Question 1

Why does continued foreign investment in U.S.stocks and bonds, and foreign companies continuing to build factories in the United States, result in a current account deficit in the United States?

Accepted Answer

The willingness of foreign investors and...

Question 2

If the price level in Canada is 110, the price level is 120 in Mexico, and the nominal exchange rate is 140 pesos per dollar, what is the real exchange rate from the Canadian perspective?

Accepted Answer

A)  94
B)  115
C)  128
D)  141
E)  153F) C) and E)
G) A) and E)

Question 3

What is the relationship between the balance of trade and the current account balance?

Accepted Answer

The balance of trade measures the differ...

Question 4

Which of the following would decrease net exports in Canada?

Accepted Answer

A)  A Canadian party planner purchases 350 piñatas from Mexico.
B)  The Televisa company in Mexico City purchases 200 episodes of children's programming from Nelvana in Toronto.
C)  A Mexican citizen purchases 100 shares of stock in BlackBerry.
D)  The Canadian government donates $2.5 million to Mexico to help victims of a hurricane in Mexico.
E)  Bombarier buys patents for aircraft engines from Airbus.F) B) and E)
G) C) and E)

Question 5

The difference between the value of the goods a country exports and the value of the goods a country imports is the country's

Accepted Answer

A)  financial account balance.
B)  current account balance.
C)  balance of trade.
D)  capital account balance.
E)  statistical discrepancy.F) B) and C)
G) C) and E)

Question 6

What happens to national saving when the government runs a budget surplus? What happens to national saving when the government runs a budget deficit?

Accepted Answer

National saving increases when the gover...

Question 7

Based on the following information, what is the balance on the current account? Exports of goods and services = $5 billion
Imports of goods and services = $3 billion
Net income on investments = -$2 billion
Net transfers = -$2 billion
Increase in foreign holdings of assets in Canada = $4 billion
Increase in Canadian holdings of assets in foreign countries = -$1 billion

Accepted Answer

A)  -$2 billion
B)  $1 billion
C)  $2 billion
D)  $3 billion
E)  $4 billionF) A) and D)
G) C) and E)

Question 8

If Canadian demand for purchases of British goods has decreased, how would you expect the equilibrium exchange rate in the market for Canadian dollars to respond? Support your answer graphically.

Accepted Answer

If Canadians are demanding fewer British...

Question 9

Table 14.3 
-Refer to Table 14.3.Given the exchange rates in the above table, what are the exchange rates stated as Canadian dollars per Danish krone and Canadian dollars per EU euro, respectively?

Accepted Answer

A)  0.20 dollars per krone and 1.43 dollars per euro
B)  2.00 dollars per krone and 7.14 dollars per euro
C)  0.02 dollars per krone and 0.70 dollars per euro
D)  0.05 dollars per krone and 1.30 dollars per euro
E)  5.00 dollars per krone and 3.5 dollars per euroF) A) and B)
G) B) and D)

Question 10

Contractionary monetary policy should increase foreign financial investment in Canada.

Accepted Answer

A) True 
 B)False

Question 11

If you know that a country's net foreign investment is positive, what does that tell you about the relationship between the country's national saving and private investment? (Assume that the capital account is zero and net transfers are zero.)

Accepted Answer

For any country, national saving must eq...

Question 12

Currency traders expect the Canadian dollar to depreciate.What impact will this have on equilibrium in the foreign exchange market?

Accepted Answer

A)  The Canadian dollar will appreciate and the equilibrium quantity of Canadian dollars will decrease.
B)  The Canadian dollar will depreciate and the equilibrium quantity of Canadian dollars exchanged will decrease.
C)  The Canadian dollar will appreciate and the equilibrium quantity of Canadian dollars will increase.
D)  The Canadian dollar will depreciate and the change in the equilibrium quantity of Canadian dollars exchanged cannot be determined.
E)  The Canadian dollar will depreciate and the equilibrium quantity of Canadian dollars exchanged will increase.F) B) and D)
G) A) and E)

Question 13

Based on the following information, calculate public saving, net foreign investment, and national income.Assume that the capital account is zero and net transfers are zero.
private saving = $145 billion
exports = $285 billion
imports = $240 billion
consumption = $600 billion
private investment = $125 billion
government purchases = $75 billion

Accepted Answer

Based on the macroeconomic equation for ...

Question 14

You're travelling in Japan and are thinking about buying a new kimono.You've decided you'd be willing to pay $175 for a new kimono, but kimonos in Japan are all priced in yen.If the kimono you're looking at costs 14,000 yen, under which of the following exchange rates would you be willing to purchase the kimono? (Assume no taxes or duties are associated with the purchase.)

Accepted Answer

A)  24.5 yen per Canadian dollar
B)  45 yen per Canadian dollar
C)  65 yen per Canadian dollar
D)  80 yen per Canadian dollar
E)  You would purchase the new kimono at any of the above exchange rates.F) A) and B)
G) A) and C)

Question 15

An increase in the government budget deficit will not lead to a current account deficit if domestic investment declines.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following would result in positive net exports for Canada?

Accepted Answer

A)  Exports of goods = $725 billion Imports of goods = $790 billionExports of services = $350 billionImports of services = $260 billion
B)  Exports of goods = $625 billion Imports of goods = $625 billionExports of services = $300 billionImports of services = $375 billion
C)  Exports of goods = $550 billion Imports of goods = $575 billionExports of services = $275 billionImports of services = $300 billion
D)  All of the above will result in a trade surplus.E) A) and B)
F) A) and C)

Question 17

If the government finances an increase in government purchases with an increase in taxes, which of the following would you expect to see?

Accepted Answer

A)  an increase in the exchange rate
B)  a decrease in the interest rate
C)  a decrease in aggregate demand
D)  an increase in net exports
E)  an increase in investmentF) A) and C)
G) All of the above

Question 18

Investment (I)in Canada may increase with either an increase in national saving or an increase in net foreign investment.

Accepted Answer

A) True 
 B)False

Question 19

When a foreign investor buys a bond issued in Canada,

Accepted Answer

A)  the balance on the capital account increases.
B)  the balance on the current account increases.
C)  the balance on the financial account increases.
D)  the balance of trade increases.
E)  the balance on the capital account decreases.F) A) and E)
G) C) and D)

Question 20

What's the difference between the nominal exchange rate and the real exchange rate?

Accepted Answer

The nominal exchange rate measures the v...

Exam 14: Macroeconomics in an Open Economy

Contractionary monetary policy should increase foreign financial investment in Canada.

Correct Answer
verified

If the price level in Canada is 110, the price level is 120 in Mexico, and the nominal exchange rate is 140 pesos per dollar, what is the real exchange rate from the Canadian perspective?

Correct Answer
verified

What happens to national saving when the government runs a budget surplus? What happens to national saving when the government runs a budget deficit?

Correct Answer
verified
National saving increases when the gover...
View Answer

When a foreign investor buys a bond issued in Canada,

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Which of the following would decrease net exports in Canada?

Correct Answer
verified

What is the relationship between the balance of trade and the current account balance?

Correct Answer
verified
The balance of trade measures the differ...
View Answer

An increase in the government budget deficit will not lead to a current account deficit if domestic investment declines.

Correct Answer
verified

Table 14.3 -Refer to Table 14.3.Given the exchange rates in the above table, what are the exchange rates stated as Canadian dollars per Danish krone and Canadian dollars per EU euro, respectively?

Correct Answer
verified

If Canadian demand for purchases of British goods has decreased, how would you expect the equilibrium exchange rate in the market for Canadian dollars to respond? Support your answer graphically.

Correct Answer
verified
If Canadians are demanding fewer British...
View Answer

What's the difference between the nominal exchange rate and the real exchange rate?

Correct Answer
verified
The nominal exchange rate measures the v...
View Answer

If you know that a country's net foreign investment is positive, what does that tell you about the relationship between the country's national saving and private investment? (Assume that the capital account is zero and net transfers are zero.)

Correct Answer
verified
For any country, national saving must eq...
View Answer

Correct Answer
verified
Based on the macroeconomic equation for ...
View Answer

Which of the following would result in positive net exports for Canada?

Correct Answer
verified

If the government finances an increase in government purchases with an increase in taxes, which of the following would you expect to see?

Correct Answer
verified

Currency traders expect the Canadian dollar to depreciate.What impact will this have on equilibrium in the foreign exchange market?

Correct Answer
verified

The difference between the value of the goods a country exports and the value of the goods a country imports is the country's

Correct Answer
verified

Investment (I)in Canada may increase with either an increase in national saving or an increase in net foreign investment.

Correct Answer
verified

Why does continued foreign investment in U.S.stocks and bonds, and foreign companies continuing to build factories in the United States, result in a current account deficit in the United States?

Correct Answer
verified
The willingness of foreign investors and...
View Answer

Exam 14: Macroeconomics in an Open Economy

Contractionary monetary policy should increase foreign financial investment in Canada.

Correct AnswerverifiedShow Answer

If the price level in Canada is 110, the price level is 120 in Mexico, and the nominal exchange rate is 140 pesos per dollar, what is the real exchange rate from the Canadian perspective?

Correct AnswerverifiedShow Answer

What happens to national saving when the government runs a budget surplus? What happens to national saving when the government runs a budget deficit?

Correct AnswerverifiedNational saving increases when the gover...View AnswerShow Answer

When a foreign investor buys a bond issued in Canada,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following would decrease net exports in Canada?

Correct AnswerverifiedShow Answer

What is the relationship between the balance of trade and the current account balance?

Correct AnswerverifiedThe balance of trade measures the differ...View AnswerShow Answer

An increase in the government budget deficit will not lead to a current account deficit if domestic investment declines.

Correct AnswerverifiedShow Answer

Table 14.3 -Refer to Table 14.3.Given the exchange rates in the above table, what are the exchange rates stated as Canadian dollars per Danish krone and Canadian dollars per EU euro, respectively?

Correct AnswerverifiedShow Answer

If Canadian demand for purchases of British goods has decreased, how would you expect the equilibrium exchange rate in the market for Canadian dollars to respond? Support your answer graphically.

Correct AnswerverifiedIf Canadians are demanding fewer British...View AnswerShow Answer

What's the difference between the nominal exchange rate and the real exchange rate?

Correct AnswerverifiedThe nominal exchange rate measures the v...View AnswerShow Answer

If you know that a country's net foreign investment is positive, what does that tell you about the relationship between the country's national saving and private investment? (Assume that the capital account is zero and net transfers are zero.)

Correct AnswerverifiedFor any country, national saving must eq...View AnswerShow Answer

Correct AnswerverifiedBased on the macroeconomic equation for ...View AnswerShow Answer

Which of the following would result in positive net exports for Canada?

Correct AnswerverifiedShow Answer

If the government finances an increase in government purchases with an increase in taxes, which of the following would you expect to see?

Correct AnswerverifiedShow Answer

Currency traders expect the Canadian dollar to depreciate.What impact will this have on equilibrium in the foreign exchange market?

Correct AnswerverifiedShow Answer

The difference between the value of the goods a country exports and the value of the goods a country imports is the country's

Correct AnswerverifiedShow Answer

Investment (I)in Canada may increase with either an increase in national saving or an increase in net foreign investment.

Correct AnswerverifiedShow Answer

Why does continued foreign investment in U.S.stocks and bonds, and foreign companies continuing to build factories in the United States, result in a current account deficit in the United States?

Correct AnswerverifiedThe willingness of foreign investors and...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
National saving increases when the gover...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The balance of trade measures the differ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
If Canadians are demanding fewer British...
View Answer

Correct Answer
verified
The nominal exchange rate measures the v...
View Answer

Correct Answer
verified
For any country, national saving must eq...
View Answer

Correct Answer
verified
Based on the macroeconomic equation for ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The willingness of foreign investors and...
View Answer