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Exam 20: Macroeconomics in an Open Economy

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Question 91

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In an open economy,fiscal policy has

A) a smaller impact on aggregate demand as compared to a closed economy.
B) the same impact on aggregate demand as compared to a closed economy.
C) a larger impact on aggregate demand as compared to a closed economy.
D) no impact on aggregate demand.

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Question 92

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An example of 'foreign direct investment' is:

A) Holden building a factory in India.
B) A British investor buying shares in an Australian firm.
C) An Australian investor buying a Canadian bond.
D) A British bank buying an Australian government bond.

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Question 93

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If the Australian government sells a bond to the Bank of China,how is this recorded in Australia's balance of payments?

Suppose the price of a mobile phone in Australia is $400 and 30 000 yen in Japan.If the current exchange rate is 100 yen to the dollar,then purchasing power parity theory would predict that in the long run

Speculators who anticipate that the future value of the dollar relative to the yen will ________,will cause a(n) ______________.

Suppose that the average price of goods imported from Great Britain increased.Is it likely that the value of the Australian dollar would appreciate or depreciate versus the British pound,ceteris paribus? Is it likely that the average price in British pounds of goods exported from Australia to Great Britain would rise or fall? _____________________________________________________________________________________________ _____________________________________________________________________________________________

Suppose that the exchange rate between the Japanese yen and the Australia dollar is currently ¥60 = $1,then an individual could trade ________.

If the rate of productivity growth in Australia exceeds the rate of productivity growth in Great Britain,we would expect the Australian dollar to depreciate in value against the British pound.

If you know that a country's net foreign investment is positive,what does that tell you about the relationship between the country's national saving and private investment? _____________________________________________________________________________________________ _____________________________________________________________________________________________

The major difference between an open economy and a closed economy is that

When the value of a currency is determined ________,the exchange rate system is defined as 'managed float'.

Australia ________ concerned with being a net borrower if Australia is using all of the borrowed funds to ________.

As Australia's net foreign investment is negative,domestic investment must be greater than national saving.

Exchange rates under the Bretton Woods System were determined by relative supplies of gold held by countries within the system.

Which of the following would increase the value of the Australian dollar in the long run?

Explain why a country might want their currency to appreciate against the currency of a major trading partner in order to fight inflation. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Refer to Figure 20.5 for the following questions. Figure 20.5 -If the government of Thailand wants to peg the baht to the US dollar at a value below 0.03 baht per US dollar,as seen in Figure 20.5,then

When compared to a closed economy,fiscal policy is more effective and monetary policy is less effective in an open economy.

Today,there are some developing countries that attempt to fix their currencies against the US dollar.

In an open economy,expansionary monetary policy will cause