Chapter 13 Notes and multiple choice

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Chapter 13—A Macroeconomic Theory of the Small Open Economy
MULTIPLE CHOICE
1. What macroeconomic measures are considered fixed in our open-economy model?
a
.
the exchange rate, GDP, and the world real interest rate
b
.
the exchange rate, net capital outflow, and the inflation rate
c
.
net capital outflow, the inflation rate, and the price level
d
.
GDP, the price level, and the world real interest rate
ANS: D PTS: 1 DIF: Easy REF: p. 304-305
BLM: Remember NOT: Macro TB_13-1
2. In an open economy, what are the determinants of the prevailing real interest rate?
a
.
domestic supply and domestic demand for loanable funds
b
.
world supply and domestic demand for loanable funds
c
.
world supply and world demand for loanable funds
d
.
domestic supply and world demand for loanable funds
ANS: C PTS: 1 DIF: Challenging REF: p. 307
BLM: Higher Order NOT: Macro TB_13-2
3. If a country’s imports are greater than its exports, what is the country said to have?
a
.
a trade surplus
b
.
a trade deficit
c
.
a comparative advantage
d
.
an absolute advantage
ANS: B PTS: 1 DIF: Easy REF: p. 300
BLM: Remember NOT: Macro TB_13-3
4. Which of the following are the main elements of our open-economy macroeconomic model?
a
.
the market for loanable funds, the foreign-currency market, and the price level
b
.
the market for goods and services, the price level, and GDP
c the market for goods and services, net capital outflow, and GDP
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.
d
.
the market for loanable funds, net capital outflow, and the foreign-currency market
ANS: D PTS: 1 DIF: Easy REF: p. 307
BLM: Remember NOT: Macro TB_13-4
5. What does the open-economy macroeconomic model examine?
a
.
the determination of output growth rate and the real interest rate
b
.
the determination of unemployment and the exchange rate
c
.
the determination of output growth rate and the inflation rate
d
.
the determination of the trade balance and the exchange rate
ANS: D PTS: 1 DIF: Easy REF: p. 307
BLM: Remember NOT: Macro TB_13-5
6. Which of the following does the open-economy macroeconomic model take as given?
a
.
GDP, but not the price level
b
.
the price level, but not GDP
c
.
both the price level and GDP
d
.
the exchange rate
ANS: C PTS: 1 DIF: Easy REF: p. 304
BLM: Remember NOT: Macro TB_13-6
7. In an open economy, what does the market for loanable funds equate national saving with?
a
.
domestic investment
b
.
net capital outflow
c
.
the sum of national consumption and government spending
d
.
the sum of domestic investment and net capital outflow
ANS: D PTS: 1 DIF: Easy REF: p. 305
BLM: Remember NOT: Macro TB_13-7
8. In an open economy, which of the following does the market for loanable funds take as given?
a saving
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.
b
.
investment
c
.
exchange rate
d
.
real interest rate
ANS: D PTS: 1 DIF: Easy REF: p. 305
BLM: Remember NOT: Macro TB_13-8
9. In the open-economy macroeconomic model, how can the market for loanable funds identity be
written?
a
.
S = I
b
.
S = NCO
c
.
S = I + NCO
d
.
S + I = NCO
ANS: C PTS: 1 DIF: Easy REF: p. 305
BLM: Remember NOT: Macro TB_13-9
10. In the open-economy macroeconomic model, where does the supply of loanable funds come from?
a
.
national saving
b
.
private saving
c
.
domestic investment
d
.
the sum of domestic investment and net capital outflow
ANS: A PTS: 1 DIF: Easy REF: p. 305
BLM: Remember NOT: Macro TB_13-10
11. In the open-economy macroeconomic model, where does the demand for loanable funds come from?
a
.
domestic investment
b
.
net exports
c
.
net capital outflow
d
.
the sum of net capital outflow and domestic investment
ANS: D PTS: 1 DIF: Easy REF: p. 305
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