Question 1

During the 1970s,1980s,and 1990s,many economies became unbalanced because of:

Accepted Answer

A)  the expansion of the WTO. 
B)  the emergence of NAFTA and the EU as powerful reenergized economic forces. 
C)  world market conditions and macroeconomic mismanagement. 
D)  China's emergence as a new global economic power.

Question 2

A depreciation of the real exchange rate (as defined in the Australian model)means that the:

Accepted Answer

A)  price of tradables rises relative to the price of nontradables. 
B)  price of tradables fall relative to the price of nontradables. 
C)  official exchange rate (defined as local currency per unit of foreign currency) falls. 
D)  official exchange rate rises more slowly than the average price of nontradables.

Question 3

The onset of the Dutch disease in represented in the Australian model as a shift of the external-balance (EB)line to the:

Accepted Answer

A)  left. 
B)  right. 
C)  left combined with a shift of the internal-balance (I
B)  line to the left. 
D)  right combined with a shift of the IB line to the left.

Question 4

IDs and Paired-Concept Questions
These terms can be used individually as short-answer identification questions, or they can be used in pairs. In the latter case, ask students to explain (1) the meaning and significance of each of the two terms and (2) the relationship between them.
-Internal balance,external balance

Accepted Answer

The answer of IDs and Paired-Concept Questions
These terms can be...

Question 5

IDs and Paired-Concept Questions
These terms can be used individually as short-answer identification questions, or they can be used in pairs. In the latter case, ask students to explain (1) the meaning and significance of each of the two terms and (2) the relationship between them.
-Tradable goods,real exchange rate

Accepted Answer

The answer of IDs and Paired-Concept Questions
These terms can be...

Question 6

Starting from an equilibrium in both markets,an increase in absorption will cause:

Accepted Answer

A)  the supply curve to shift to the left for both tradables (T) and nontradables (N). 
B)  the demand curve to shift to the right for both T and N. 
C)  the demand curve to shift to the right for N and to the left for T. 
D)  no shift in the curves, but the economy moves to a position of inflation and external surplus.

Question 7

IDs and Paired-Concept Questions
These terms can be used individually as short-answer identification questions, or they can be used in pairs. In the latter case, ask students to explain (1) the meaning and significance of each of the two terms and (2) the relationship between them.
-Small economy,open economy

Accepted Answer

The answer of IDs and Paired-Concept Questions
These terms can be...

Question 8

Which of the following should be classified as a nontradable?

Accepted Answer

A)  rural road construction services 
B)  wheat production wholly consumed within the country 
C)  computer equipment that cannot be produced locally 
D)  all of the above

Question 9

If the world price of tradables remains unchanged while the official exchange rate rises by 20 percent and domestic prices for nontradables rise by 50 percent,then the real exchange rate (as defined in the Australian model):

Accepted Answer

A)  rises by 30 percent. 
B)  falls by 30 percent. 
C)  falls by 20 percent. 
D)  rises by 70 percent.

Question 10

At any point to the left of the EB line in the phase diagram:

Accepted Answer

A)  there is inflationary pressure. 
B)  there is an external surplus. 
C)  fiscal and monetary policies are too loose. 
D)  all of the above.

Exam 15: Managing Short-Run Crises in an Open Economy

During the 1970s,1980s,and 1990s,many economies became unbalanced because of:

A depreciation of the real exchange rate (as defined in the Australian model) means that the:

The onset of the Dutch disease in represented in the Australian model as a shift of the external-balance (EB) line to the:

Starting from an equilibrium in both markets,an increase in absorption will cause:

Which of the following should be classified as a nontradable?

If the world price of tradables remains unchanged while the official exchange rate rises by 20 percent and domestic prices for nontradables rise by 50 percent,then the real exchange rate (as defined in the Australian model) :

At any point to the left of the EB line in the phase diagram: