110B_blanchard_4e_Ch 19 Homework Questions

110B_blanchard_4e_Ch 19 Homework Questions - 5 Suppose...

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110B Ch 19 Homework Questions 1. Which of the following represents the domestic demand for goods? A. C + I + G + X - IM/ε B. C + I + G + X C. C + I + G D. C + I + G + X – εIM 2. Which of the following would cause an increase in imports? A. an increase in domestic output. B. a reduction in the real exchange rate. C. a reduction in foreign output. D. all of A, B, and C. 3. For this question, assume that the J-curve effect exists. Which of the following will occur after a real appreciation? A. The trade deficit will worsen temporarily before it improves. B. The trade deficit will worsen permanently. C. The trade deficit will improve permanently. D. The trade deficit will improve temporarily before it worsens. 4. The reason for the answer to question 4 is that A. X adjusts very much but not IM initially B. IM adjusts very much but not X initially C. neither X nor IM adjusts very much initially. D. both X and IM adjust very much initially.
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Unformatted text preview: 5. Suppose policy makers want to reduce Y and reduce NX. Which of the following policies would most likely achieve this goal? A. a reduction in government spending. B. a decrease in the real exchange rate. C. an increase in taxes and a decrease in the real exchange rate. D. a real appreciation. 6. Which is a correct relationship between a trade balance and savings? A. NX = I - S – T – G. B. NX – (T – G) = I – S. C. NX = S + T – G – I. D. NX = S – I. 7. An increase in domestic demand will have a ____ effect on output in an open economy than in a closed economy, and will have a ____ effect on the trade balance. A. larger, positive. B. larger, negative. C. smaller, positive. D. smaller, negative. 8. Suppose that a nation has enough savings, more than enough to fund its investment (I). Does the nation run a trade deficit or a trade surplus? Explain your argument....
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This note was uploaded on 09/18/2008 for the course ECON 100B taught by Professor Rauch during the Winter '07 term at UCSD.

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110B_blanchard_4e_Ch 19 Homework Questions - 5 Suppose...

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