in the supply of loanable funds?

According to the open-economy macroeconomic model, which of the following would NOT be a consequence of an increase in the Canadian government budget deficit?

Which of the following lists contains only things that decrease when the budget deficit of the Canadian government increases?

Use the figure below to answer the following questions. Figure 32-2 -Refer to Figure 32-2. Suppose that these diagrams refer to Canada. Which of the following shifts show the effect of a voluntary export restriction by the government of China?

Using the macroeconomic model of a foreign-currency exchange market, (a) analyze the situation in which a government imposes a fixed exchange rate, and (b) determine what that government should do in order to maintain the fixed exchange.