Question 1

If the quantity of loanable funds supplied is greater than the quantity demanded,what does the excess measure?

Accepted Answer

A)  purchase of domestic investments 
B)  net capital outflow 
C)  net capital inflow. 
D)  foreigners purchase of Canadian goods

Question 2

What will NOT change Canadian net exports?

Accepted Answer

A)  capital flight from Canada 
B)  an increase in the government budget deficit 
C)  the imposition of Canadian import quotas 
D)  an increase in the world interest rate

Question 3

If a country's imports are greater than its exports,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 4

In the open-economy macroeconomic model,the supply curve of currency is vertical because the quantity of currency supplied does not depend on the real exchange rate.

Accepted Answer

A) True 
 B)False

Question 5

If Greece suffers from capital flight,Grecian domestic investment will fall and Grecian net exports will increase.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following would do the most to reduce a trade deficit?

Accepted Answer

A)  increasing domestic saving 
B)  increasing political stability and respect for property rights 
C)  negotiating with other countries to get them to reduce their trade restrictions 
D)  imposing higher tariffs on imported goods

Question 7

What is the variable that links the loanable funds market and the foreign-currency exchange market?

Accepted Answer

A)  net capital outflow 
B)  national saving 
C)  exports 
D)  imports

Question 8

If a country went from a government budget deficit to a surplus,which statement would best predict the consequences?

Accepted Answer

A)  National saving would increase,shifting the supply of loanable funds right. 
B)  National saving would increase,shifting the supply of loanable funds left. 
C)  National saving would decrease,shifting the demand for loanable funds right. 
D)  National saving would decrease,shifting the demand for loanable funds left.

Question 9

The country of Lexburgh is politically very stable and has a long tradition of respecting property rights.If several other countries suddenly became politically unstable,which statement would happen?

Accepted Answer

A)  Lexburgh's real interest rate would rise. 
B)  Lexburgh's real exchange rate would fall. 
C)  Lexburgh's net exports would fall. 
D)  Lexburgh's net exports would not change.

Question 10

Suppose that Canadian citizens start saving more.What does this imply about the supply of loanable funds and the equilibrium real interest rate? What happens to the real exchange rate?

Accepted Answer

The answer of Suppose that Canadian citizens start saving more.What...

Question 11

If the quantity of loanable funds supplied is greater than the quantity demanded,which statement best describes the difference?

Accepted Answer

A)  There is a deficit of loanable funds and the excess is net capital outflow. 
B)  There is a deficit of loanable funds and the shortage is net capital outflow. 
C)  There is a surplus of loanable funds and the excess is net capital outflow. 
D)  There is a surplus of loanable funds,and the shortage is net capital outflow.

Question 12

Which statement is consistent with a below-the-equilibrium exchange rate of the dollar?

Accepted Answer

A)  The quantity of dollars supplied is less than the quantity demanded,and the dollar will appreciate. 
B)  The quantity of dollars supplied is less than the quantity demanded,and the dollar will depreciate. 
C)  The quantity of dollars supplied is greater than the quantity demanded,and the dollar will appreciate. 
D)  The quantity of dollars supplied is greater than the quantity demanded,and the dollar will depreciate.

Question 13

What is the effect of an increase in the Canadian real interest rate above the world interest rate?

Accepted Answer

A)  Canadians buy more foreign assets,which increases Canadian net capital outflow. 
B)  Canadians buy more foreign assets,which reduces Canadian net capital outflow. 
C)  Foreigners buy more Canadian assets,which reduces Canadian net capital outflow. 
D)  Foreigners buy more Canadian assets,which increases Canadian net capital outflow.

Question 14

Suppose that Canadian investors decide that investment opportunities in African countries have improved.What happens to Canadian net capital outflow? What happens to the Canadian real interest rate?

Accepted Answer

The answer of Suppose that Canadian investors decide that investment...

Question 15

How does a change in government budget affect national saving?

Accepted Answer

A)  An increase in budget deficit increases national saving. 
B)  An increase in budget surplus increases national saving. 
C)  A decrease in budget surplus increases national saving. 
D)  A decrease in budget deficit does not affect national saving.

Question 16

If a government increases its budget deficit,which statement would best predict the effects?

Accepted Answer

A)  Interest rates rise,and the trade balance moves toward surplus. 
B)  Interest rates rise,and the trade balance moves toward deficit. 
C)  Interest rates fall,and the trade balance moves toward surplus. 
D)  Interest rates fall,and the trade balance moves toward deficit.

Question 17

If Canada imposes an import quota on bicycles,which statement would best predict the consequences?

Accepted Answer

A)  Canadian exports increase,imports increase,and net exports are unchanged. 
B)  Canadian exports increase,imports decrease,and net exports increase. 
C)  Canadian exports decrease,imports increase,and net exports decrease. 
D)  Canadian exports decrease,imports decrease,and net exports are unchanged.

Question 18

Net capital outflow represents the quantity of dollars supplied in the foreign-currency exchange market.

Accepted Answer

A) True 
 B)False

Question 19

What does a lower real interest rate decrease the quantity of?

Accepted Answer

A)  loanable funds demanded 
B)  loanable funds supplied 
C)  domestic investment 
D)  net capital outflow

Question 20

When the government increases the government budget deficit,national saving decreases.

Accepted Answer

A) True 
 B)False

Exam 13: A Macroeconomic Theory of the Small Open Economy

If the quantity of loanable funds supplied is greater than the quantity demanded,what does the excess measure?

What will NOT change Canadian net exports?

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

In the open-economy macroeconomic model,the supply curve of currency is vertical because the quantity of currency supplied does not depend on the real exchange rate.

If Greece suffers from capital flight,Grecian domestic investment will fall and Grecian net exports will increase.

Which of the following would do the most to reduce a trade deficit?

What is the variable that links the loanable funds market and the foreign-currency exchange market?

If a country went from a government budget deficit to a surplus,which statement would best predict the consequences?

The country of Lexburgh is politically very stable and has a long tradition of respecting property rights.If several other countries suddenly became politically unstable,which statement would happen?

Suppose that Canadian citizens start saving more.What does this imply about the supply of loanable funds and the equilibrium real interest rate? What happens to the real exchange rate?

If the quantity of loanable funds supplied is greater than the quantity demanded,which statement best describes the difference?

Which statement is consistent with a below-the-equilibrium exchange rate of the dollar?

What is the effect of an increase in the Canadian real interest rate above the world interest rate?

Suppose that Canadian investors decide that investment opportunities in African countries have improved.What happens to Canadian net capital outflow? What happens to the Canadian real interest rate?

How does a change in government budget affect national saving?

If a government increases its budget deficit,which statement would best predict the effects?

If Canada imposes an import quota on bicycles,which statement would best predict the consequences?

Net capital outflow represents the quantity of dollars supplied in the foreign-currency exchange market.

What does a lower real interest rate decrease the quantity of?

When the government increases the government budget deficit,national saving decreases.