(6) Topic Ii.d: The Open Economy

Front 1

A “small” economy is one in which the:

Back 1

domestic interest rate equals the world interest rate.

Front 2

If domestic saving exceeds domestic investment, then net exports are ______ and net capital outflows are ______.

Back 2

positive; positive

Front 3

In a small open economy, if exports equal $15 billion and imports equal $8 billion, then there is a trade ______ and ______ net capital outflow.

Back 3

surplus; positive

Front 4

When the real exchange rate rises:

Back 4

exports will decrease and imports will increase.

Front 5

If the real exchange rate decreases, then net exports will _____.

Back 5

increase.

Front 6

When exports exceed imports, all of the following are true except:

Back 6

a. net capital outflows are positive.

b. net exports are positive.

* c. domestic investment exceeds domestic saving.

d. domestic output exceeds domestic spending.Feedback

Front 7

If 5 Swiss francs trade for $1, the U.S. price level equals $1 per good, and the Swiss price level equals 2 francs per good, then the real exchange rate between Swiss goods and U.S. goods is ______ Swiss good(s) per U.S. good.

Back 7

2.5

Front 8

In a small open economy, if domestic saving equals $50 billion and domestic investment equals $50 billion, then there is ______ and net capital outflow equals ______.

Back 8

balanced trade; $0

Front 9

If the real exchange rate depreciates from 1 Japanese good per U.S. good to 0.5 Japanese good per U.S. good, then U.S. exports ______ and U.S. imports ______.

Back 9

increase; decrease

Front 10

(Exhibit: Policies Influence Real Exchange Rate) Which of the panels illustrates the impact on the real exchange rate of contractionary fiscal policies at home?

Back 10

(A)

Front 11

(Exhibit: Policies Influence Real Exchange Rate) Which of the panels illustrates the impact on the real exchange rate of contractionary fiscal policies abroad?

Back 11

(B)

Front 12

(Exhibit: Policies Influence Real Exchange Rate) Which of the panels illustrates the impact on the real exchange rate of an increase in investment demand?

Front 13

(Exhibit: Saving and Investment in a Small Open Economy) In a small open economy, if the world interest rate is r1, then the economy has:

Back 13

a trade surplus.

Front 14

(Exhibit: Saving and Investment in a Small Open Economy) In a small open economy, if the world interest rate is r3, then the economy has:

Back 14

a trade deficit.

Front 15

In a small, open economy if net exports are negative, then:

Back 15

domestic spending is greater than output.

Front 16

In a small open economy, if the world real interest rate is above the rate at which national saving equals domestic investment, then there will be a trade ______ and ______ net capital outflow.

Back 16

surplus; positive

Front 17

If the information technology boom increases investment demand in a small open economy, then net exports ______ and the real exchange rate ______.

Back 17

decrease; appreciates

Front 18

A depreciation of the real exchange rate in a small open economy could be the result of:

Back 18

the expiration of an investment tax-credit provision.

Front 19

An appreciation of the real exchange rate in a small open economy could be the result of:

Back 19

an increase in government spending.

Front 20

Expansionary fiscal policy in a large open economy ______ the real interest rate and ______ the real exchange rate.

Back 20

increases; increases