26 If the Japanese government wants to reduce its trade surplus with the United States, which measure would achieve this? A. Remove the import quotas for U.S. cars. B. Impose export quotas on Japanese cars. C. Enact legislation that would make Japanese companies less competitive. D. None of the above.
4 If net exports are positive, which of the following is false? A. Domestic output exceeds domestic spending. B. Domestic saving exceeds domestic investment. C. Net capital outflow is positive. D. There is a balance of trade deficit.
5 If net capital outflow is positive, then A. S - I is negative. B. private savings exceeds private investment. C. NX is positive. D. public saving exceeds public investment.
11 In the small open economy model of Chapter 5, if a country begins in a position of balanced trade, what happens when the government increases taxes? A. Net capital outflow becomes negative. B. The interest rate rises. C. Net exports decrease. D. The balance of trade goes into surplus.
14 In the small open economy model of Chapter 5, starting from balanced trade, an increase in the world interest rate from a fiscal expansion abroad leads to which of the following? A. Negative net capital outflow and a trade surplus. B. Positive net capital outflow and a trade surplus. C. Positive net capital outflow and a trade deficit. D. Negative net capital outflow and a trade deficit.
6 In a small open economy, the interest rate is determined by the A. equilibrium of saving and investment. B. interest rate in the rest of the world. C. excess of government spending over government revenue. D. value of net capital outflow.
3. If the IS* curve in the Mundell-Fleming model is expressed by the equation Y = C(Y - T) + I(r*) + G + NX(e) then NX(e) should be interpreted as meaning that A. net exports depend positively on the exchange rate. B. exports depend negatively on the exchange rate. C. imports depend positively on the exchange rate. D. net exports depend negatively on the exchange rate.
7. In a small open economy with a floating exchange rate, a fiscal expansion A. increases income. B. decreases income. C. leaves income unchanged. D. could increase or decrease income, depending on what happens to the exchange rate.
9. In a small open economy with a floating exchange rate, a monetary expansion A. increases income. B. decreases income. C. leaves income unchanged. D. could either decrease or increase income, depending on what happens to the exchange rate.
12. In an open economy with a fixed exchange rate, a fiscal contraction A. increases both the money supply and income. B. increases the money supply and decreases income. C. decreases the money supply and increases income. D. decreases both the money supply and income.
13. In an open economy with a fixed exchange rate, expansionary monetary policy A. increases income. B. decreases income. C. lowers the interest rate. D. is impossible.
7 In a small open economy, which interest rate equals the world interest rate? A. The real interest rate B. The nominal interest rate C.Both the real and the nominal interest rates D. It depends on whether the exchange rate is fixed or floating.
8 If a Canadian investor buys one million dollars worth of stock in an American company, how does this transaction appear in the national income accounts of the United States? A. The balance of trade rises as we export $1 million of stock. B. The balance of trade falls as we import Canadian investment. C. Net capital outflow rises by $1 million. D. Net capital outflow falls by $1 million.
9. If the government increases the amount of unemployment insurance that unemployed workers can collect, the amount of frictional unemployment would be expected to A. fall. B. remain constant. C. rise. D. first rise and then fall.
8. In the quantity equation, V represents the A. total number of transaction during some period of time. B. price of a typical transaction. C. the rate at which each unit of money circulates in the economy. D. quantity of money.
10. If production remains the same and all prices double, then real GDP
A. and nominal GDP are both constant. B. is constant and nominal GDP is reduced by half.
