Exam 5: The Open Economy

In a small open economy,if exports equal $20 billion,imports equal $30 billion,and domestic national saving equals $25 billion,then net capital outflow equals:

In the long-run,increased national saving must I: increase total labour income in a closed economy. II: increase total labour income in a small open economy.

A small open economy has exports equal to 10,imports equal to 6,foreign debt equal to 20.The world interest rate is 10 percent.The country's current account balance is:

In a small open economy,if exports equal $15 billion and imports equal $8 billion,then there is a trade ______ and ______ net capital outflow.

Suppose that the International Monetary Fund (IMF)is concerned about currency depreciation in a small open economy.Use the basic version of our exchange-rate model for your answers.a.What type of fiscal policy should the IMF propose to the government of the small open economy to generate a currency appreciation? b.Illustrate graphically the impact of the IMF proposal on the exchange rate of the small open economy.c.What will happen to the trade balance of the small open economy,assuming that it started from a position of balanced trade?

A small open economy has exports equal to 10,imports equal to 7,and foreign debt service obligations of 4.I: The country has a current account deficit.II: The country is moving deeper into debt.

The world interest rate:

Assume that some large foreign countries decide to subsidize investment by instituting an investment tax credit.Then a small country's real exchange rate:

The adoption of an investment tax credit in a small open economy is likely to lead to:

When a country's real exchange rate rises:

The currencies of countries with high inflation rates relative to Canada have tended to ______,and the currencies of countries with low inflation rates relative to Canada have tended to ______.

In the basic model of a small open economy,if consumers shift their preferences toward foreign cars,then net exports:

Use the following to answer questions : Exhibit: Policies Influence Real Exchange Rate -(Exhibit: Policies Influence Real Exchange Rate)Which of the graphs illustrates the impact on the real exchange rate of an increase in investment demand in the basic version of the small open economy model?

Use the following to answer questions : Exhibit: Policies Influence Real Exchange Rate -(Exhibit: Policies Influence Real Exchange Rate)Which of the graphs illustrates the impact on the real exchange rate of an increase in household saving in the basic version of the small open economy model?

The real exchange rate is determined by the equality of:

In a small open economy,starting from a position of balanced trade,if the government increases the income tax,this produces a tendency toward a trade ______ and ______ net capital outflow.

If a graph is drawn with net exports on the horizontal axis and the real exchange rate on the vertical axis,then the real exchange rate is determined by the intersection of the ______ net-exports schedule and the ______ line representing saving minus investment.

Use the following to answer questions : Exhibit: Saving and Investment in a Small Open Economy -(Exhibit: Saving and Investment in a Small Open Economy)In a small open economy if the world interest rate is r₁,then the economy has:

A trade deficit can be financed in all of the following methods except by:

If a Canadian corporation purchases a product made in Europe and the European producer uses the proceeds to purchase a Canadian government bond,then Canadian net exports ______ and net capital outflows ______.