mid1f09ans - Econ 434 Professor Ickes Fall 2009 Midterm...

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Econ 434 Professor Ickes Fall 2009 Midterm Exam I: Answer Sheet Instructions Read the entire exam over carefully before beginning. The value of each question is given. Allocate your time e ciently given the price schedule that is imposed. There are no trick questions. Cheating in this exam will result in failure of the course Part I: Multiple Choice (36%) circle the correct answer 1. If a nation is a net creditor internationally, it means that: (a) residents of the nation have more foreign assets than foreign liabilities. (b) the nation is running low on international assets. (c) residents of the national have more foreign liabilities than foreign assets. (d) the nation’s government has extended credit to other nations’ governments. 2. Major global imbalances in the f nancial and current account exist. Nations with the largest imbalances are: (a) Canada, the United States, Mexico. (b) China, Japan, and the United States. (c) Argentina, Chile, Brazil. (d) the European Union, Russia, Japan. 3. If a small country is open to international transactions, then the current account balance: (a) decreases as world interest rates increase. (b) depends on real GDP and the level of imports. (c) increases as world interest rates increase. (d) must equal 0. 4. From 1985, world saving and investment as a share of world GDP have fallen. Over the same period, the world real interest rate also fell. What do these patterns suggest about the rates of growth of world saving and investment? (a) World investment demand grew more rapidly than the supply of world saving. (b) World investment demand grew at the same rate as the supply of world saving. 1
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(c) World investment demand grew more slowly than the supply of world saving. (d) This information allows no conclusion to be made about the rates of growth of world saving and investment. 5. The economy of Macronesia (which is small despite its name) discovers oil, that will take one period to start producing. In the two-period model, which of the following is true: (a) If the economy is closed the autarky interest rate will decrease. (b)
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mid1f09ans - Econ 434 Professor Ickes Fall 2009 Midterm...

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