Question 1

If   then

Accepted Answer

A)   the competitive equilibrium is Pareto optimal.
B)   the firm can benefit by producing more of good a.
C)   there is a competitive equilibrium in the SOE without trade.
D)   the firm can benefit by producing more of good b.
E)   the firm can benefit by producing more of both a and b.F) A) and E)
G) C) and E)

Question 2

In a two-good,two-period model with trade,an anticipated future increase in domestic total factor productivity

Accepted Answer

A)   increases domestic output and increases the current account surplus.
B)   increases domestic output and decreases the current account surplus.
C)   has no effect on domestic output and increases the current account surplus.
D)   has no effect on domestic output and decreases the current account surplus.
E)   increases domestic output with no change in the current account surplus.F) A) and D)
G) None of the above

Question 3

When a country runs a current account deficit to finance an increase in domestic investment expenditures,it causes

Accepted Answer

A)   taxes to rise.
B)   an increase in capital stock and future productive capacity.
C)   consumption smoothing over time.
D)   a government deficit to occur.
E)   the real interest rate to increase.F) A) and B)
G) B) and E)

Question 4

The steeper the PPF,

Accepted Answer

A)   the more of both goods are exported.
B)   the more of both goods are imported.
C)   the more of both goods are consumed.
D)   the more aggregate output takes place.
E)   the greater the comparative advantage in producing one good over another.F) All of the above
G) C) and D)

Question 5

In 2011,there was

Accepted Answer

A)   large dispersion across countries in current account surpluses.
B)   relatively low unemployment in most countries.
C)   small dispersion across countries in current account surpluses.
D)   no dispersion across countris in current account surpluses.
E)   small dispersion in patterns of trade across countries.F) C) and D)
G) B) and C)

Question 6

Which of the following pairs of terms can be used interchangeably?

Accepted Answer

A)   the terms of trade and comparative advantage
B)   comparative advantage and purchasing power parity
C)   purchasing power parity and the real exchange rate
D)   the real exchange rate and the terms of trade
E)   purchasing power parity and the terms of trade.F) None of the above
G) A) and B)

Question 7

In a two-good,two-period model with trade,an increase in the capital stock

Accepted Answer

A)   can eliminate the current account deficit in the long run.
B)   increases domestic output and decreases consumption.
C)   decreases domestic output and increases the current account surplus.
D)   decreases domestic output and decreases the current account surplus.
E)   has no impact on domestic consumption.F) A) and B)
G) C) and D)

Question 8

In a two-good,two-period model with trade,an increase in domestic government spending

Accepted Answer

A)   increases domestic output and increases the current account surplus.
B)   increases domestic output and decreases the current account surplus.
C)   decreases domestic output and increases the current account surplus.
D)   decreases domestic output and decreases the current account surplus.
E)   increases domestic output with no change in the current account surplus.F) B) and C)
G) A) and D)

Question 9

In the 19th century,Canada had a period of significant current account deficits,which contributed to economic growth.These deficits most notably

Accepted Answer

A)   financed consumer spending.
B)   allowed for a substantial increase in government spending's share of GDP.
C)   financed construction of railroads.
D)   financed the development of land-grant universities.
E)   financed lower taxes.F) A) and B)
G) A) and D)

Question 10

Current account deficits may not be undesirable for the domestic economy as it

Accepted Answer

A)   leads to more government spending.
B)   leads to lower interest rates.
C)   helps domestic consumers to smooth consumption over time.
D)   causes the domestic currency to appreciate.
E)   leads to lower taxes.F) A) and C)
G) C) and D)

Question 11

In a two-good,one-period model,when the terms of trade move against you,

Accepted Answer

A)   exports unambiguously decrease and imports unambiguously increase.
B)   the effect on exports is uncertain and imports unambiguously decrease.
C)   the effect on exports is uncertain and imports unambiguously increase.
D)   the effects on both exports and imports is uncertain.
E)   exports and imports unambiguously increase.F) C) and E)
G) D) and E)

Question 12

For Canada,the net effect in the terms of trade of an increase in world oil prices

Accepted Answer

A)   was uncertain.
B)   was negative.
C)   was positive.
D)   could not be separated out from the change in other commodity prices.
E)   was only positive for Alberta.F) A) and B)
G) C) and D)

Question 13

In a two-good,two-period model with trade,an increase in government spending will have a tendency to cause

Accepted Answer

A)   interest rates to rise.
B)   the trade balance to improve.
C)   the domestic exchange rate to appreciate.
D)   the taxes to increase.
E)   the current account surplus to decrease.F) A) and C)
G) C) and D)

Question 14

Small open economy models are used to explain large economy models because

Accepted Answer

A)   there are smaller populations to deal with.
B)   they consume smaller amounts to goods and services.
C)   they are not as complicated as large economy models.
D)   they are relatively simple to work with.
E)   they are more politically and economically stable.F) B) and C)
G) A) and C)

Question 15

One of the reasons why the growth in world trade has occurred is due to

Accepted Answer

A)   more stable political environments.
B)   countries are getting more prosperous.
C)   the income inequality gap is narrowing among countries.
D)   barriers to trade have been relaxed.
E)   economies have become more materialistic.F) A) and C)
G) B) and E)

Question 16

If the SOE currently imports good a and the terms of trade increase,this represents a

Accepted Answer

A)   negative income effect.
B)   positive subsitution effect.
C)   pure substitution effect.
D)   positive income effect.
E)   negative substitution effect.F) D) and E)
G) A) and B)

Question 17

In a two-good,two-period model,the government expenditure multiplier

Accepted Answer

A)   is larger in an open economy because net exports fall.
B)   is larger in an open economy because net exports are unaffected.
C)   is smaller in an open economy because net exports fall.
D)   is smaller in an open economy because net exports increase.
E)   is larger in an open economy because net exports increase.F) A) and B)
G) A) and E)

Question 18

What would be the impact of a persistent increase in total factor productivity on domestic aggregate output,consumption,investment,and the current account surplus?

Accepted Answer

A persistent increase in total factor pr...

Question 19

Comparative advantage is determined by the

Accepted Answer

A)   slope of the representative consumer's indifference curve.
B)   slope of the country's production possibilities frontier.
C)   curvature of the representative consumer's indifference curve.
D)   curvature of the country's production possibilities frontier.
E)   where the marginal rate of substitution equals the marginal rate of transformation.F) B) and C)
G) B) and E)

Question 20

The terms of trade move against a country if

Accepted Answer

A)   imports become more expensive relative to exports.
B)   exports become more expensive relative to imports.
C)   the volume of exports becomes greater than the volume of imports.
D)   the volume of imports becomes greater than the volume of exports.
E)   trade barriers are implemented to encourage more domestic production.F) B) and E)
G) B) and D)

Exam 15: Inflation: Phillips Curves and Neo-Fisherism

In a two-good,two-period model with trade,an increase in the capital stock

Correct AnswerverifiedShow Answer

The terms of trade move against a country if

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Current account deficits may not be undesirable for the domestic economy as it

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If the SOE currently imports good a and the terms of trade increase,this represents a

Correct AnswerverifiedShow Answer

The steeper the PPF,

Correct AnswerverifiedShow Answer

What would be the impact of a persistent increase in total factor productivity on domestic aggregate output,consumption,investment,and the current account surplus?

Correct AnswerverifiedA persistent increase in total factor pr...View AnswerShow Answer

In a two-good,one-period model,when the terms of trade move against you,

Correct AnswerverifiedShow Answer

In the 19th century,Canada had a period of significant current account deficits,which contributed to economic growth.These deficits most notably

Correct AnswerverifiedShow Answer

Small open economy models are used to explain large economy models because

Correct AnswerverifiedShow Answer

In 2011,there was

Correct AnswerverifiedShow Answer

In a two-good,two-period model,the government expenditure multiplier

Correct AnswerverifiedShow Answer

Comparative advantage is determined by the

Correct AnswerverifiedShow Answer

In a two-good,two-period model with trade,an anticipated future increase in domestic total factor productivity

Correct AnswerverifiedShow Answer

For Canada,the net effect in the terms of trade of an increase in world oil prices

Correct AnswerverifiedShow Answer

In a two-good,two-period model with trade,an increase in government spending will have a tendency to cause

Correct AnswerverifiedShow Answer

In a two-good,two-period model with trade,an increase in domestic government spending

Correct AnswerverifiedShow Answer

When a country runs a current account deficit to finance an increase in domestic investment expenditures,it causes

Correct AnswerverifiedShow Answer

One of the reasons why the growth in world trade has occurred is due to

Correct AnswerverifiedShow Answer

Which of the following pairs of terms can be used interchangeably?

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If < then

Correct AnswerverifiedShow Answer

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A persistent increase in total factor pr...
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