Chapter 4 Homework

If domestic saving exceeds domestic investment, then net exports are ______ and net capital outflows are ______. a. positive; positive b. positive; negative c. negative; negative d. negative; positive

a. positive; positive

(Exhibit: Policies Influence Real Exchange Rate) Which of the panels illustrates the impact on the real exchange rate of an increase in household saving? a. (A) b. (B) c. (C) d. (D)

a. (A)

(Exhibit: Policies Influence Real Exchange Rate) Which of the panels illustrates the impact on the real exchange rate of contractionary fiscal policies at home? a. (A) b. (B) c. (C) d. (D)

a. (A)

(Exhibit: Saving and Investment in a Small Open Economy) In a small open economy, if the world interest rate is r1, then the economy has: a. a trade surplus. b. balanced trade. c. a trade deficit. d. negative capital outflows.

a. a trade surplus.

In a small open economy, if exports equal $5 billion and imports equal $7 billion, then there is a trade ______ and ______ net capital outflow. a. deficit; negative b. surplus; negative c. deficit; positive d. surplus; positive

a. deficit; negative

Exhibit: Policies Influence Real Exchange Rate) Which of the panels illustrates the impact on the real exchange rate of contractionary fiscal policies abroad? a. (A) b. (B) c. (C) d. (D)

b. (B)

If 5 Swiss francs trade for $1, the U.S. price level equals $1 per good, and the Swiss price level equals 2 francs per good, then the real exchange rate between Swiss goods and U.S. goods is ______ Swiss good(s) per U.S. good. a. 0.5 b. 2.5 c. 5 d. 10 Feedback

b. 2.5

If the number of dollars per yen rises, this is called a(n): a. appreciation of the dollar. b. appreciation of the yen. c. increase in the terms of trade. d. decrease in the terms of trade.

b. appreciation of the yen.

The nominal exchange rate between the U.S. dollar and the Japanese yen is the: a. number of yen you can get for lending one dollar in Japan for one year. b. number of yen you can get for one dollar. c. price of U.S. goods divided by the price of Japanese goods. d. price of Japanese goods divided by the price of U.S. goods.

b. number of yen you can get for one dollar.

(Exhibit: Policies Influence Real Exchange Rate) Which of the panels illustrates the impact on the real exchange rate of an increase in investment demand? a. (A) b. (B) c. (C) d. (D)

c. (C)

(Exhibit: Saving and Investment in a Small Open Economy) In a small open economy, if the world interest rate is r3, then the economy has: a. a trade surplus. b. balanced trade. c. a trade deficit. d. positive capital outflows.

c. a trade deficit.

A "small" economy is one in which the: a. level of output is fixed. b. price level is fixed. c. domestic interest rate equals the world interest rate. d. domestic saving is less than domestic investment.

c. domestic interest rate equals the world interest rate.

If the real exchange rate depreciates from 1 Japanese good per U.S. good to 0.5 Japanese good per U.S. good, then U.S. exports ______ and U.S. imports ______. a. increase; increase b. decrease; decrease c. increase; decrease d. decrease; increase

c. increase; decrease

If domestic saving is less than domestic investment, then net exports are ______ and net capital outflows are ______. a. positive; positive b. positive; negative c. negative; negative d. negative; positive

c. negative; negative

(Exhibit: Policies Influence Real Exchange Rate) Which of the panels illustrates the impact on the real exchange rate of protectionist trade policies? a. (A) b. (B) c. (C) d. (D)

d. (D)

If a U.S. corporation purchases a product made in Europe and the European producer uses the proceeds to purchase a U.S. government bond, then U.S. net exports ______ and net capital outflows ______. a. increase; increase b. increase; decrease c. decrease; increase d. decrease; decrease

d. decrease; decrease

In a small open economy, if the world interest rate falls, then domestic investment will _____ and the real exchange rate will _____, holding all else constant. a. decrease; decrease b. decrease; increase c. increase; decrease d. increase; increase

d. increase; increase

The world interest rate: a. is equal to the domestic interest rate. b. makes domestic saving equal to domestic investment. c. is the interest rate charged on loans by the World Bank. d. is the interest rate prevailing in world financial markets.

d. is the interest rate prevailing in world financial markets.

A depreciation of the real exchange rate in a small open economy could be the result of: a. a domestic tax cut. b. an increase in government spending. c. a decrease in the world interest rate. d. the expiration of an investment tax-credit provision.

d. the expiration of an investment tax-credit provision.

An "open" economy is one in which: a. the level of output is fixed. b. government spending exceeds revenues. c. the national interest rate equals the world interest rate. d. there is trade in goods and services with the rest of the world.

d. there is trade in goods and services with the rest of the world.