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Economics Ps 10

18 Questions
Economics Quizzes & Trivia
Questions and Answers
  • 1. 
    When exports exceed imports, all of the following are true except:
    • A. 

      Net capital outflows are positive.

    • B. 

      Net exports are positive.

    • C. 

      Domestic investment exceeds domestic saving.

    • D. 

      Domestic output exceeds spending.

  • 2. 
    A country's exports may be written as equal to:
    • A. 

      GDP minus consumption minus investment minus government spending.

    • B. 

      GDP minus consumption of domestic goods and services minus investment of domestic goods and services minus government purchases of domestic goods and services.

    • C. 

      Imports.

    • D. 

      GDP minus imports.

  • 3. 
    An increase in the trade deficit of a small open economy could be the result of:
    • A. 

      An increase in taxes.

    • B. 

      An increase in government spending.

    • C. 

      A decrease in the world interest rate.

    • D. 

      The expiration of an investment tax-credit provision.

  • 4. 
    Holding other factors constant, legislation to cut taxes in an open economy will:
    • A. 

      Increase national saving and lead to a trade surplus.

    • B. 

      Increase national saving and lead to a trade deficit

    • C. 

      Reduce national saving and lead to a trade surplus.

    • D. 

      Reduce national saving and lead to a trade deficit.

  • 5. 
    Starting from a small open economy with balanced trade, if large foreign countries increase their domestic government purchases, this policy will tend to increase:
    • A. 

      Investment in the small open economy.

    • B. 

      Saving in the small open economy.

    • C. 

      Exports by the small open economy.

    • D. 

      Imports by the small open economy.

  • 6. 
    Starting from trade balance, if the world interest rate falls, then, holding other factors constant, in a small, open economy the amount of domestic investment will _____ and net exports will _____.
    • A. 

      Increase; increase

    • B. 

      Increase; decrease

    • C. 

      Increase, not change

    • D. 

      Decrease; increase

  • 7. 
    The adoption of an investment tax credit in a small open economy is likely to lead to:
    • A. 

      No change in either domestic investment or domestic saving in the small open economy.

    • B. 

      An increase in both domestic investment and domestic saving in the small open economy.

    • C. 

      An increase in domestic saving but no change in domestic investment in the small open economy.

    • D. 

      An increase in domestic investment but no change in domestic saving in the small open economy.

  • 8. 
    If the real exchange rate decreases, then net exports will _____.
    • A. 

      Be positive.

    • B. 

      Be negative.

    • C. 

      Increase.

    • D. 

      Decrease.

  • 9. 
    In a small open economy, when the government reduces national saving, the equilibrium real exchange rate:
    • A. 

      Rises and net exports fall.

    • B. 

      Rises and net exports rise.

    • C. 

      Falls and net exports fall.

    • D. 

      Falls and net exports rise.

  • 10. 
    In a small open economy with perfect capital mobility, a reduction in the government's budget deficit ______ net exports and the real exchange rate ______.
    • A. 

      Increases; appreciates

    • B. 

      Increases; depreciates

    • C. 

      Decreases; appreciates

    • D. 

      Decreases; depreciates

  • 11. 
    In a small open economy, when foreign governments reduce national saving in their countries, the equilibrium real exchange rate:
    • A. 

      Rises and net exports fall.

    • B. 

      Rises and net exports rise.

    • C. 

      Falls and net exports fall.

    • D. 

      Falls and net exports rise.

  • 12. 
    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

  • 13. 
    In a small, open economy, if the world interest rate increases, then the supply of domestic currency on the foreign exchange market will _____ and the real exchange rate will _____, holding all else constant.
    • A. 

      Decrease; decrease

    • B. 

      Decrease; increase

    • C. 

      Increase; decrease

    • D. 

      Increase; increase

  • 14. 
    Use the following to answer questions 23-27: (Exhibit: Policies Influence Real Exchange Rate) Which of the graphs illustrates the impact on the real exchange rate of contractionary fiscal policies abroad?
    • A. 

      (A)

    • B. 

      (B)

    • C. 

      (C)

    • D. 

      (D)

  • 15. 
    • A. 

      (A)

    • B. 

      (B)

    • C. 

      (C)

    • D. 

      (D)

  • 16. 
    Use the following to answer questions 23-27: (Exhibit: Policies Influence Real Exchange Rate) Which of the graphs illustrates the impact on the real exchange rate of protectionist trade policies?
    • A. 

      (A)

    • B. 

      (B)

    • C. 

      (C)

    • D. 

      (D)

  • 17. 
    The currencies of countries with high inflation rates relative to the United States have tended to ______, and the currencies of countries with low inflation rates relative to the United States have tended to ______.
    • A. 

      Appreciate; appreciate

    • B. 

      Appreciate; depreciate

    • C. 

      Depreciate; depreciate

    • D. 

      Depreciate; appreciate

  • 18. 
    • A. 

      Rises and net exports fall.

    • B. 

      And net exports both rise.

    • C. 

      Falls and net exports rise.

    • D. 

      And net exports both fall.