Question 1

If a government started with a deficit and moved to a surplus,which statement would best describe the effects of these changes?

Accepted Answer

A)  Domestic investment and the real exchange rate would rise. 
B)  Domestic investment and the real exchange rate would fall. 
C)  Domestic investment would rise,and the real exchange rate would fall. 
D)  Domestic investment would fall,and the real exchange rate would rise. 
A)  Domestic investment and the real exchange rate would rise. 
B)  Domestic investment and the real exchange rate would fall. 
C)  Domestic investment would rise,and the real exchange rate would fall. 
D)  Domestic investment would fall,and the real exchange rate would rise.

Question 2

What is net capital outflow equal to?

Accepted Answer

A)  national saving minus the net exports 
B)  domestic investment plus national saving 
C)  national saving minus domestic investment 
D)  domestic investment minus national saving 
A)  national saving minus the net exports 
B)  domestic investment plus national saving 
C)  national saving minus domestic investment 
D)  domestic investment minus national saving

Question 3

Suppose that in the 1990s,Canadian net capital outflow fell.Which of the following could explain this?

Accepted Answer

A)  an increase in the demand for Canadian currency in the foreign-currency exchange 
B)  a decrease in the demand for Canadian currency in the foreign-currency exchange 
C)  an increase in the demand for loanable funds 
D)  a decrease in the demand for loanable funds 
A)  an increase in the demand for Canadian currency in the foreign-currency exchange 
B)  a decrease in the demand for Canadian currency in the foreign-currency exchange 
C)  an increase in the demand for loanable funds 
D)  a decrease in the demand for loanable funds

Question 4

Which statement 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 5

Figure 13-2  
-Refer to the Figure13-2.If the interest rate was initially at r0 and an import quota was imposed,what would happen to the real interest rate?

Accepted Answer

A)  It would not change because the world interest rate is not affected. 
B)  It would decrease because supply would shift right. 
C)  It would not change because both supply and demand would shift right. 
D)  It would decrease because demand would shift left. 
A)  It would not change because the world interest rate is not affected. 
B)  It would decrease because supply would shift right. 
C)  It would not change because both supply and demand would shift right. 
D)  It would decrease because demand would shift left.

Question 6

What happens in Canada when the Canadian government imposes an import quota on Gouda cheese?

Accepted Answer

A)  the real interest rate increases 
B)  the real interest rate decreases 
C)  the real exchange rate increases 
D)  the real exchange rate decreases 
A)  the real interest rate increases 
B)  the real interest rate decreases 
C)  the real exchange rate increases 
D)  the real exchange rate decreases

Question 7

What is the term for 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 8

Where does the supply of dollars in the foreign-currency exchange market come from?

Accepted Answer

A)  from Canadian national saving 
B)  from Canadian net capital outflow 
C)  from domestic investment 
D)  from foreign demand for Canadian goods 
A)  from Canadian national saving 
B)  from Canadian net capital outflow 
C)  from domestic investment 
D)  from foreign demand for Canadian goods

Question 9

Suppose that Canada imposed an import quota on beef.Which statement identifies the most likely results?

Accepted Answer

A)  Sales of Canadian beef would rise; exports of other industries would increase. 
B)  Sales of Canadian beef would rise; exports of other industries would decline. 
C)  Sales of Canadian beef would not change; exports of other industries would increase. 
D)  Sales of Canadian beef would not change; exports of other industries would decline. 
A)  Sales of Canadian beef would rise; exports of other industries would increase. 
B)  Sales of Canadian beef would rise; exports of other industries would decline. 
C)  Sales of Canadian beef would not change; exports of other industries would increase. 
D)  Sales of Canadian beef would not change; exports of other industries would decline.

Question 10

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

Accepted Answer

A)  The exchange rate rises. 
B)  The exchange rate falls. 
C)  The expected rate of return on Canadian assets rises. 
D)  The expected rate of return on Canadian assets falls. 
A)  The exchange rate rises. 
B)  The exchange rate falls. 
C)  The expected rate of return on Canadian assets rises. 
D)  The expected rate of return on Canadian assets falls.

Question 11

What is the price that balances supply and demand in the market for foreign-currency exchange in the open-economy macroeconomic model?

Accepted Answer

A)  the nominal exchange rate 
B)  the nominal interest rate 
C)  the real exchange rate 
D)  the real interest rate 
A)  the nominal exchange rate 
B)  the nominal interest rate 
C)  the real exchange rate 
D)  the real interest rate

Question 12

If a government increases its budget deficit,which statement would best predict the effects?

Accepted Answer

A)  The real exchange rate appreciates,and the trade balance moves toward surplus. 
B)  The real exchange rate appreciates,and the trade balance moves toward deficit. 
C)  The real exchange rate depreciates,and the trade balance moves toward surplus. 
D)  The real exchange rate depreciates,and the trade balance moves toward deficit. 
A)  The real exchange rate appreciates,and the trade balance moves toward surplus. 
B)  The real exchange rate appreciates,and the trade balance moves toward deficit. 
C)  The real exchange rate depreciates,and the trade balance moves toward surplus. 
D)  The real exchange rate depreciates,and the trade balance moves toward deficit.

Question 13

What effect does a fall in the real interest rate have on the quantity of loanable funds?

Accepted Answer

A)  It increases the quantity demanded and decreases the quantity supplied. 
B)  It decreases both the quantity demanded and supplied. 
C)  It increases both the quantity demanded and supplied. 
D)  It decreases the quantity demanded and increases the quantity supplied. 
A)  It increases the quantity demanded and decreases the quantity supplied. 
B)  It decreases both the quantity demanded and supplied. 
C)  It increases both the quantity demanded and supplied. 
D)  It decreases the quantity demanded and increases the quantity supplied.

Question 14

Explain how the relation between the real exchange rate and net exports explains the downward slope of the demand curve for foreign-currency exchange.

Accepted Answer

When the Canadian real exchange rate app

Question 15

Although trade policies do not affect a country's overall trade balance,they do affect specific firms and industries.

Accepted Answer

A) True 
 B)False

Question 16

Following an increase in the Canadian budget deficit,it has been observed that the trade deficit has increased,the Canadian real exchange rate has appreciated,the net capital outflow has decreased,and the interest rate has decreased.Which event is contrary to what the open-economy macroeconomic model predicts concerning the effects of an increase in the budget deficit?

Accepted Answer

A)  The trade deficit has increased. 
B)  The real exchange rate has appreciated. 
C)  The net capital outflow has decreased. 
D)  The interest rate has decreased. 
A)  The trade deficit has increased. 
B)  The real exchange rate has appreciated. 
C)  The net capital outflow has decreased. 
D)  The interest rate has decreased.

Question 17

Our macroeconomic model assumes that GDP is constant.However,the model could be used to analyze the effects of a one-time increase in GDP.What does the model predict about the real interest rate,net capital outflow,net exports,and the real exchange rate when GDP increases?

Accepted Answer

The next figure shows that the primary e

Question 18

In the open-economy macroeconomic model,we focus on the determination of GDP and the price level.

Accepted Answer

A) True 
 B)False

Question 19

In 2012 and again in 2015,citizens of Greece were reported to be withdrawing their savings from Greek banks because they feared that Greece would leave the European Union.What is consistent with what the open-economy macroeconomic model predicts?

Accepted Answer

A)  This event should have raised Grecian interest rates and caused the Grecian currency to appreciate. 
B)  This event should have raised Grecian interest rates and caused the Grecian currency to depreciate. 
C)  This event should have lowered Grecian interest rates and caused the Grecian currency to appreciate. 
D)  This event should have lowered Grecian interest rates and caused the Grecian currency to depreciate. 
A)  This event should have raised Grecian interest rates and caused the Grecian currency to appreciate. 
B)  This event should have raised Grecian interest rates and caused the Grecian currency to depreciate. 
C)  This event should have lowered Grecian interest rates and caused the Grecian currency to appreciate. 
D)  This event should have lowered Grecian interest rates and caused the Grecian currency to depreciate.

Question 20

In the open-economy macroeconomic model,what is net capital outflow equal to?

Accepted Answer

A)  the quantity of dollars supplied in the foreign exchange market 
B)  the quantity of dollars demanded in the foreign exchange market 
C)  the quantity of funds supplied in the loanable funds market 
D)  the quantity of funds demanded in the loanable funds market 
A)  the quantity of dollars supplied in the foreign exchange market 
B)  the quantity of dollars demanded in the foreign exchange market 
C)  the quantity of funds supplied in the loanable funds market 
D)  the quantity of funds demanded in the loanable funds market

If a government started with a deficit and moved to a surplus,which statement would best describe the effects of these changes?

What is net capital outflow equal to?

Suppose that in the 1990s,Canadian net capital outflow fell.Which of the following could explain this?

Which statement is consistent with an appreciation of the dollar?

Figure 13-2 -Refer to the Figure13-2.If the interest rate was initially at r0 and an import quota was imposed,what would happen to the real interest rate?

What happens in Canada when the Canadian government imposes an import quota on Gouda cheese?

What is the term for a limit on the quantity of an imported good?

Where does the supply of dollars in the foreign-currency exchange market come from?

Suppose that Canada imposed an import quota on beef.Which statement identifies the most likely results?

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

What is the price that balances supply and demand in the market for foreign-currency exchange in the open-economy macroeconomic model?

If a government increases its budget deficit,which statement would best predict the effects?

What effect does a fall in the real interest rate have on the quantity of loanable funds?

Explain how the relation between the real exchange rate and net exports explains the downward slope of the demand curve for foreign-currency exchange.

Although trade policies do not affect a country's overall trade balance,they do affect specific firms and industries.

Our macroeconomic model assumes that GDP is constant.However,the model could be used to analyze the effects of a one-time increase in GDP.What does the model predict about the real interest rate,net capital outflow,net exports,and the real exchange rate when GDP increases?

In the open-economy macroeconomic model,we focus on the determination of GDP and the price level.

In 2012 and again in 2015,citizens of Greece were reported to be withdrawing their savings from Greek banks because they feared that Greece would leave the European Union.What is consistent with what the open-economy macroeconomic model predicts?

In the open-economy macroeconomic model,what is net capital outflow equal to?

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 Small Open Economy

If a government started with a deficit and moved to a surplus,which statement would best describe the effects of these changes?

What is net capital outflow equal to?

Suppose that in the 1990s,Canadian net capital outflow fell.Which of the following could explain this?

Which statement is consistent with an appreciation of the dollar?

Figure 13-2 -Refer to the Figure13-2.If the interest rate was initially at r0 and an import quota was imposed,what would happen to the real interest rate?

What happens in Canada when the Canadian government imposes an import quota on Gouda cheese?

What is the term for a limit on the quantity of an imported good?

Where does the supply of dollars in the foreign-currency exchange market come from?

Suppose that Canada imposed an import quota on beef.Which statement identifies the most likely results?

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

What is the price that balances supply and demand in the market for foreign-currency exchange in the open-economy macroeconomic model?

If a government increases its budget deficit,which statement would best predict the effects?

What effect does a fall in the real interest rate have on the quantity of loanable funds?

Explain how the relation between the real exchange rate and net exports explains the downward slope of the demand curve for foreign-currency exchange.

Although trade policies do not affect a country's overall trade balance,they do affect specific firms and industries.

Our macroeconomic model assumes that GDP is constant.However,the model could be used to analyze the effects of a one-time increase in GDP.What does the model predict about the real interest rate,net capital outflow,net exports,and the real exchange rate when GDP increases?

In the open-economy macroeconomic model,we focus on the determination of GDP and the price level.

In 2012 and again in 2015,citizens of Greece were reported to be withdrawing their savings from Greek banks because they feared that Greece would leave the European Union.What is consistent with what the open-economy macroeconomic model predicts?

In the open-economy macroeconomic model,what is net capital outflow equal to?

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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