Question 1

In the open-economy macroeconomic model, how can the market for loanable funds identity be written?

Accepted Answer

A) S = I 
B) S = NCO 
C) S = I + NCO 
D) S + I = NCO 
A) S = I 
B) S = NCO 
C) S = I + NCO 
D) S + I = NCO

Question 2

If a government increases its budget deficit, which of the following best predicts the effects?

Accepted Answer

A) Interest rates rise and the real exchange rate appreciates. 
B) Interest rates fall and the real exchange rate depreciates. 
C) Interest rates rise and the real exchange rate depreciates. 
D) Interest rates fall and the real exchange rate appreciates. 
A) Interest rates rise and the real exchange rate appreciates. 
B) Interest rates fall and the real exchange rate depreciates. 
C) Interest rates rise and the real exchange rate depreciates. 
D) Interest rates fall and the real exchange rate appreciates.

Question 3

Which of the following best identifies the effects of trade policies? And on firms or industries?

Accepted Answer

A) Trade policies affect the trade balance and all firms and industries the same. 
B) Trade policies affect the trade balance and some firms or industries differently than others. 
C) Trade policies do not affect the trade balance, but they affect some firms or industries differently than others. 
D) Trade policies affect neither the trade balance nor specific firms or industries. 
A) Trade policies affect the trade balance and all firms and industries the same. 
B) Trade policies affect the trade balance and some firms or industries differently than others. 
C) Trade policies do not affect the trade balance, but they affect some firms or industries differently than others. 
D) Trade policies affect neither the trade balance nor specific firms or industries.

Question 4

Suppose that Canada imposes an import quota on automobiles. Which of the following describes the most likely effects of this quota?

Accepted Answer

A) The quota would cause the real exchange rate of Canadian dollars to appreciate, but it would not change the real interest rate in Canada. 
B) The quota would cause the real exchange rate of Canadian dollars to appreciate and the real interest rate in Canada to increase. 
C) The quota would cause the real exchange rate of Canadian dollars to depreciate and the real interest rate in Canada to decrease. 
D) The quota would cause the real exchange rate of Canadian dollars to depreciate, but it would not change the real interest rate in Canada. 
A) The quota would cause the real exchange rate of Canadian dollars to appreciate, but it would not change the real interest rate in Canada. 
B) The quota would cause the real exchange rate of Canadian dollars to appreciate and the real interest rate in Canada to increase. 
C) The quota would cause the real exchange rate of Canadian dollars to depreciate and the real interest rate in Canada to decrease. 
D) The quota would cause the real exchange rate of Canadian dollars to depreciate, but it would not change the real interest rate in Canada.

Question 5

Which of the following best predicts the effects of an increase in a country's real interest rate?

Accepted Answer

A) Its net capital outflow and the real exchange rate increase. 
B) Its net capital outflow and the real exchange rate decrease. 
C) Its net capital outflow increases and the real exchange rate decreases. 
D) Its net capital outflow decreases and the real exchange rate increases. 
A) Its net capital outflow and the real exchange rate increase. 
B) Its net capital outflow and the real exchange rate decrease. 
C) Its net capital outflow increases and the real exchange rate decreases. 
D) Its net capital outflow decreases and the real exchange rate increases.

Question 6

If the government of Colombia implemented a policy that reduced national saving, which of the following best predicts the consequences?

Accepted Answer

A) Its real exchange rate would depreciate, and Colombian net exports would rise. 
B) Its real exchange rate would depreciate, and Colombian net exports would fall. 
C) Its real exchange rate would appreciate, and Colombian net exports would rise. 
D) Its real exchange rate would appreciate, and Colombian net exports would fall. 
A) Its real exchange rate would depreciate, and Colombian net exports would rise. 
B) Its real exchange rate would depreciate, and Colombian net exports would fall. 
C) Its real exchange rate would appreciate, and Colombian net exports would rise. 
D) Its real exchange rate would appreciate, and Colombian net exports would fall.

Question 7

Which of the following is consistent with negative net exports?

Accepted Answer

A) Net capital outflow is positive, so foreign assets bought by Canadians are greater than Canadian assets bought by foreigners. 
B) Net capital outflow is positive, so Canadian assets bought by foreigners are greater than foreign assets bought by Canadians. 
C) Net capital outflow is negative, so foreign assets bought by Canadians are greater than Canadian assets bought by foreigners. 
D) Net capital outflow is negative, so Canadian assets bought by foreigners are greater than foreign assets bought by Canadians. 
A) Net capital outflow is positive, so foreign assets bought by Canadians are greater than Canadian assets bought by foreigners. 
B) Net capital outflow is positive, so Canadian assets bought by foreigners are greater than foreign assets bought by Canadians. 
C) Net capital outflow is negative, so foreign assets bought by Canadians are greater than Canadian assets bought by foreigners. 
D) Net capital outflow is negative, so Canadian assets bought by foreigners are greater than foreign assets bought by Canadians.

Question 8

In the open-economy macroeconomic model, net exports represent the quantity of dollars demanded in the foreign-currency exchange market.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is consistent with an above-the-equilibrium exchange rate of the dollar?

Accepted Answer

A) The quantity of dollars supplied is greater than the quantity demanded, and the dollar will appreciate. 
B) The quantity of dollars supplied is greater than the quantity demanded, and the dollar will depreciate. 
C) The quantity of dollars supplied is less than the quantity demanded, and the dollar will appreciate. 
D) The quantity of dollars supplied is less than the quantity demanded, and the dollar will depreciate. 
A) The quantity of dollars supplied is greater than the quantity demanded, and the dollar will appreciate. 
B) The quantity of dollars supplied is greater than the quantity demanded, and the dollar will depreciate. 
C) The quantity of dollars supplied is less than the quantity demanded, and the dollar will appreciate. 
D) The quantity of dollars supplied is less than the quantity demanded, and the dollar will depreciate.

Question 10

Which of the following is consistent with an appreciation of the dollar?

Accepted Answer

A) Canadian goods become less expensive relative to foreign goods, which makes exports rise and imports fall. 
B) Canadian goods become less expensive relative to foreign goods, which makes exports fall and imports rise. 
C) Canadian goods become more expensive relative to foreign goods, which makes exports rise and imports fall. 
D) Canadian goods become more expensive relative to foreign goods, which makes exports fall and imports rise. 
A) Canadian goods become less expensive relative to foreign goods, which makes exports rise and imports fall. 
B) Canadian goods become less expensive relative to foreign goods, which makes exports fall and imports rise. 
C) Canadian goods become more expensive relative to foreign goods, which makes exports rise and imports fall. 
D) Canadian goods become more expensive relative to foreign goods, which makes exports fall and imports rise.

Question 11

Which of the following is consistent with a depreciation of the dollar?

Accepted Answer

A) Canadian goods become less expensive relative to foreign goods, which makes exports rise and imports fall. 
B) Canadian goods become less expensive relative to foreign goods, which makes exports fall and imports rise. 
C) Canadian goods become more expensive relative to foreign goods, which makes exports rise and imports fall. 
D) Canadian goods become more expensive relative to foreign goods, which makes exports fall and imports rise. 
A) Canadian goods become less expensive relative to foreign goods, which makes exports rise and imports fall. 
B) Canadian goods become less expensive relative to foreign goods, which makes exports fall and imports rise. 
C) Canadian goods become more expensive relative to foreign goods, which makes exports rise and imports fall. 
D) Canadian goods become more expensive relative to foreign goods, which makes exports fall and imports rise.

Question 12

Suppose a prime ministerial candidate promises to increase the government budget surplus and claims that doing so will stop Canadian citizens from investing in foreign companies and increase the value of the dollar. Evaluate this promise.

Accepted Answer

An increase in the government budget sur

Question 13

Suppose that Canadian investors decide that investment opportunities in African countries have improved. What happens to Canadian net capital outflow? What happens to the Canadian real interest rate?

Accepted Answer

Canadian net capital outflow w

Question 14

The key determinant of net capital outflow is the real exchange rate.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following refers to a limit on the quantity of an imported good?

Accepted Answer

A) a tariff 
B) an excise tax 
C) an import quota 
D) net imports 
A) a tariff 
B) an excise tax 
C) an import quota 
D) net imports

Question 16

In the open-economy macroeconomic model, the supply curve of currency is vertical because the quantity of currency supplied does not depend on the real exchange rate.

Accepted Answer

A) True 
 B)False

Question 17

According to the open-economy macroeconomic model, if Canada moved from a government budget deficit to a government budget surplus, Canadian real interest rates would increase and the real exchange rate of the Canadian dollar would appreciate.

Accepted Answer

A) True 
 B)False

Question 18

Suppose Canada imposes an import quota on steel. Which of the following describes the most likely effects of this quota?

Accepted Answer

A) Canadian exports would increase, the real exchange rate of the Canadian dollar would appreciate, and Canadian net capital outflow would increase. 
B) Canadian exports would increase, the real exchange rate of the Canadian dollar would depreciate, and Canadian net capital outflow would remain unchanged. 
C) Canadian exports would decrease, the real exchange rate of the Canadian dollar would appreciate, and Canadian net capital outflow would remain unchanged. 
D) Canadian exports would decrease, the real exchange rate of the Canadian dollar would depreciate, and Canadian net capital outflow would decrease. 
A) Canadian exports would increase, the real exchange rate of the Canadian dollar would appreciate, and Canadian net capital outflow would increase. 
B) Canadian exports would increase, the real exchange rate of the Canadian dollar would depreciate, and Canadian net capital outflow would remain unchanged. 
C) Canadian exports would decrease, the real exchange rate of the Canadian dollar would appreciate, and Canadian net capital outflow would remain unchanged. 
D) Canadian exports would decrease, the real exchange rate of the Canadian dollar would depreciate, and Canadian net capital outflow would decrease.

Question 19

Why do higher real interest rates lead to lower net capital outflow?

Accepted Answer

Higher Canadian interest rates make Cana

Question 20

When Mexico suffered from capital flight in 1994, which of the following best describes the effects of this event on Canadian economy?

Accepted Answer

A) The Canadian real interest rate rose, and the real exchange rate of the dollar appreciated. 
B) The Canadian real interest rate rose, and the real exchange rate of the dollar depreciated. 
C) The Canadian real interest rate fell, and the real exchange rate of the dollar appreciated. 
D) The Canadian real interest rate fell, and the real exchange rate of the dollar depreciated. 
A) The Canadian real interest rate rose, and the real exchange rate of the dollar appreciated. 
B) The Canadian real interest rate rose, and the real exchange rate of the dollar depreciated. 
C) The Canadian real interest rate fell, and the real exchange rate of the dollar appreciated. 
D) The Canadian real interest rate fell, and the real exchange rate of the dollar depreciated.

In the open-economy macroeconomic model, how can the market for loanable funds identity be written?

If a government increases its budget deficit, which of the following best predicts the effects?

Which of the following best identifies the effects of trade policies? And on firms or industries?

Suppose that Canada imposes an import quota on automobiles. Which of the following describes the most likely effects of this quota?

Which of the following best predicts the effects of an increase in a country's real interest rate?

If the government of Colombia implemented a policy that reduced national saving, which of the following best predicts the consequences?

Which of the following is consistent with negative net exports?

In the open-economy macroeconomic model, net exports represent the quantity of dollars demanded in the foreign-currency exchange market.

Which of the following is consistent with an above-the-equilibrium exchange rate of the dollar?

Which of the following is consistent with an appreciation of the dollar?

Which of the following is consistent with a depreciation of the dollar?

Suppose a prime ministerial candidate promises to increase the government budget surplus and claims that doing so will stop Canadian citizens from investing in foreign companies and increase the value of the dollar. Evaluate this promise.

Suppose that Canadian investors decide that investment opportunities in African countries have improved. What happens to Canadian net capital outflow? What happens to the Canadian real interest rate?

The key determinant of net capital outflow is the real exchange rate.

Which of the following refers to a limit on the quantity of an imported good?

In the open-economy macroeconomic model, the supply curve of currency is vertical because the quantity of currency supplied does not depend on the real exchange rate.

According to the open-economy macroeconomic model, if Canada moved from a government budget deficit to a government budget surplus, Canadian real interest rates would increase and the real exchange rate of the Canadian dollar would appreciate.

Suppose Canada imposes an import quota on steel. Which of the following describes the most likely effects of this quota?

Why do higher real interest rates lead to lower net capital outflow?

When Mexico suffered from capital flight in 1994, which of the following best describes the effects of this event on Canadian economy?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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Exam 13: A Macroeconomic Theory of the Open Economy

In the open-economy macroeconomic model, how can the market for loanable funds identity be written?

If a government increases its budget deficit, which of the following best predicts the effects?

Which of the following best identifies the effects of trade policies? And on firms or industries?

Suppose that Canada imposes an import quota on automobiles. Which of the following describes the most likely effects of this quota?

Which of the following best predicts the effects of an increase in a country's real interest rate?

If the government of Colombia implemented a policy that reduced national saving, which of the following best predicts the consequences?

Which of the following is consistent with negative net exports?

In the open-economy macroeconomic model, net exports represent the quantity of dollars demanded in the foreign-currency exchange market.

Which of the following is consistent with an above-the-equilibrium exchange rate of the dollar?

Which of the following is consistent with an appreciation of the dollar?

Which of the following is consistent with a depreciation of the dollar?

Suppose a prime ministerial candidate promises to increase the government budget surplus and claims that doing so will stop Canadian citizens from investing in foreign companies and increase the value of the dollar. Evaluate this promise.

Suppose that Canadian investors decide that investment opportunities in African countries have improved. What happens to Canadian net capital outflow? What happens to the Canadian real interest rate?

The key determinant of net capital outflow is the real exchange rate.

Which of the following refers to a limit on the quantity of an imported good?

In the open-economy macroeconomic model, the supply curve of currency is vertical because the quantity of currency supplied does not depend on the real exchange rate.

According to the open-economy macroeconomic model, if Canada moved from a government budget deficit to a government budget surplus, Canadian real interest rates would increase and the real exchange rate of the Canadian dollar would appreciate.

Suppose Canada imposes an import quota on steel. Which of the following describes the most likely effects of this quota?

Why do higher real interest rates lead to lower net capital outflow?

When Mexico suffered from capital flight in 1994, which of the following best describes the effects of this event on Canadian economy?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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