ch5--practice questions

ch5--practice questions - 1. If domestic spending exceeds...

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1. If domestic spending exceeds output, we ______ the difference—net exports are ______. A) import; negative B) export; positive C) import; positive D) export; negative 2. The value of net exports is also the value of: A) net investment. B) net saving. C) national saving. D) the excess of national saving over domestic investment. 3. The world interest rate: A) is equal to the domestic interest rate. B) makes domestic saving equal to domestic investment. C) is the interest rate charged on loans by the World Bank. D) is the interest rate prevailing in world financial markets. 4. In a country with a small open economy, the real interest rate will always be: A) above the world real interest rate. B) below the world real interest rate. C) equal to the world real interest rate. D) equal to the world nominal interest rate. 5. In a small open economy, if the world real interest rate is above the rate at which national saving equals domestic investment, then there will be a trade ______ and ______ net capital outflow. A) surplus; negative B) deficit; positive C) surplus; positive D) deficit; negative 6. Starting from trade balance, if the world interest rate falls, then, holding other factors constant, in a small open economy the amount of domestic investment will _____ and net exports will _____. A) increase; increase B) increase; decrease C) increase, not change D) decrease; increase Page 1
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7. If the government of a small open economy wishes to reduce a trade deficit, which policy action will be successful in achieving this goal? A)
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ch5--practice questions - 1. If domestic spending exceeds...

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