exam2_sample - Exam 2 (Sample) 1. If the nominal exchange...

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Exam 2 (Sample) 1. If the nominal exchange rate falls 10 percent, the domestic price level rises 4 percent, and the foreign price level rises 6 percent, the real exchange rate will fall: A) 0 percent. B) 8 percent. C) 10 percent. D) 12 percent. 2. In a small open economy, if the government encourages investment, say through an investment tax credit, investment: A) increases and is financed through an increase in national saving. B) increases and is financed through an increase in exports. C) increases and is financed through an inflow of foreign capital. D) does not increase; the interest rate rises instead. 3. 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 4. In a small open economy, if the government adopts a policy that lowers imports, then the quantity of exports: A) remains unchanged. B) decreases but not as much as the quantity of imports decreases. C) decreases by exactly the same amount as the quantity of imports decreases. D) decreases by more than the quantity of imports decrease. 5. Net capital outflow is equal to the amount that: A) foreign investors lend here. B) domestic investors lend abroad. C) foreign investors lend here minus the amount domestic investors lend abroad. D) domestic investors lend abroad minus the amount that foreign investors lend here. Page 1
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6. If domestic saving exceeds domestic investment, then net exports are ______ and net capital outflows are ______. A) positive; positive B) positive; negative C) negative; negative D) negative; positive 7. In a small open economy, if consumers shift their preferences toward Japanese cars, then net exports: A) fall and the real exchange rate falls. B) fall but the real exchange rate remains unchanged. C) remain unchanged but the real exchange rate falls. D) and the real exchange rate remain unchanged. 8. When there is structural unemployment, the real wage is: A) rigid at a level below the market-clearing level. B) rigid at the market-clearing level. C) rigid at a level above the market-clearing level. D) flexible. 9. The minimum wage: A) is usually about 75 percent of the average wage earned in manufacturing. B) raises the wages of highly skilled workers. C) encourages master workers to take on apprentices.
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This note was uploaded on 12/06/2009 for the course ECO Macro123 taught by Professor Yung during the Spring '09 term at Culver-Stockton.

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exam2_sample - Exam 2 (Sample) 1. If the nominal exchange...

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