Question 12 Initially, there is a trade surplus in a small open economy with a perfect...
Question 12 Initially, there is a trade surplus in a small open economy with a perfect capital mobility. Suppose the world interest rate rw increases. Which of the following statement is correct?
A. NX remains positive.
B. NX becomes negative.
C. NX becomes zero.
D. It does not provide sufficient information to conclude if NX is
positive, negative, or zero.
E. None of the above is correct
Homework Answers
A trade surplus in the market will lead to an appreciation of the local currency, an increase in the world interest rate will lead to a capital outflow and depreciation of the local currency. This will decrease the imports and increase the exports making the NX zero but we don't have the exact information to come to an conclusion. The answer is "D".
Add Answer to:
Question 12 Initially, there is a trade surplus in a small open
economy with a perfect...
Question 14 Initially, there is a balanced trade in a small open economy with a perfect...
Question 14 Initially, there is a balanced trade in a small open economy with a perfect capital mobility. Suppose the world interest rate rw increases. Which of the following statement is correct? A. NX becomes positive. B. NX becomes negative. C. NX remains zero. D. It does not provide sufficient information to conclude if NX is positive, negative, or zero. E. None of the above is correct
Question 10 Initially, there is a negative net capital outflow in a small open economy with...
Question 10 Initially, there is a negative net capital outflow in a small open economy with a perfect capital mobility. Suppose an investment tax credit is introduced to give a tax advantage to any firm building a new factory or buying a new piece of equipment. Which of the following statement is correct in the loanable funds market? A. Savings increase and investment increases. B. Savings decrease and investment increases. C. Savings increase and investment remains unchanged. D. Savings remain...
12. In a small open economy, starting from a position of balanced trade, if the government...
12. In a small open economy, starting from a position of balanced trade, if the government increases domestic government purchases, this produces a tendency toward a trade _and net capital outflow. A) deficit; negative B) surplus; positive C) deficit; positive D) surplus; negative
13. A small open economy with perfect capital mobility is characterized by all of the following...
13. A small open economy with perfect capital mobility is characterized by all of the following except that: A) its domestic interest rate always exceeds the world interest rate. B) it engages in international trade. its net capital outflows always equal the trade balance. D) its government does not impede international borrowing or lending,
8. In a small open economy, if the world real interest rate is above the rate...
8. In a small open economy, if the world real interest rate is above the rate at which national saving exceeds domestic investment, then there will be a trade _and net capital outflow. A) surplus; negative B) deficit; positive C) surplus, positive D) deficit; negative
Macroland is a small open economy with perfect capital mobility and a fixed-exchange-rate system. Macroland is...
Macroland is a small open economy with perfect capital mobility and a fixed-exchange-rate system. Macroland is initially in the long-run equilibrium at the natural level of output with balanced trade. With the help of an appropriate diagram, compare the impact of a tax cut in the short run (when prices are fixed) and in the long run (when prices are flexible) on: 1. Output, 2. Consumption, 3. Investment, 4. Net exports 5. Exchange rate.
1. Consider the following economy of Syldavia (a small open economy) Y=C+I+G+NX , NX = S-I...
1. Consider the following economy of Syldavia (a small open economy) Y=C+I+G+NX , NX = S-I Y=8000 G=750 T=750 C=1000+0.75(Y-T) I=1000-100r NX=500-500e r=r*=5 d. [ 5 points] Suppose the world interest rate drop from r=5 to 2percent (assume government G=750). Find the national saving, investment, trade balance, capital outflow and equilibrium exchange rate.
3. (8 points) Consider a small open economy in the Specific-Factors model with 2 goods (C and F) ...
True or False, only answer part c is fine
3. (8 points) Consider a small open economy in the Specific-Factors model with 2 goods (C and F) and three factors (mobile labor, fixed capital in C, and fixed land in F). Except otherwise noted, assume that every factor has the same preferences for C and F. Under free trade, the economy exports F. (a) As the home country opens up from autarky to trade, the opportunity cost of F in...
5. A small open economy is initially in trade balance. There is a temporary increase in...
5. A small open economy is initially in trade balance. There is a temporary increase in householo income fo r one period (i.e. rise in y.). What effect does this have on the current acc period t and the following periods? Does this story change if the increase in income is permanent?
Consider a small open economy with floating exchange rates. The LM curve of this economy is...
Consider a small open economy with floating exchange rates. The LM curve of this economy is given as ??=20,000???200+(????), and the IS curve is given as ??=500?20,000??+????, where ????=600?300??. Suppose that ??=1,??=100, and the world interest rate (???) is 0.025. 1) Find out the equilibrium values of output (Y), exchange rate (e), and net export (NX) of this economy. ANSWERS = Y = 400, NX = 400, e = 2/3. 2) Suppose the central bank increases the money supply to...
12. In a small open economy, starting from a position of balanced trade, if the government increases domestic government purchases, this produces a tendency toward a trade _and net capital outflow. A) deficit; negative B) surplus; positive C) deficit; positive D) surplus; negative
13. A small open economy with perfect capital mobility is characterized by all of the following except that: A) its domestic interest rate always exceeds the world interest rate. B) it engages in international trade. its net capital outflows always equal the trade balance. D) its government does not impede international borrowing or lending,
8. In a small open economy, if the world real interest rate is above the rate at which national saving exceeds domestic investment, then there will be a trade _and net capital outflow. A) surplus; negative B) deficit; positive C) surplus, positive D) deficit; negative
True or False, only answer part c is fine
3. (8 points) Consider a small open economy in the Specific-Factors model with 2 goods (C and F) and three factors (mobile labor, fixed capital in C, and fixed land in F). Except otherwise noted, assume that every factor has the same preferences for C and F. Under free trade, the economy exports F. (a) As the home country opens up from autarky to trade, the opportunity cost of F in...
5. A small open economy is initially in trade balance. There is a temporary increase in householo income fo r one period (i.e. rise in y.). What effect does this have on the current acc period t and the following periods? Does this story change if the increase in income is permanent?
Most questions answered within 3 hours.
-
Where is the error in this code sequence?
String s1 = "Hello";
String s2 = "ello";...
asked 10 months ago -
Financial data for Joel de Paris, Inc., for last year
follow:
Joel de Paris, Inc.
Balance...
asked 10 months ago -
Consider this reaction:
Al2(SO4)3 (aq)+ BaCl3
(aq) Al2Cl6 (aq)- +
3BaSO4(s) . What is the...
asked 10 months ago -
Suppose that Savneet is considering increasing her
recent random sample from 20 car rentals to 40...
asked 10 months ago -
Trucks arrive at an unloading terminal at an average rate of 120
per hour.
Trucks arrive...
asked 10 months ago -
Why are methanol and ethanol completely soluble in water while
octanol is not very little soluble....
asked 10 months ago -
A facilities manager at a university reads in a research report
that the mean amount of...
asked 10 months ago -
When the CuSO4 is rehydrated by adding water to the anhydrous
compound, is this an endothermic...
asked 10 months ago -
A ray of sunlight is passing from diamond into crown glass; the
angle of incidence is...
asked 10 months ago -
A block of mass 0.249 kg is placed on top of a light, vertical
spring of...
asked 10 months ago -
how do the kidneys compensate in the presences of acidosis
a) trigger hyperventilate
b) reserve acid...
asked 10 months ago -
Question 501 pts
The rental rate of capital to the firm increases. Which of the
following...
asked 10 months ago