When fear of default on bonds issued by U.S. corporations decline, then
a. net capital outflow and the exchange rate both rise.
b. net capital outflow rises and the exchange rate falls.
c. net capital outflow falls and the exchange rate rises.
d. net capital outflow and the exchange rate both fall.
c
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According to the above figure, equilibrium is at point
A) E. B) B. C) C. D) D.
If two nations both peg to a center nation, and one devalues its exchange rate against the other partner (cooperatively) and to the center as a result of a demand shock, what is the effect?
A) The center nation will require that the two line up their rates. B) The devaluing nation will see an increase in demand while the other partner sees a decrease (thus sharing the impact of the demand shock). C) The devaluing nation will see a larger increase in demand while its partner will suffer more (thus favoring the devaluing nation). D) Both nations will suffer more because the center nation will match the devaluation, thus negating the effect.
What do tests of the gravity equation for trade between Canadian provinces and American states indicate?
a. Individual state and individual provincial GDPs are negatively related to the amount of trade between individual states and provinces. b. Individual state and individual provincial GDPs are positively related to the amount of trade between individual states and provinces. c. Individual state and individual provincial GDPs are not at all related to the amount of trade between individual states and provinces. d. The gravity equation does not apply to U.S.Canadian trade.
Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential B. expansionary; higher; potential C. recessionary; lower; potential D. recessionary; lower; lower