Exam 13: A Macroeconomic Theory of the Small Open Economy

The 1998 default by the Russian government had results that were predictable using the textbook model.Which statement best describes what happened?

Which statement best describes the effects of an increase in real interest rates in Canada?

Which statement is consistent with a depreciation of the dollar?

Mexico suffered from capital flight in 1994.What happened to Mexico's real interest rate and the peso?

In an open economy,the supply of loanable funds comes from national saving.

If the quantity of loanable funds supplied is greater than the quantity demanded,what are the excess funds used for?

Which of the following is included in the supply of dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

In the open-economy macroeconomic model,where does the demand for loanable funds come from?

Which statement best describes the effects of an increase in the real interest rate?

A drop in the Peruvian real interest rate reduces Peruvian net capital outflow.

What is the real exchange rate equal to?

The law of one price assumes that trade take place at no cost,so that prices across borders equalize.The result of this assumption is that the real interest rate is always constant. a)Draw a graph to show the demand for dollars in the foreign-currency exchange market under the assumption that purchasing-power parity holds. b)On the other hand,our model of real exchange rate determination shows a downward sloping demand-for-dollars curve.What could determine how steep or flat the demand for dollars is?

In the market for foreign-currency exchange in the open-economy macroeconomic model,which of the following results from a higher real exchange rate?

What is most likely to increase exports in the country of Lexburgh?

What does the open-economy macroeconomic model examine?

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

What are the main elements of our open-economy macroeconomic model?

Which statement could be prompted by an interest rate that is temporarily higher in Canada than in the rest of the world?

In an open economy,what are the determinants of the prevailing real interest rate?

In the open-economy macroeconomic model,net capital outflow links the markets for loanable funds and foreign-currency exchange.