A Macroeconomic Theory of the Open Economy

Chapter 19

A Macroeconomic Theory of the Open Economy

MULTIPLE CHOICE

1. Over the past two decades, the United States has

a. generally had, or been very near to a trade balance.

b. had trade deficits in about as many years as it has trade surpluses.

c. persistently had a trade deficit.

d. persistently had a trade surplus.

ANSWER: c. persistently had a trade deficit.

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2. Many U.S. business leaders argue that the current state of U.S. net exports is the result of

a. U.S. export subsidies.

b. free trade policies of foreign governments.

c. unproductive U.S. workers.

d. unfair foreign competition.

ANSWER: d. unfair foreign competition.

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3. If a country’s imports are greater than its exports, the country is said to have a

a. trade surplus.

b. trade deficit.

c. comparative advantage.

d. absolute advantage.

ANSWER: b. trade deficit.

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4. The open-economy macroeconomic model includes

a. only the market for loanable funds.

b. only the market for foreign-currency exchange.

c. both the market for loanable funds and the market for foreign-currency exchange.

d. neither the market for loanable funds or the market for foreign-currency exchange.

ANSWER: c. both the market for loanable funds and the market for foreign-currency exchange.

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5. The open-economy macroeconomic model examines the determination of

a. output growth rate and the real interest rate.

b. unemployment and the exchange rate

c. output growth rate and the inflation rate.

d. the trade balance and the exchange rate.

ANSWER: d. the trade balance and the exchange rate.

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6. The open-economy macroeconomic model takes

a. GDP, but not the price level as...