Exam 20: Part A: The Classical Model in an Open Economy

In the classical model with an open economy,an increase in government purchases may not cause complete crowding out,but crowding out will be complete worldwide.

Which of the following is a leakage in an open economy?

In the classical model,when an open economy has balanced trade,Say's law holds.

In the classical model,even when a country runs a trade deficit,Say's law holds.

In the classical model with an open economy,an increase in government purchases always causes complete crowding out.

In the classical model with an open economy,an increase in the trade deficit as a result of a tax cut,causes a decline in the interest rate,attracting more loanable funds from abroad.

In the classical model,when an open economy has balanced trade,Say's law does not hold.

Which of the following is an injection in an open economy?

When a country runs a trade deficit,

In the classical model with an open economy,an increase in government purchases can affect a country's exchange rate,causing its imports and exports to change.