Question 1

Which of the following would be part of the nation's current account?

Accepted Answer

A) An old house purchased by an American in Italy 
B) The purchase of a U.S.Treasury bond by a foreigner 
C) The interest an American earns on a British bond 
D) A factory built by the Japanese in the United States 
A) An old house purchased by an American in Italy 
B) The purchase of a U.S.Treasury bond by a foreigner 
C) The interest an American earns on a British bond 
D) A factory built by the Japanese in the United States

Question 2

If all international factor payment flows are investment income,then net investment income from abroad equals

Accepted Answer

A) net exports. 
B) the current account balance. 
C) the trade balance. 
D) net factor payments from abroad. 
A) net exports. 
B) the current account balance. 
C) the trade balance. 
D) net factor payments from abroad.

Question 3

If there is a decrease in taxes on business firms in a small open economy,it causes the current account to ________ and saving to ________.

Accepted Answer

A) fall; fall 
B) rise; remain unchanged 
C) fall; remain unchanged 
D) rise; fall 
A) fall; fall 
B) rise; remain unchanged 
C) fall; remain unchanged 
D) rise; fall

Question 4

The government of a small open economy announces a tax cut of $100 this year,combined with a tax increase of $110 next year,when the interest rate is 10%.What are the effects of this change on the world real interest rate,national saving,investment,and the current account balance in equilibrium when
(a)Ricardian equivalence holds?
(b)Ricardian equivalence does not hold?

Accepted Answer

(a)No effect on any of the variables.
(b

Question 5

If a country has a current account surplus,it also has

Accepted Answer

A) a capital and financial account surplus. 
B) an increase in its official reserve assets. 
C) a balance of payments deficit. 
D) an increase in its holding of net foreign assets. 
A) a capital and financial account surplus. 
B) an increase in its official reserve assets. 
C) a balance of payments deficit. 
D) an increase in its holding of net foreign assets.

Question 6

When a temporary adverse supply shock hits a large open economy,it causes the current account to ________ and investment to ________.

Accepted Answer

A) fall; fall 
B) rise; remain unchanged 
C) fall; remain unchanged 
D) rise; fall 
A) fall; fall 
B) rise; remain unchanged 
C) fall; remain unchanged 
D) rise; fall

Question 7

If there's an increase in the future marginal product of capital in a large open economy,it causes the current account to ________ and saving to ________.

Accepted Answer

A) fall; rise 
B) rise; remain unchanged 
C) fall; remain unchanged 
D) rise; rise 
A) fall; rise 
B) rise; remain unchanged 
C) fall; remain unchanged 
D) rise; rise

Question 8

Due to a change in the regulatory structure of a small open economy,the desired capital stock becomes higher for both private investment and government investment.Increased government investment spending is financed by borrowing,not by higher taxes.If both desired investment and government spending rise at the same time,will there be "twin deficits"?

Accepted Answer

Desired saving shifts left,des

Question 9

A large open economy reduces its investment demand.This causes the world real interest rate to ________ and the country's current account balance to ________.

Accepted Answer

A) rise; fall 
B) rise; rise 
C) fall; rise 
D) fall; fall 
A) rise; fall 
B) rise; rise 
C) fall; rise 
D) fall; fall

Question 10

A large open economy has desired national saving of Sd = 1200 + 1000rw,and desired national investment of Id = 1000 - 500rw.The foreign economy has desired national saving of   = 1300 + 1000rw,and desired national investment of
  = 1800 - 500rw.In equilibrium,the foreign country has net exports equal to

Accepted Answer

A) 500. 
B) 350. 
C) -350. 
D) -500. 
A) 500. 
B) 350. 
C) -350. 
D) -500.

Question 11

An economy is considered a small open economy if it

Accepted Answer

A) is too small to affect the world real interest rate. 
B) has GDP less than 1% of world GDP. 
C) doesn't trade internationally. 
D) has a zero trade balance. 
A) is too small to affect the world real interest rate. 
B) has GDP less than 1% of world GDP. 
C) doesn't trade internationally. 
D) has a zero trade balance.

Question 12

A small open economy has a current account balance of zero.A rise in the world real interest rate causes

Accepted Answer

A) a current account surplus. 
B) a capital and financial account surplus. 
C) net borrowing from abroad. 
D) absorption to exceed income. 
A) a current account surplus. 
B) a capital and financial account surplus. 
C) net borrowing from abroad. 
D) absorption to exceed income.

Question 13

If a French company exports $2 million of machinery to Italy and French tourists spend $2 million at Italian beaches,the Italian current account balance ________,and the Italian capital and financial account balance ________.

Accepted Answer

A) rises; rises 
B) rises; is unchanged 
C) is unchanged; is unchanged 
D) is unchanged; rises 
A) rises; rises 
B) rises; is unchanged 
C) is unchanged; is unchanged 
D) is unchanged; rises

Question 14

If France has a trade deficit,then

Accepted Answer

A) imports into France exceed exports from France. 
B) exports from France exceed imports into France. 
C) imports into the United States from France exceed exports from the United States into France. 
D) imports into France from the United States exceed exports from France into the United States. 
A) imports into France exceed exports from France. 
B) exports from France exceed imports into France. 
C) imports into the United States from France exceed exports from the United States into France. 
D) imports into France from the United States exceed exports from France into the United States.

Question 15

In a small open economy,Sd = 200 + 500 rw and Id = 300 - 200 rw.If rw = 0.1,then net exports =

Accepted Answer

A) -50. 
B) -30. 
C) 30. 
D) 50. 
A) -50. 
B) -30. 
C) 30. 
D) 50.

Question 16

If a freeze destroys much of the crop of an agricultural nation,then

Accepted Answer

A) the desired investment curve would shift to the left. 
B) the desired investment curve would shift to the right. 
C) net foreign lending would increase. 
D) net foreign lending would decrease. 
A) the desired investment curve would shift to the left. 
B) the desired investment curve would shift to the right. 
C) net foreign lending would increase. 
D) net foreign lending would decrease.

Question 17

A country's capital and financial account balance decreases if

Accepted Answer

A) its current account balance increases. 
B) its income payment inflows on foreign assets decrease. 
C) its domestic residents working abroad reduce the income they send home to their families. 
D) foreigners increase their purchases of its existing assets. 
A) its current account balance increases. 
B) its income payment inflows on foreign assets decrease. 
C) its domestic residents working abroad reduce the income they send home to their families. 
D) foreigners increase their purchases of its existing assets.

Question 18

If a country's merchandise exports exceed its merchandise imports it has a

Accepted Answer

A) trade surplus. 
B) trade deficit. 
C) current account surplus. 
D) current account deficit. 
A) trade surplus. 
B) trade deficit. 
C) current account surplus. 
D) current account deficit.

Question 19

A negative value for the U.S.official reserve assets line in the balance of payments accounts means that

Accepted Answer

A) U)S.residents have sold more gold to foreigners than they bought. 
B) U)S.residents bought more gold from foreigners than they sold. 
C) the U.S.central bank has increased its holdings of foreign reserve assets. 
D) the U.S.central bank has decreased its holdings of foreign reserve assets. 
A) U)S.residents have sold more gold to foreigners than they bought. 
B) U)S.residents bought more gold from foreigners than they sold. 
C) the U.S.central bank has increased its holdings of foreign reserve assets. 
D) the U.S.central bank has decreased its holdings of foreign reserve assets.

Question 20

The United States became a net debtor because

Accepted Answer

A) it ran consistently large current account deficits. 
B) it ran consistently large current account surpluses. 
C) it lent a lot to people in foreign countries. 
D) it provided much foreign aid to other countries. 
A) it ran consistently large current account deficits. 
B) it ran consistently large current account surpluses. 
C) it lent a lot to people in foreign countries. 
D) it provided much foreign aid to other countries.

Which of the following would be part of the nation's current account?

If all international factor payment flows are investment income,then net investment income from abroad equals

If there is a decrease in taxes on business firms in a small open economy,it causes the current account to and saving to .

If a country has a current account surplus,it also has

When a temporary adverse supply shock hits a large open economy,it causes the current account to and investment to .

If there's an increase in the future marginal product of capital in a large open economy,it causes the current account to and saving to .

A large open economy reduces its investment demand.This causes the world real interest rate to and the country's current account balance to .

A large open economy has desired national saving of Sd = 1200 + 1000rw,and desired national investment of Id = 1000 - 500rw.The foreign economy has desired national saving of = 1300 + 1000rw,and desired national investment of = 1800 - 500rw.In equilibrium,the foreign country has net exports equal to

An economy is considered a small open economy if it

A small open economy has a current account balance of zero.A rise in the world real interest rate causes

If a French company exports $2 million of machinery to Italy and French tourists spend $2 million at Italian beaches,the Italian current account balance ,and the Italian capital and financial account balance .

If France has a trade deficit,then

In a small open economy,Sd = 200 + 500 rw and Id = 300 - 200 rw.If rw = 0.1,then net exports =

If a freeze destroys much of the crop of an agricultural nation,then

A country's capital and financial account balance decreases if

If a country's merchandise exports exceed its merchandise imports it has a

A negative value for the U.S.official reserve assets line in the balance of payments accounts means that

The United States became a net debtor because

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, Output, and Employment

Consumption, Saving, and Investment

Long-Run Economic Growth

The Asset Market, Money, and Prices

Business Cycles

The IS-LM/AD-AS Model

Classical Business Cycle Analysis

Keynesianism: The Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates,Business Cycles,and Macroeconomic Policy in the Open Economy

Monetary Policy and the Federal Reserve System

Government Spending and Its Financing

Filters

Exam 5: Saving and Investment in the Open Economy

Which of the following would be part of the nation's current account?

If all international factor payment flows are investment income,then net investment income from abroad equals

If there is a decrease in taxes on business firms in a small open economy,it causes the current account to ________ and saving to ________.

If a country has a current account surplus,it also has

When a temporary adverse supply shock hits a large open economy,it causes the current account to ________ and investment to ________.

If there's an increase in the future marginal product of capital in a large open economy,it causes the current account to ________ and saving to ________.

A large open economy reduces its investment demand.This causes the world real interest rate to ________ and the country's current account balance to ________.

An economy is considered a small open economy if it

A small open economy has a current account balance of zero.A rise in the world real interest rate causes

If a French company exports $2 million of machinery to Italy and French tourists spend $2 million at Italian beaches,the Italian current account balance ________,and the Italian capital and financial account balance ________.

If France has a trade deficit,then

In a small open economy,Sd = 200 + 500 rw and Id = 300 - 200 rw.If rw = 0.1,then net exports =

If a freeze destroys much of the crop of an agricultural nation,then

A country's capital and financial account balance decreases if

If a country's merchandise exports exceed its merchandise imports it has a

A negative value for the U.S.official reserve assets line in the balance of payments accounts means that

The United States became a net debtor because

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, Output, and Employment

Consumption, Saving, and Investment

Long-Run Economic Growth

The Asset Market, Money, and Prices

Business Cycles

The IS-LM/AD-AS Model

Classical Business Cycle Analysis

Keynesianism: The Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates,Business Cycles,and Macroeconomic Policy in the Open Economy

Monetary Policy and the Federal Reserve System

Government Spending and Its Financing

Filters

If there is a decrease in taxes on business firms in a small open economy,it causes the current account to and saving to .

When a temporary adverse supply shock hits a large open economy,it causes the current account to and investment to .

If there's an increase in the future marginal product of capital in a large open economy,it causes the current account to and saving to .

A large open economy reduces its investment demand.This causes the world real interest rate to and the country's current account balance to .

If a French company exports $2 million of machinery to Italy and French tourists spend $2 million at Italian beaches,the Italian current account balance ,and the Italian capital and financial account balance .