Question 1

Explain how the relation between the real exchange rate and net exports explains the downward slope of the demand for foreign-currency exchange curve.

Accepted Answer

When the Canadian real exchange rate app...

Question 2

Use the figure below to answer the following questions.
Figure 32-2 0 and E0 and the government removed import quotas, what would happen to the exchange rate? A) It would appreciate to E1. B) It would appreciate to E2. C) It would depreciate to E1. D) It would depreciate to E2." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 32-2. If the economy were initially in equilibrium at r0 and E0 and the government removed import quotas, what would happen to the exchange rate?

Accepted Answer

A)  It would appreciate to E1.
B)  It would appreciate to E2.
C)  It would depreciate to E1.
D)  It would depreciate to E2.E) None of the above
F) A) and B)

Question 3

Suppose we measure Canada's net capital outflow by what Statistics Canada calls "net international investment position," and we approximate the real exchange rate of the dollar by the price of Canadian dollar in terms of U.S. dollars. The following table gives data on these two variables, as provided by Statistics Canada.
  
a.What does our open-economy macro model predict with regard to the relationship between net capital outflow and the real exchange rate?
b.Do you find evidence in the data to support the theory?
c.If you find discrepancies between the data and the theory, what could cause them?

Accepted Answer

a.Our macro model predicts an inverse re...

Question 4

Use the figure below to answer the following questions.
Figure 32-2 0 and an import quota was imposed, what would happen to the interest rate? A) It would stay at r0. B) It would decrease because supply would shift right. C) It would increase because supply would shift left. D) It would decrease because demand would shift left." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 32-2. If the interest rate were initially at r0 and an import quota was imposed, what would happen to the interest rate?

Accepted Answer

A)  It would stay at r0.
B)  It would decrease because supply would shift right.
C)  It would increase because supply would shift left.
D)  It would decrease because demand would shift left.E) A) and B)
F) None of the above

Question 5

Which of the following would NOT be a consequence of an increase in the Canadian government's budget deficit?

Accepted Answer

A)  Canadian interest rates rise.
B)  Canadian net capital outflow falls.
C)  The real exchange rate of the Canadian dollar depreciates.
D)  The Canadian supply of loanable funds shifts left.E) None of the above
F) All of the above

Question 6

Which of the following is the most accurate statement about trade policy?

Accepted Answer

A)  Trade policy has neither microeconomic nor macroeconomic effects.
B)  Trade policy has similar microeconomic and macroeconomic effects.
C)  The effects of trade policy are more macroeconomic than microeconomic.
D)  The effects of trade policy are more microeconomic than macroeconomic.E) A) and C)
F) C) and D)

Question 7

According to the open-economy macroeconomic model, an increase in the Canadian government budget surplus increases Canadian net capital outflow, causes the real exchange rate of the dollar to depreciate, and increases Canadian net exports.

Accepted Answer

A) True 
 B)False

Question 8

State what, if anything, each of the following does to the supply or demand of loanable funds.
a.net capital outflow increases at each interest rate
b.domestic investment increases at each interest rate
c.the government deficit increases
d.private saving increases

Accepted Answer

a.The demand for loanable fund...

Question 9

Use the figure below to answer the following questions.
Figure 32-2 0 and China voluntarily restricted its exports to Canada, what would happen to the interest rate? A) It would stay at r0. B) It would decrease because supply would shift right. C) It would increase because supply would shift left. D) It would decrease because demand would shift left." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 32-2. Suppose that these diagrams refer to Canada. If the interest rate were initially at r0 and China voluntarily restricted its exports to Canada, what would happen to the interest rate?

Accepted Answer

A)  It would stay at r0.
B)  It would decrease because supply would shift right.
C)  It would increase because supply would shift left.
D)  It would decrease because demand would shift left.E) A) and B)
F) All of the above

Question 10

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

Such a campaign will increase the demand...

Question 11

In the market for foreign-currency exchange in the open-economy macroeconomic model, which of the following results from a higher real exchange rate?

Accepted Answer

A)  It makes Canadian goods more expensive relative to foreign goods and reduces the quantity of dollars supplied.
B)  It makes Canadian goods more expensive relative to foreign goods and reduces the quantity of dollars demanded.
C)  It makes foreign goods more expensive relative to Canadian goods and reduces the quantity of dollars supplied.
D)  It makes foreign goods more expensive relative to Canadian goods and reduces the quantity of dollars demanded.E) None of the above
F) A) and D)

Question 12

A drop in the Peruvian real interest rate reduces Peruvian net capital outflow.

Accepted Answer

A) True 
 B)False

Question 13

In an open economy, which of the following does the market for loanable funds take as given?

Accepted Answer

A)  saving
B)  investment
C)  exchange rate
D)  real interest rateE) None of the above
F) A) and B)

Question 14

The People's Republic of China has had a large trade surplus in recent years. Which of the following is the most likely explanation of this surplus?

Accepted Answer

A)  China has a high rate of inflation, which reduces the value of its currency.
B)  China has a large supply of labour, so low wages give it a competitive edge.
C)  China has many trade barriers, which restrict the ability of other countries to sell their products in China.
D)  China has a large amount of saving relative to domestic investment.E) None of the above
F) A) and C)

Question 15

Figure 32-3 0 and E0. Which of the following are consistent with the effects of capital flight? A) the shift from D0 to D1 in Panel A B) the shift from NCO0 to NCO1 in Panel B C) the shift from S1 to S0 in Panel C D) the shift from r1 to r0 in Panel A" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 32-3. Suppose that the Mexican economy starts at r0 and E0. Which of the following are consistent with the effects of capital flight?

Accepted Answer

A)  the shift from D0 to D1 in Panel A
B)  the shift from NCO0 to NCO1 in Panel B
C)  the shift from S1 to S0 in Panel C
D)  the shift from r1 to r0 in Panel AE) A) and B)
F) None of the above

Question 16

If Canadian firms decide to invest more domestically at each interest rate, which of the following best describes the results?

Accepted Answer

A)  The real interest rate decreases, the real exchange rate of the dollar depreciates, and Canadian net capital outflow decreases.
B)  The real interest rate decreases, the real exchange rate of the dollar appreciates, and Canadian net capital outflow increases.
C)  The real interest rate increases, the real exchange rate of the dollar appreciates, and Canadian net capital outflow decreases.
D)  The real interest rate increases, the real exchange rate of the dollar depreciates, and Canadian net capital outflow increases.E) A) and B)
F) A) and C)

Question 17

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

Accepted Answer

A)  Aquilonia's real interest rate would rise.
B)  Aquilonia's real exchange rate would fall.
C)  Aquilonia's net exports would fall.
D)  Aquilonia's net exports would not change.E) A) and D)
F) B) and C)

Question 18

In an open economy, the supply of loanable funds comes from national saving.

Accepted Answer

A) True 
 B)False

Question 19

Other things the same, when the real exchange rate of the dollar appreciates, Canadian goods become more attractive to Canadian residents, but less attractive to foreign residents.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following will decrease Canadian net capital outflow?

Accepted Answer

A)  capital flight from Canada
B)  an increase in the government budget deficit
C)  the imposition of Canadian government import quotas
D)  a decrease in the tax on capital gainsE) C) and D)
F) A) and B)

Exam 13: A Macroeconomic Theory of the Open Economy

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?

Correct Answer
verified
Such a campaign will increase the demand...
View Answer

According to the open-economy macroeconomic model, an increase in the Canadian government budget surplus increases Canadian net capital outflow, causes the real exchange rate of the dollar to depreciate, and increases Canadian net exports.

Correct Answer
verified

State what, if anything, each of the following does to the supply or demand of loanable funds. a.net capital outflow increases at each interest rate b.domestic investment increases at each interest rate c.the government deficit increases d.private saving increases

Correct Answer
verified
a.The demand for loanable fund...
View Answer

Correct Answer
verified
a.Our macro model predicts an inverse re...
View Answer

In an open economy, which of the following does the market for loanable funds take as given?

Correct Answer
verified

Use the figure below to answer the following questions. Figure 32-2 -Refer to Figure 32-2. If the interest rate were initially at r₀ and an import quota was imposed, what would happen to the interest rate?

Correct Answer
verified

In the market for foreign-currency exchange in the open-economy macroeconomic model, which of the following results from a higher real exchange rate?

Correct Answer
verified

Use the figure below to answer the following questions. Figure 32-2 -Refer to Figure 32-2. If the economy were initially in equilibrium at r₀and E₀ and the government removed import quotas, what would happen to the exchange rate?

Correct Answer
verified

Which of the following would NOT be a consequence of an increase in the Canadian government's budget deficit?

Correct Answer
verified

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

Correct Answer
verified

Explain how the relation between the real exchange rate and net exports explains the downward slope of the demand for foreign-currency exchange curve.

Correct Answer
verified
When the Canadian real exchange rate app...
View Answer

Which of the following is the most accurate statement about trade policy?

Correct Answer
verified

Other things the same, when the real exchange rate of the dollar appreciates, Canadian goods become more attractive to Canadian residents, but less attractive to foreign residents.

Correct Answer
verified

Which of the following will decrease Canadian net capital outflow?

Correct Answer
verified

A drop in the Peruvian real interest rate reduces Peruvian net capital outflow.

Correct Answer
verified

In an open economy, the supply of loanable funds comes from national saving.

Correct Answer
verified

If Canadian firms decide to invest more domestically at each interest rate, which of the following best describes the results?

Correct Answer
verified

The People's Republic of China has had a large trade surplus in recent years. Which of the following is the most likely explanation of this surplus?

Correct Answer
verified

Figure 32-3 -Refer to Figure 32-3. Suppose that the Mexican economy starts at r₀ and E₀. Which of the following are consistent with the effects of capital flight?

Correct Answer
verified

Use the figure below to answer the following questions. Figure 32-2 -Refer to Figure 32-2. Suppose that these diagrams refer to Canada. If the interest rate were initially at r₀ and China voluntarily restricted its exports to Canada, what would happen to the interest rate?

Correct Answer
verified

Exam 13: A Macroeconomic Theory of the Open Economy

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?

Correct AnswerverifiedSuch a campaign will increase the demand...View AnswerShow Answer

According to the open-economy macroeconomic model, an increase in the Canadian government budget surplus increases Canadian net capital outflow, causes the real exchange rate of the dollar to depreciate, and increases Canadian net exports.

Correct AnswerverifiedShow Answer

State what, if anything, each of the following does to the supply or demand of loanable funds. a.net capital outflow increases at each interest rate b.domestic investment increases at each interest rate c.the government deficit increases d.private saving increases

Correct Answerverifieda.The demand for loanable fund...View AnswerShow Answer

Correct Answerverifieda.Our macro model predicts an inverse re...View AnswerShow Answer

In an open economy, which of the following does the market for loanable funds take as given?

Correct AnswerverifiedShow Answer

Use the figure below to answer the following questions. Figure 32-2 -Refer to Figure 32-2. If the interest rate were initially at r0 and an import quota was imposed, what would happen to the interest rate?

Correct AnswerverifiedShow Answer

In the market for foreign-currency exchange in the open-economy macroeconomic model, which of the following results from a higher real exchange rate?

Correct AnswerverifiedShow Answer

Use the figure below to answer the following questions. Figure 32-2 -Refer to Figure 32-2. If the economy were initially in equilibrium at r0 and E0 and the government removed import quotas, what would happen to the exchange rate?

Correct AnswerverifiedShow Answer

Which of the following would NOT be a consequence of an increase in the Canadian government's budget deficit?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Explain how the relation between the real exchange rate and net exports explains the downward slope of the demand for foreign-currency exchange curve.

Correct AnswerverifiedWhen the Canadian real exchange rate app...View AnswerShow Answer

Which of the following is the most accurate statement about trade policy?

Correct AnswerverifiedShow Answer

Other things the same, when the real exchange rate of the dollar appreciates, Canadian goods become more attractive to Canadian residents, but less attractive to foreign residents.

Correct AnswerverifiedShow Answer

Which of the following will decrease Canadian net capital outflow?

Correct AnswerverifiedShow Answer

A drop in the Peruvian real interest rate reduces Peruvian net capital outflow.

Correct AnswerverifiedShow Answer

In an open economy, the supply of loanable funds comes from national saving.

Correct AnswerverifiedShow Answer

If Canadian firms decide to invest more domestically at each interest rate, which of the following best describes the results?

Correct AnswerverifiedShow Answer

The People's Republic of China has had a large trade surplus in recent years. Which of the following is the most likely explanation of this surplus?

Correct AnswerverifiedShow Answer

Figure 32-3 -Refer to Figure 32-3. Suppose that the Mexican economy starts at r0 and E0. Which of the following are consistent with the effects of capital flight?

Correct AnswerverifiedShow Answer

Use the figure below to answer the following questions. Figure 32-2 -Refer to Figure 32-2. Suppose that these diagrams refer to Canada. If the interest rate were initially at r0 and China voluntarily restricted its exports to Canada, what would happen to the interest rate?

Correct AnswerverifiedShow Answer

Correct Answer
verified
Such a campaign will increase the demand...
View Answer

Correct Answer
verified

Correct Answer
verified
a.The demand for loanable fund...
View Answer

Correct Answer
verified
a.Our macro model predicts an inverse re...
View Answer

Correct Answer
verified

Use the figure below to answer the following questions. Figure 32-2 -Refer to Figure 32-2. If the interest rate were initially at r₀ and an import quota was imposed, what would happen to the interest rate?

Correct Answer
verified

Correct Answer
verified

Use the figure below to answer the following questions. Figure 32-2 -Refer to Figure 32-2. If the economy were initially in equilibrium at r₀and E₀ and the government removed import quotas, what would happen to the exchange rate?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
When the Canadian real exchange rate app...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Figure 32-3 -Refer to Figure 32-3. Suppose that the Mexican economy starts at r₀ and E₀. Which of the following are consistent with the effects of capital flight?

Correct Answer
verified

Use the figure below to answer the following questions. Figure 32-2 -Refer to Figure 32-2. Suppose that these diagrams refer to Canada. If the interest rate were initially at r₀ and China voluntarily restricted its exports to Canada, what would happen to the interest rate?

Correct Answer
verified