question
Which of the following represents the demand for domestic goods?
C + I + G + X
C + I + G - εIM
C + I + G + X — IM/ε
C + I + G
C + I + G + X + εIM
C + I + G + X
C + I + G - εIM
C + I + G + X — IM/ε
C + I + G
C + I + G + X + εIM
answer
C + I + G + X — IM/ε
question
Assume the Marshall-Lerner condition holds. Which of the following will cause a reduction in net exports?
a reduction in government spending
an increase in the real exchange rate
an increase in foreign output
a reduction in investment
all of the above
a reduction in government spending
an increase in the real exchange rate
an increase in foreign output
a reduction in investment
all of the above
answer
an increase in the real exchange rate
question
For this question, assume that the J-curve effect exists. Which of the following will occur after a real appreciation?
the real exchange rate will fall temporarily before it rises.
the trade deficit will improve temporarily before it worsens.
the real exchange rate will rise temporarily before it falls.
the trade deficit will worsen temporarily before it improves.
none of the above
the real exchange rate will fall temporarily before it rises.
the trade deficit will improve temporarily before it worsens.
the real exchange rate will rise temporarily before it falls.
the trade deficit will worsen temporarily before it improves.
none of the above
answer
the trade deficit will improve temporarily before it worsens.
question
Suppose that the rest of the world experiences an economic boom causing an increase in foreign output (Y). This increase in Y will NOT cause which of the following to occur?
the domestic country's consumption to increase
the domestic country's output to increase
the domestic country's output to increase and its trade balance to worsen as imports increase
all of the above
none of the above
the domestic country's consumption to increase
the domestic country's output to increase
the domestic country's output to increase and its trade balance to worsen as imports increase
all of the above
none of the above
answer
the domestic country's output to increase and its trade balance to worsen as imports increase
question
An open economy with a low saving rate (private and public) must have
high investment only.
low investment only.
low investment or a trade deficit.
low investment or a trade surplus.
a trade surplus only.
high investment only.
low investment only.
low investment or a trade deficit.
low investment or a trade surplus.
a trade surplus only.
answer
low investment or a trade deficit.
question
Policy coordination is difficult because each country
prefers that other countries increase taxes.
prefers to be the one to increase demand.
prefers to be the one to increase taxes.
prefers that other countries increase their demand.
prefers to be the one to appreciate its currency.
prefers that other countries increase taxes.
prefers to be the one to increase demand.
prefers to be the one to increase taxes.
prefers that other countries increase their demand.
prefers to be the one to appreciate its currency.
answer
prefers that other countries increase their demand.
question
Which of the following conditions must be satisfied for the demand for domestic goods to be equal to the domestic demand for goods?
X = εIM
X = 0
X = IM/ε
G - T = 0
S = I
X = εIM
X = 0
X = IM/ε
G - T = 0
S = I
answer
X = IM/ε
question
Which of the following is true when a country is experiencing a trade surplus (NX > 0)?
demand for domestic goods is equal to the domestic demand for goods
demand for domestic goods is less than the domestic demand for goods
demand for domestic goods is greater than the domestic demand for goods
a budget surplus exists
demand for domestic goods is equal to the domestic demand for goods
demand for domestic goods is less than the domestic demand for goods
demand for domestic goods is greater than the domestic demand for goods
a budget surplus exists
answer
demand for domestic goods is greater than the domestic demand for goods
question
Which of the following is true when a county is experiencing a trade deficit (NX < 0)?
a budget deficit exists
demand for domestic goods is less than the domestic demand for goods
demand for domestic goods is greater than the domestic demand for goods
demand for domestic goods is equal to the domestic demand for goods
a budget deficit exists
demand for domestic goods is less than the domestic demand for goods
demand for domestic goods is greater than the domestic demand for goods
demand for domestic goods is equal to the domestic demand for goods
answer
demand for domestic goods is less than the domestic demand for goods
question
An increase in which of the following variables will cause a reduction in the demand for domestic goods?
the real exchange rate
consumer confidence
foreign income
domestic income
all of the above
the real exchange rate
consumer confidence
foreign income
domestic income
all of the above
answer
the real exchange rate
question
An increase in domestic demand will have which of the following effects in an open economy?
a smaller effect on output than in a closed economy and a negative effect on the trade balance
a smaller effect on output than in a closed economy and a positive effect on the trade balance
a larger effect on output than in a closed economy and a positive effect on the trade balance
a larger effect on output than in a closed economy and a negative effect on the trade balance
a smaller effect on output than in a closed economy and a negative effect on the trade balance
a smaller effect on output than in a closed economy and a positive effect on the trade balance
a larger effect on output than in a closed economy and a positive effect on the trade balance
a larger effect on output than in a closed economy and a negative effect on the trade balance
answer
a smaller effect on output than in a closed economy and a negative effect on the trade balance
question
An increase in the marginal propensity to import will cause
the ZZ line to become steeper and a given change in
government spending (G) to have a smaller effect on domestic output.
the ZZ line to become flatter and a given change in government spending (G) to have a larger effect on domestic output.
the ZZ line to become flatter and a given change in government spending (G) to have a smaller effect on domestic output.
the ZZ line to become steeper and a given change in government spending (G) to have a larger effect on domestic output.
the ZZ line to become steeper and a given change in
government spending (G) to have a smaller effect on domestic output.
the ZZ line to become flatter and a given change in government spending (G) to have a larger effect on domestic output.
the ZZ line to become flatter and a given change in government spending (G) to have a smaller effect on domestic output.
the ZZ line to become steeper and a given change in government spending (G) to have a larger effect on domestic output.
answer
the ZZ line to become flatter and a given change in government spending (G) to have a smaller effect on domestic output.
question
A reduction in the marginal propensity to import will cause
the multiplier to decrease and a given change in
government spending (G) to have a smaller effect on domestic output.
the multiplier to increase and a given change in government spending (G) to have a larger effect on domestic output.
the multiplier to decrease and a given change in government spending (G) to have a larger effect on domestic output.
the multiplier to increase and a given change in government spending (G) to have a smaller effect on domestic output.
the multiplier to decrease and a given change in
government spending (G) to have a smaller effect on domestic output.
the multiplier to increase and a given change in government spending (G) to have a larger effect on domestic output.
the multiplier to decrease and a given change in government spending (G) to have a larger effect on domestic output.
the multiplier to increase and a given change in government spending (G) to have a smaller effect on domestic output.
answer
the multiplier to increase and a given change in government spending (G) to have a larger effect on domestic output.
question
The quantity of imports will increase when there is
an increase in domestic output.
a reduction in the real exchange rate.
an increase in foreign output.
all of the above
none of the above
an increase in domestic output.
a reduction in the real exchange rate.
an increase in foreign output.
all of the above
none of the above
answer
an increase in domestic output.
question
We will generally observe that the more open an economy
the smaller the effect of fiscal policy on output and the smaller the effect of fiscal policy on the trade position.
the smaller the effect of fiscal policy on output and the larger the effect of fiscal policy on the trade position.
the larger the effect of fiscal policy on output and the larger the effect of fiscal policy on the trade position.
the larger the effect of fiscal policy on output and the smaller the effect of fiscal policy on the trade position.
the smaller the effect of fiscal policy on output and the smaller the effect of fiscal policy on the trade position.
the smaller the effect of fiscal policy on output and the larger the effect of fiscal policy on the trade position.
the larger the effect of fiscal policy on output and the larger the effect of fiscal policy on the trade position.
the larger the effect of fiscal policy on output and the smaller the effect of fiscal policy on the trade position.
answer
the smaller the effect of fiscal policy on output and the larger the effect of fiscal policy on the trade position.
question
We will generally observe that the less open an economy
the larger the effect of fiscal policy on output and the larger the effect of fiscal policy on the trade position.
the smaller the effect of fiscal policy on output and the larger the effect of fiscal policy on the trade position.
the smaller the effect of fiscal policy on output and the smaller the effect of fiscal policy on the trade position.
the larger the effect of fiscal policy on output and the smaller the effect of fiscal policy on the trade position.
the larger the effect of fiscal policy on output and the larger the effect of fiscal policy on the trade position.
the smaller the effect of fiscal policy on output and the larger the effect of fiscal policy on the trade position.
the smaller the effect of fiscal policy on output and the smaller the effect of fiscal policy on the trade position.
the larger the effect of fiscal policy on output and the smaller the effect of fiscal policy on the trade position.
answer
the larger the effect of fiscal policy on output and the smaller the effect of fiscal policy on the trade position.
question
For this question, assume that the Marshall-Lerner condition does NOT hold. An increase in the real exchange rate will tend to cause which of the following to occur?
an increase in NX and a reduction in Y
a reduction in NX and a reduction in Y
a reduction in NX and an increase in Y
an increase in NX and an increase in Y
an increase in NX and a reduction in Y
a reduction in NX and a reduction in Y
a reduction in NX and an increase in Y
an increase in NX and an increase in Y
answer
an increase in NX and an increase in Y
question
By assuming Marshall Lerner condition, exports will decrease when there is
an increase in foreign output. !
an increase in the real exchange rate.
an increase in domestic output.
all of the above
none of the above
an increase in foreign output. !
an increase in the real exchange rate.
an increase in domestic output.
all of the above
none of the above
answer
an increase in the real exchange rate.
question
Suppose the rest of the world experiences an expansion that causes an increase in foreign income (Y). From the domestic economy's perspective, this increase in foreign income will cause which of the following as the domestic economy adjusts to the rise in Y?
an increase in domestic income
an increase in imports
an increase in net exports
all of the above
both A and C
an increase in domestic income
an increase in imports
an increase in net exports
all of the above
both A and C
answer
all of the above
question
Suppose the rest of the world experiences a recession that causes a reduction in foreign income (Y). From the domestic economy's perspective, this reduction in foreign income will cause which of the following as the domestic economy adjusts to the drop in Y?
the NX line to shift up
an ambiguous effect on net exports
a reduction in income and a reduction in imports
a reduction in imports and an increase in net exports
the NX line to shift up
an ambiguous effect on net exports
a reduction in income and a reduction in imports
a reduction in imports and an increase in net exports
answer
a reduction in income and a reduction in imports
question
A reduction in private saving (S) can be reflected in
an increase in investment.
an increase in the budget deficit.
a reduction in net exports.
all of the above
an increase in investment.
an increase in the budget deficit.
a reduction in net exports.
all of the above
answer
a reduction in net exports.
question
The existence of the J-curve suggests that a real depreciation will cause
an initial increase in net exports.
an initial reduction in the demand for domestic goods.
an initial increase in economic activity.
a final reduction in net exports.
an initial increase in net exports.
an initial reduction in the demand for domestic goods.
an initial increase in economic activity.
a final reduction in net exports.
answer
an initial reduction in the demand for domestic goods.
question
The quantity of imports will decrease when there is
a reduction in foreign output.
a reduction in domestic output.
an increase in the real exchange rate.
all of the above
none of the above
a reduction in foreign output.
a reduction in domestic output.
an increase in the real exchange rate.
all of the above
none of the above
answer
a reduction in domestic output.
question
In an open economy, a reduction in government spending will cause
an increase in net exports.
an increase in domestic output.
an increase in imports.
all of the above
none of the above
an increase in net exports.
an increase in domestic output.
an increase in imports.
all of the above
none of the above
answer
an increase in net exports.
question
Which of the following will always cause a reduction in net exports?
a reduction in investment
a reduction in the real exchange rate
an increase in domestic output
a reduction in government spending
all of the above
a reduction in investment
a reduction in the real exchange rate
an increase in domestic output
a reduction in government spending
all of the above
answer
an increase in domestic output
question
Which of the following will occur as a result of a tax cut?
private saving decreases
the trade balance improves
investment decreases
the budget deficit decreases
the trade balance worsens
private saving decreases
the trade balance improves
investment decreases
the budget deficit decreases
the trade balance worsens
answer
the trade balance worsens
question
A reduction in the budget deficit can be reflected in
an increase in net exports.
a reduction in private saving.
an increase in investment.
all of the above
none of the above
an increase in net exports.
a reduction in private saving.
an increase in investment.
all of the above
none of the above
answer
all of the above
question
An increase in private saving (S) can be reflected in
an increase in net exports.
a reduction in the budget deficit.
a reduction in investment.
all of the above
an increase in net exports.
a reduction in the budget deficit.
a reduction in investment.
all of the above
answer
an increase in net exports.
question
In an open economy, an increase in government spending will cause
a reduction in imports.
a reduction in net exports.
a reduction in domestic output.
all of the above
none of the above
a reduction in imports.
a reduction in net exports.
a reduction in domestic output.
all of the above
none of the above
answer
a reduction in net exports.
question
Which of the following represents the domestic demand for goods?
C + I + G — IM/ε
C + I + G + X + εIM
C + I + G
C + I + G + X
C + I + G + X - εM/ε
C + I + G — IM/ε
C + I + G + X + εIM
C + I + G
C + I + G + X
C + I + G + X - εM/ε
answer
C + I + G
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