Open Economy-macro
10 Questions
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An open economy is defined as an economy affected by imports and exports. Allowing products and services from other countries makes it open. Take up the quiz to understand this part of macroeconomics better. All the best.
Questions and Answers
- 1.
- A.
True
- B.
False
- 2.In an open economy, the price level affects output through its effects on the real exchange rate.
- A.
True
- B.
False
- 3.In the short run, a fixed nominal exchange rate implies a fixed real exchange rate.
- A.
True
- B.
False
- 4.In the medium run, a fixed nominal exchange rate is consistent with an adjustment of the real exchange rate through movements in the price level.
- A.
True
- B.
False
- 5.A devaluation of the right size can return an economy in recession back to the natural level of output.
- A.
True
- B.
False
- 6.In an open economy, the “domestic demand for goods” is not the same as the “demand for domestic goods.”
- A.
True
- B.
False
- 7.A higher real exchange rate makes foreign goods relatively more expensive, leading to a decrease in the quantity of imports.
- A.
True
- B.
False
- 8.An increase in Y*, or foreign output, leads to higher U.S. exports. An increase in e, the value of foreign goods in terms of domestic goods, also leads to an increase in imports.
- A.
True
- B.
False
- 9.Increases in demand, both foreign and domestic, lead to an increase in output. However, they have opposite impacts on the trade situation of the country.
- A.
True
- B.
False
- 10.The Marshall-Lerner condition is the condition under which a real depreciation (an increase in e) leads to an increase in net exports.
- A.
True
- B.
False
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