ECON 2410 Chapter 19: Chapter 19-The Goods Market in an Open Economy.docx

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7 Apr 2015

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We must subtract imports the part of the domestic demand that falls on foreign goods rather than on domestic goods: we must first express the value of imports in terms of domestic goods, this o is what im/ + x . Is the real exchange rate, defined as the domestic goods in terms of foreign goods stands for: im (1/ ) or im/ is the value of imports in terms of domestic goods, x is the exports the part of the demand for domestic goods that comes from abroad. An increase in foreign demand leads to an increase in output and to a trade surplus: the line that shows the domestic demand for goods c + i + g as a function of income. This line is drawn as dd: this line that dd is steeper than zz, the difference between zz and dd equal net exports, so that if trade is balanced, zz and.

Related Questions

Since the United States has negative net foreignâ investment, its

A. net capital flow must be negative.

B. domestic saving must be less than its domestic investment.

C. exports must be greater than its imports.

D. domestic investment must be less than its domestic saving.

Expansionary fiscal policy is less effective in an open economy because

A. increases in the money supply will reduce interest rates and lower the value of theâ dollar, reducing aggregate demand.

B. increases in government spending can increase interestâ rates, which increases the value of the dollar and crowds out net exports.

C. increases in government spending will be partly spent on importedâ goods, which do not benefit the domestic economy.

D. increases in taxes reduceâ consumption, which in turn reduces consumption of imports and increases net exports.

When the Federal reserve uses contractionary monetary policy to reduceâ inflation, it

A. sells treasury securities increasing interestâ rates, leading to a stronger dollar that lowers net exports in an open economy.

B. buys treasury securities decreasing interestâ rates, leading to a weaker dollar that lowers consumption of durables in a closed economy.

C. sells treasury securities decreasing interestâ rates, leading to a stronger dollar that lowers domestic investment in a closed economy.

D. buys treasury securities increasing interestâ rates, leading to a weaker dollar that increases net exports in an open economy.

If a country saves more than it investsâ domestically, then its net foreign investment must be (positive, negative, or zero)?

An economy with zero net exports is described below:

C	= 100 + 0.6 (Y 'T)
I ^p	= 70
G	= 120
NX	= 0
T	= 150
The multiplier in this economy is 2.5.

A. Find short-run equilibrium output.

Instruction: Enter your response as an integer value.

Short-run equilibrium output: .

B. Economic recovery abroad increases the demand for the country's exports; as a result, NX rises to 80.

Instruction: Enter your response as an integer value.

Short-run equilibrium output (Click to select)decreases/ increases to ________ .

C. Assume that foreign economies are slowing, reducing the demand for the country's exports so that NX = -80. (A negative value of net exports means that exports are less than imports.)

Instruction: Enter your response as an integer value.

Short-run equilibrium output (Click to select)increases/decreases to ___________ .

D. Which of the following best describes the tendency of recessions and expansions to spread across countries?

1. Lower planned aggregate spending in one nation will reduce the amount of goods it exports abroad, thereby lowering the value of imports for its trading partners, which will reduce its short-term equilibrium output as well.

2. Lower planned aggregate spending abroad means that fewer goods will be exported from a specific nation, leaving more goods available for domestic consumption (C) in that nation, which will increase its short-term equilibrium output.

3. Lower planned aggregate spending abroad will reduce the amount of investment that flows into domestic industries from other countries, thereby reducing domestic short-term equilibrium output.

4. Lower planned aggregate spending in a nation means fewer imports of foreign goods, thereby reducing the short-term equilibrium output of its trading partners through lower net export (NX) values in those nations.

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PLEASE EXPLAIN ANSWER: I give best asnwer at the end of the time limit!!!

The more certain private property rights are,

a. A. the less people need to invest in education or human capital development.

b. tB. The less entrepreneurship there will be.

c. C/ the more capital accumulation there will be.

D/ d. the more an economy must grow to maintain a certain living standard.

In general, who will benefit as the result of a tariff?

Domestic Producers
Domestic Consumers
The domestic government

a. I only

b. II only

c. both I and III

d. both II and III

e. All of these are correct

In the long run, imports will most likely be paid for with:

a. a. Aexports.

b. tB. The sale of real and financial assets.

c. C/ the extension of credit.

d. D. higher domestic unemployment.

The World Trade Organization is a successor organization to the

a. A.United Nations.

b. B.World Bank.

c. C.International Court of Justice.

d. D.GATT.

A new industry develops, and our government wants to protect it from foreign competition. Which one of the following arguments would appropriately describe this type of protection?

A. ANational security

B. BCartelization

C. CInfant industry

D. DProtecting American jobs

If equilibrium price falls and the equilibrium quantity of the good purchased decreases, what has happened to either the supply curve or to the demand curve?

a. ADemand decreased.

b. Supply increased.

c. CSupply decreased.

d. DDemand increased.

Suppose there is a simultaneous increase in the demand for diamonds and increase in the supply of diamonds. Which of the following will occur as a result of these simultaneous events?

a. B/Both the market clearing price and equilibrium quantity will rise.

b. A.The market clearing price will fall, but the equilibrium quantity may rise, fall, or stay the same.

c. C.The market clearing price may rise, fall, or stay the same, but the equilibrium quantity will increase.

d. F.The market clearing price will fall, but the equilibrium quantity will rise.

Price Q_d Q_s

$2 5,000 1,000
$4 4,000 2,000
$6 3,000 3,000
$8 2,000 4,000
$10 1,000 5,000

Consider the above table. Assuming the government imposes a price floor on garbanzo beans of $8, what would be the likely result?

a. A/ no change, equilibrium would prevail

b. B.The quantity demanded of garbanzo beans would fall to zero.

c. C. shortage of 2000 garbanzo beans

d. D/ surplus of 2000 garbanzo beans

ECON 2410 Chapter 19: Chapter 19-The Goods Market in an Open Economy.docx

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