Net Exports
An open economy is one in which:
there is trade in goods and services with the rest of the world.
In a small open economy, if exports equal $5 billion and imports equal $7 billion, then there is a trade ___________ and _____________ net capital outflow.
Deficit/Negative
A "small" economy is one in which the domestic interest rate:
equals the world interest rate
An increase in the trade deficit of a small open economy could be the result of increased:
government spending
The nominal exchange rate between the U.S. dollar and the Japanese Yen is:
the number of yen you get for one dollar
Net exports equal GCP minus domestic spending on:
All goods and services
In a small open economy, if domestic saving exceeds domestic investment, then the extra saving will be used to:
Make loans to foreigners
In a small open economy, if the world real interest rate is above the rate which national saving equals domestic investment, then there will be a trade _________ and ____________ net capital outflow.
Surplus/Positive
An increase in the trade surplus of a small open economy could be the result of an increase in:
world interest rates
If the real exchange rate is high, foreign goods are relatively __________ and domestic goods are relatively __________.
Cheap/Expensive
If domestic spending exceeds output we __________ the difference and net exports are ___________.
Import/Negative
If a U.S. corporation buys a product made in Europe and the European producer uses the proceeds to purchase U.S. government bonds, then U.S. net exports ______________ and net capital outflows _____________.
Decrease/Decrease
In a large open economy, the interest rated adjusts so that domestic saving equals:
domestic investment plus net capital outflow
Holding other factors constant, legislation to cut taxes in an open economy will reduce national saving and lead to a:
Trade deficit
When the real exchange rate rises, exports will __________ and imports will ____________.
Decrease/Increase
The value of net exports is also the value of the __________ of national spending over ___________ investment.
Excess/Domestic
If a U.S. corporation sells a product in Europe and uses the proceeds to purchase shares in a European corporation, the U.S. net exports ____________ and the net capital outflows ___________.
Increase/Increase
Assume a war breaks out abroad and foreign investors choose to invest more in a large, safe country - the United States - then the U.S. interest rate and net exports will ___________.
Fall
In a small open economy, policies that increase investment tend to cause a trade:
deficit
The real exchange rate is determined by the equality of:
Net capital outflow and demand for net exports
A country's exports may be written as equal to:
GDP minus consumption of domestic goods and services minus investment of domestic goods and services and minus government purchases of domestic goods and services
If a U.S. corporation sells a product in Canada and uses the proceeds to purchase a product made in Canada, then U.S. net exports ___________ and net capital outflows ___________.
Do not change/Do not change
If the nominal interest rates in the United States and Canada are 8% and 12% respectively, the real interest rates are the same, and the real exchange rate is fixed, then the market's expectation about the number of Canadian dollars received for a U.S. dollar a year from now will be that it will:
Increase by 4%
In an open economy a trade deficit may be:
good or bad
Which of the following would decrease the real exchange rate in a small open economy in the long run:
A. personal income tax cut
B. reduction in government spending
C. a tariff on imports
D. an increase in investment
B. reduction in government spending