Question 1

If the real interest rate were above the equilibrium rate,there would be a shortage of loanable funds.

Accepted Answer

A) True 
 B)False

Question 2

If foreign investors believe that the Algerian government will default on their debt,what might happen?

Accepted Answer

A)  a decrease in Algerian interest rates and an increase in Algerian net capital outflow 
B)  an increase in both Algerian interest rates and net capital outflow 
C)  a decrease in both Algerian interest rates and net capital outflow 
D)  an increase in Algerian interest rates and a decrease in Algerian net capital outflow

Question 3

If there is capital flight from Canada,how does the open-economy macroeconomic model change?

Accepted Answer

A)  Both the supply of loanable funds and the supply of dollars for foreign exchange curves shift right. 
B)  Both the supply of loanable funds and the supply of dollars for foreign exchange curves shift left. 
C)  The supply of loanable funds shifts left,while the supply of dollars shifts right. 
D)  The supply of loanable funds shifts right,while the supply of dollars shifts left.

Question 4

What is the effect of an increase in Canadian government deficit?

Accepted Answer

A)  Canadian national saving increases. 
B)  The real exchange rate of the dollar increases. 
C)  Canadian net exports increase. 
D)  Canadian domestic investment increases.

Question 5

Suppose that Canada places higher tariffs on imports of ice cream.What would be the most likely result?

Accepted Answer

A)  The tariffs would reduce imports into Canada,which would cause Canadian net exports to rise. 
B)  The tariffs would reduce imports into Canada,which would cause the net supply of dollars in the foreign exchange market to rise. 
C)  The tariffs would reduce imports of ice cream into Canada,but would reduce Canadian exports of other goods by an equal amount. 
D)  The tariffs would reduce imports of ice cream into Canada,but would increase Canadian exports of other goods by an equal amount.

Question 6

If the world real interest rate exceeds the interest rate that would occur if the Canadian economy were closed,then what would the Canadian net capital outflow be?

Accepted Answer

A)  positive 
B)  negative 
C)  decreasing 
D)  increasing

Question 7

Using the macroeconomic model studied,analyze the impact of the following events on the Canadian economy:
a.a voluntary export restraint (VER)by Japanese car producers
b.an export subsidy by Canadian government for Canadian lumber producers
c.an increase in U.S.GDP

Accepted Answer

The answer of Using the macroeconomic model studied,analyze the impact...

Question 8

What is most likely to result if foreigners decide to withdraw the funds that they have loaned to Canada over the past two decades?

Accepted Answer

A)  Canadian net exports will rise. 
B)  Canadian saving will rise. 
C)  Canadian domestic investment will rise. 
D)  Canadian imports will rise.

Question 9

What is the term for a tax on imported goods?

Accepted Answer

A)  an excise tax 
B)  a tariff 
C)  an import quota 
D)  import tax

Question 10

Why do higher real interest rates lead to lower net capital outflow?

Accepted Answer

The answer of Why do higher real interest rates lead...

Question 11

If the Canadian government imposes an import quota on French Brie cheese,which statement would best predict the consequences?

Accepted Answer

A)  Both Canadian net exports and domestic sales of Canadian cheese will increase. 
B)  Canadian net exports will not change,and domestic sales of Canadian cheese will increase. 
C)  Both Canadian net exports and domestic sales of Canadian cheese will decrease. 
D)  Canadian net exports will not change,and domestic sales of Canadian cheese will decrease.

Question 12

What is consistent with capital flight from Mexico?

Accepted Answer

A)  The Mexican capital outflow decreases. 
B)  The real exchange rate of the peso depreciates. 
C)  The Mexican real interest rate decreases. 
D)  The Mexican demand for loanable funds increases.

Question 13

In the open-economy macroeconomic model,what does the quantity of dollars demanded in the foreign-currency exchange market depend on?

Accepted Answer

A)  the real exchange rate and import quotas 
B)  the real exchange rate and government deficit 
C)  the real interest rate and import quotas 
D)  the real interest rate and government deficit

Question 14

Suppose the Canadian government institutes a "Buy Canadian" campaign,in order to encourage spending on domestic goods.What effect will this have on the Canadian trade balance?

Accepted Answer

The answer of Suppose the Canadian government institutes a "Buy...

Question 15

In 2002 and again in 2014,the Argentinean government defaulted on its debt.Which statement is consistent with what the open-economy macroeconomic model predicts?

Accepted Answer

A)  This event should have raised Argentinean interest rates and caused the Argentinean currency to appreciate. 
B)  This event should have raised Argentinean interest rates and caused the Argentinean currency to depreciate. 
C)  This event should have lowered Argentinean interest rates and caused the Argentinean currency to appreciate. 
D)  This event should have lowered Argentinean interest rates and caused the Argentinean currency to depreciate.

Question 16

Mexico suffered from capital flight in 1994.What happened to Mexico's net capital outflow and net exports?

Accepted Answer

A)  The net capital outflow and net exports decreased. 
B)  The net capital outflow and net exports increased. 
C)  The net capital outflow increased while net exports decreased. 
D)  The net capital outflow decreased while net exports increased.

Question 17

When a country imposes a trade restriction,the real exchange rate of that country's currency appreciates.

Accepted Answer

A) True 
 B)False

Question 18

Figure 13-2 
-Refer to the Figure13-2.Which of the following shifts shows the effects of an import quota?

Accepted Answer

A)  a shift of the supply of Canadian dollars (S-I)curve to the right 
B)  a shift from D0 to D1 
C)  a shift from D0 to D2 
D)  a shift of the demand for loanable funds curve to the right

Question 19

If a country's exports are greater than its imports,what is the country said to have?

Accepted Answer

A)  a trade surplus 
B)  a trade deficit 
C)  a comparative advantage 
D)  an absolute advantage

Question 20

In an open economy,what does net capital outflow equal?

Accepted Answer

A)  imports 
B)  net exports 
C)  exports 
D)  net imports

Exam 13: A Macroeconomic Theory of the Small Open Economy