Macroeconomics flashcard week 5

Front

If an economy’s output is fixed by the factors of production and available technology, which of the following is most likely to increase output in the long run? A) An increase in the money supply, B) A rise in government spending, C) An improvement in technology, D) A temporary decrease in taxes

Back

An improvement in technology

Front

In close economy, what happens when a country has a trade surplus (NX>0)? A) It is a net borrower, B) It is a net lender, C) It has a budget deficit, D) It imports more than it exports

Back

It is a net lender.

Front

In an open economy, the relationship between saving (S), investment (I), and net capital outflow (NFI) is given by: Net capital outflow equals domestic residents' lending abroad minus foreigners' lending to the domestic country.

Back

Net capital outflow equals domestic residents' lending abroad minus foreigners' lending to the domestic country.

Front

In an open economy, what determines the real interest rate?

Back

Equilibrium in the loanable funds market

Front

Suppose a country has the following net capital outflow NFI function: NFI = 50 - 5r where r is the domestic real interest rate in %. If the domestic real interest rate rises from 4% to 6%, what happens to net capital outflow (NFI), and is the country a net lender or net borrower?

Back

NFI falls from 30 to 20; the country remains a net lender.

Front

Suppose the real exchange rate between Vietnam and the U.S. is 1.2, the price level in Vietnam is 50 million VND, and the price level in the U.S. is 20,000 USD. What is the exchange rate in VND/USD?

Back

3000 VND/USD

Front

Which of the following is NOT a factor in determining the trade balance? A) National saving, B) Investment, C) Government spending, D) Unemployment rate

Back

Unemployment rate

Front

In close economy, what happens in the loanable funds market under an expansionary fiscal policy?

Back

Supply of loanable funds shifts left.

Front

A decrease in the real exchange rate (a depreciation) tends to:

Back

Increase net exports

Front

In a small open economy with free capital mobility, what determines the real interest rate? A) Domestic demand and supply, B) Government policies, C) The world interest rate, D) Net exports

Back

The world interest rate