Exam 13: A Macroeconomic Theory of the Small Open Economy

If the government of India made policy changes that increased national saving,which statement would best predict the consequences?

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.

In an open economy,what does the market for loanable funds equate national saving with?

When a country suffers from capital flight,which statement best explains the effects?

In the market for foreign-currency exchange in the open-economy macroeconomic model,what does the amount of net capital outflow represent?

In an open economy,what does the market for loanable funds take as given?

Mexico suffered from capital flight in 1994.Which statement best describes the effects of this event on the Canadian economy?

State what,if anything,each of the following does to the supply or demand of loanable funds. a.Net capital outflow increases at each interest rate. b.Domestic investment decreases at each interest rate. c.The government surplus increases. d.Private saving increases.

How does an increase in the Canadian government budget deficit change the graph representing the Canadian market for loanable funds?

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.

If the government of Colombia implemented a policy that reduced national saving,which statement would best predict the consequences?

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

Figure 13-2 -Refer to the Figure13-2.Suppose that these diagrams refer to Canada.If the interest rate was initially at r0 and Japan voluntarily restricted its exports to Canada,what would happen to the interest rate?

Suppose we measure Canada's net capital outflow by what Statistics Canada calls "net international investment position," and we approximate the real exchange rate of the dollar by the price of the Canadian dollar in terms of U.S.dollars.The following table gives some fictitious data on these two variables. a.What does our open-economy macroeconomic model predict with regard to the relationship between net capital outflow and the real exchange rate? b.Do you find evidence in the data to support the theory? c.If you find discrepancies between the data and the theory,what could cause them?

According to the theory of purchasing-power parity,what is the shape of the demand curve for foreign-currency exchange?

Figure 13-1 -Refer to the Figure13-1.In the figure shown,if the real interest rate is 4 percent,what is the quantity of loanable funds demanded?

At the equilibrium interest rate in the open-macroeconomic model,what is the amount that people want to save?

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

Suppose the Canadian government imposed import quotas on agricultural products.According to the foreign-currency exchange market diagram,which outcome would most likely result?

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