[Week 5] Macroecon

Front

What does the equation ( S - I = NFI ) represent in economic terms?

Back

Net foreign investment

Front

In the equation ( S - I = NFI = CO - CI ), what does ( CO ) represent?

Back

Domestic residents’ lending abroad

Front

How does the world interest rate affect investment in a small open economy?

Back

Investment negatively depends on the real interest rate.

Front

If national saving does not depend on the interest rate, what implication can be drawn about the savings curve?

Back

It is vertical.

Front

How is the trade balance determined in the Small Open Economy Model?

Back

By the difference between saving and investment at the world interest rate

Front

What is the relationship between the real exchange rate and the nominal exchange rate?

Back

The nominal exchange rate is derived from the real exchange rate adjusted for inflation.

Front

In a small open economy, what happens to the real exchange rate when the government imposes tariffs on imports?

Back

The real exchange rate appreciates.

Front

How is the nominal exchange rate defined?

Back

The price of one country’s currency in terms of another currency

Front

What is the key determinant of investment in a small open economy with perfect capital mobility? Options: The domestic real interest rate, The world real interest rate, The level of government spending, The trade balance

Back

The world real interest rate

Front

How does an expansionary fiscal policy at home affect the trade balance in a small open economy with free capital mobility?

Back

It reduces net exports