Question 1

Using the macroeconomic model of a foreign-currency exchange market,(a)analyze the situation in which a government imposes a fixed exchange rate,and (b)determine what that government should do in order to maintain the fixed exchange.

Accepted Answer

a.According to our "exchange rate vs.qua...

Question 2

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 the Canadian dollar in terms of U.S.dollars.The following table gives some fictitious data on these two variables.  
a.What does our open-economy macroeconomic 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 3

In an open economy,what does the market for loanable funds take as given?

Accepted Answer

A)   saving
B)   investment
C)   exchange rate
D)   real interest rateE) B) and C)
F) C) and D)

Question 4

Suppose a prime ministerial candidate promises to increase the government budget surplus and claims that doing so will stop Canadian citizens from investing in foreign companies and increase the value of the dollar.Evaluate this promise.

Accepted Answer

An increase in the government budget sur...

Question 5

Which statement best predicts the effects of an increase in a country's real interest rate?

Accepted Answer

A)   Its net capital outflow and the real exchange rate increase.
B)   Its net capital outflow and the real exchange rate decrease.
C)   Its net capital outflow increases,and the real exchange rate decreases.
D)   Its net capital outflow decreases,and the real exchange rate increases.E) A) and B)
F) None of the above

Question 6

In an open economy,what does the market for loanable funds equate national saving with?

Accepted Answer

A)   domestic investment
B)   net capital outflow
C)   the sum of national consumption and net exports
D)   the sum of domestic investment and net capital outflowE) All of the above
F) A) and B)

Question 7

Suppose that from 1980 to 1987,Canadian net capital outflows decreased.According to the open-economy macroeconomic model,what could have caused this?

Accepted Answer

A)   an increase in the demand for Canadian currency in the foreign-currency exchange
B)   a decrease in the demand for Canadian currency in the foreign-currency exchange
C)   an increase in the supply of loanable funds
D)   a decrease in the supply of loanable fundsE) None of the above
F) B) and D)

Question 8

At the equilibrium interest rate in the open-macroeconomic model,what is the amount that people want to save?

Accepted Answer

A)   the desired quantity of net capital outflow
B)   the desired quantity of domestic investment
C)   the desired quantity of net capital outflow plus domestic investment
D)   the desired quantity of net capital outflow minus domestic investmentE) A) and B)
F) None of the above

Question 9

Figure 13-2 
-Refer to the Figure13-2.Suppose that these diagrams refer to Canada.If the interest rate was initially at r0 and Japan 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) All of the above
F) B) and D)

Question 10

When a country suffers from capital flight,which statement best explains the effects?

Accepted Answer

A)   The supply for loanable funds shifts right,and the interest rate increases.
B)   The supply for loanable funds shifts right,and the interest rate decreases.
C)   The supply for loanable funds shifts left,and the interest rate increases.
D)   The supply for loanable funds shifts left,and the interest rate decreases.E) B) and D)
F) All of the above

Question 11

According to the theory of purchasing-power parity,what is the shape of the demand curve for foreign-currency exchange?

Accepted Answer

A)   downward sloping
B)   upward sloping
C)   horizontal
D)   verticalE) A) and B)
F) A) and C)

Question 12

Suppose that Canada imposes an import quota on automobiles.Which statement best describes the most likely effects of this quota?

Accepted Answer

A)   The quota would cause the real exchange rate of Canadian dollars to appreciate,but it would not change the real interest rate in Canada.
B)   The quota would cause the real exchange rate of Canadian dollars to appreciate and the real interest rate in Canada to increase.
C)   The quota would cause the real exchange rate of Canadian dollars to depreciate and the real interest rate in Canada to decrease.
D)   The quota would cause the real exchange rate of Canadian dollars to depreciate,but it would not change the real interest rate in Canada.E) B) and D)
F) All of the above

Question 13

Mexico suffered from capital flight in 1994.Which statement best describes the effects of this event on the Canadian economy?

Accepted Answer

A)   The Canadian real interest rate rose,and the real exchange rate of the dollar appreciated.
B)   The Canadian real interest rate rose,and the real exchange rate of the dollar depreciated.
C)   The Canadian real interest rate fell,and the real exchange rate of the dollar appreciated.
D)   The Canadian real interest rate fell,and the real exchange rate of the dollar depreciated.E) A) and B)
F) C) and D)

Question 14

If the government of India made policy changes that increased national saving,which statement would best predict the consequences?

Accepted Answer

A)   The real exchange rate of the rupee would depreciate,and Indian net exports would rise.
B)   The real exchange rate of the rupee would depreciate,and Indian net exports would fall.
C)   The real exchange rate of the rupee would appreciate,and Indian net exports would rise.
D)   The real exchange rate of the rupee would appreciate,and Indian net exports would fall.E) A) and D)
F) B) and C)

Question 15

Suppose the Canadian government imposed import quotas on agricultural products.According to the foreign-currency exchange market diagram,which outcome would most likely result?

Accepted Answer

A)   Both the demand and supply curves would shift right.
B)   Both the demand and supply curves would shift left.
C)   Only the demand curve would shift right.
D)   Only the supply curve would shift right.E) B) and C)
F) A) and B)

Question 16

In the market for foreign-currency exchange in the open-economy macroeconomic model,what does the amount of net capital outflow represent?

Accepted Answer

A)   the quantity of dollars supplied for the purpose of selling assets domestically
B)   the quantity of dollars supplied for the purpose of buying assets abroad
C)   the quantity of dollars demanded for the purpose of buying Canadian exports of goods and services
D)   the quantity of dollars demanded for the purpose of importing foreign goods and servicesE) A) and B)
F) B) and C)

Question 17

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 decreases at each interest rate.
c.The government surplus increases.
d.Private saving increases.

Accepted Answer

a.The demand for loanable fund...

Question 18

How does an increase in the Canadian government budget deficit change the graph representing the Canadian market for loanable funds?

Accepted Answer

A)   The supply of loanable funds curve shifts to the right.
B)   The supply of loanable funds curve shifts to the left.
C)   The demand for loanable funds shifts to the right.
D)   The demand for loanable funds shifts to the left.E) C) and D)
F) B) and D)

Question 19

Figure 13-1 
-Refer to the Figure13-1.In the figure shown,if the real interest rate is 4 percent,what is the quantity of loanable funds demanded?

Accepted Answer

A)   $3000
B)   $4000
C)   $5000
D)   $6000E) None of the above
F) A) and B)

Question 20

If the government of Colombia implemented a policy that reduced national saving,which statement would best predict the consequences?

Accepted Answer

A)   Its real exchange rate would depreciate,and Colombian net exports would rise.
B)   Its real exchange rate would depreciate,and Colombian net exports would fall.
C)   Its real exchange rate would appreciate,and Colombian net exports would rise.
D)   Its real exchange rate would appreciate,and Colombian net exports would fall.E) A) and D)
F) B) and C)

Exam 13: A Macroeconomic Theory of the Small Open Economy

Suppose that Canada imposes an import quota on automobiles.Which statement best describes the most likely effects of this quota?

Correct Answer
verified

Figure 13-1 -Refer to the Figure13-1.In the figure shown,if the real interest rate is 4 percent,what is the quantity of loanable funds demanded?

Correct Answer
verified

According to the theory of purchasing-power parity,what is the shape of the demand curve for foreign-currency exchange?

Correct Answer
verified

Suppose the Canadian government imposed import quotas on agricultural products.According to the foreign-currency exchange market diagram,which outcome would most likely result?

Correct Answer
verified

If the government of Colombia implemented a policy that reduced national saving,which statement would best predict the consequences?

Correct Answer
verified

In an open economy,what does the market for loanable funds equate national saving with?

Correct Answer
verified

Figure 13-2 -Refer to the Figure13-2.Suppose that these diagrams refer to Canada.If the interest rate was initially at r0 and Japan voluntarily restricted its exports to Canada,what would happen to the interest rate?

Correct Answer
verified

When a country suffers from capital flight,which statement best explains the effects?

Correct Answer
verified

At the equilibrium interest rate in the open-macroeconomic model,what is the amount that people want to save?

Correct Answer
verified

If the government of India made policy changes that increased national saving,which statement would best predict the consequences?

Correct Answer
verified

Suppose that from 1980 to 1987,Canadian net capital outflows decreased.According to the open-economy macroeconomic model,what could have caused this?

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 decreases at each interest rate. c.The government surplus increases. d.Private saving increases.

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

In the market for foreign-currency exchange in the open-economy macroeconomic model,what does the amount of net capital outflow represent?

Correct Answer
verified

Suppose a prime ministerial candidate promises to increase the government budget surplus and claims that doing so will stop Canadian citizens from investing in foreign companies and increase the value of the dollar.Evaluate this promise.

Correct Answer
verified
An increase in the government budget sur...
View Answer

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

Using the macroeconomic model of a foreign-currency exchange market,(a)analyze the situation in which a government imposes a fixed exchange rate,and (b)determine what that government should do in order to maintain the fixed exchange.

Correct Answer
verified
a.According to our "exchange rate vs.qua...
View Answer

In an open economy,what does the market for loanable funds take as given?

Correct Answer
verified

Which statement best predicts the effects of an increase in a country's real interest rate?

Correct Answer
verified

How does an increase in the Canadian government budget deficit change the graph representing the Canadian market for loanable funds?

Correct Answer
verified

Mexico suffered from capital flight in 1994.Which statement best describes the effects of this event on the Canadian economy?

Correct Answer
verified

Exam 13: A Macroeconomic Theory of the Small Open Economy

Suppose that Canada imposes an import quota on automobiles.Which statement best describes the most likely effects of this quota?

Correct AnswerverifiedShow Answer

Figure 13-1 -Refer to the Figure13-1.In the figure shown,if the real interest rate is 4 percent,what is the quantity of loanable funds demanded?

Correct AnswerverifiedShow Answer

According to the theory of purchasing-power parity,what is the shape of the demand curve for foreign-currency exchange?

Correct AnswerverifiedShow Answer

Suppose the Canadian government imposed import quotas on agricultural products.According to the foreign-currency exchange market diagram,which outcome would most likely result?

Correct AnswerverifiedShow Answer

If the government of Colombia implemented a policy that reduced national saving,which statement would best predict the consequences?

Correct AnswerverifiedShow Answer

In an open economy,what does the market for loanable funds equate national saving with?

Correct AnswerverifiedShow Answer

Figure 13-2 -Refer to the Figure13-2.Suppose that these diagrams refer to Canada.If the interest rate was initially at r0 and Japan voluntarily restricted its exports to Canada,what would happen to the interest rate?

Correct AnswerverifiedShow Answer

When a country suffers from capital flight,which statement best explains the effects?

Correct AnswerverifiedShow Answer

At the equilibrium interest rate in the open-macroeconomic model,what is the amount that people want to save?

Correct AnswerverifiedShow Answer

If the government of India made policy changes that increased national saving,which statement would best predict the consequences?

Correct AnswerverifiedShow Answer

Suppose that from 1980 to 1987,Canadian net capital outflows decreased.According to the open-economy macroeconomic model,what could have caused this?

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 decreases at each interest rate. c.The government surplus increases. d.Private saving increases.

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

In the market for foreign-currency exchange in the open-economy macroeconomic model,what does the amount of net capital outflow represent?

Correct AnswerverifiedShow Answer

Suppose a prime ministerial candidate promises to increase the government budget surplus and claims that doing so will stop Canadian citizens from investing in foreign companies and increase the value of the dollar.Evaluate this promise.

Correct AnswerverifiedAn increase in the government budget sur...View AnswerShow Answer

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

Using the macroeconomic model of a foreign-currency exchange market,(a)analyze the situation in which a government imposes a fixed exchange rate,and (b)determine what that government should do in order to maintain the fixed exchange.

Correct Answerverifieda.According to our "exchange rate vs.qua...View AnswerShow Answer

In an open economy,what does the market for loanable funds take as given?

Correct AnswerverifiedShow Answer

Which statement best predicts the effects of an increase in a country's real interest rate?

Correct AnswerverifiedShow Answer

How does an increase in the Canadian government budget deficit change the graph representing the Canadian market for loanable funds?

Correct AnswerverifiedShow Answer

Mexico suffered from capital flight in 1994.Which statement best describes the effects of this event on the Canadian economy?

Correct AnswerverifiedShow Answer

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

Correct Answer
verified

Correct Answer
verified
An increase in the government budget sur...
View Answer

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

Correct Answer
verified
a.According to our "exchange rate vs.qua...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified