Question

QUICK CHECK multiple choice 1. Holding other things constant, an increase in the world interest rate increases which of the following? a. national saving and domestic investment b. national saving and the net capital outflow c. domestic investment and the net capital outflow d. national saving only 2. An appreciation of a nation's currency can be the result of which of the following? a. an increase in net exports b. a decrease in net exports c. a fall in national saving d. a decrease in domestic demand for investment 3. The government in an open economy increases spend ing. As a result, the supply of loanable funds from national saving_ leading to a(n) ____ net capital out- flow__ and a real exchange rate_ a. falls, reduced, appreciation b. falls, increased, depreciation c. increases, increased, appreciation d. increases, decreases, depreciation 4. The nation of Ectenia has long banned the export of its highly prized puka shells. A newly elected president, however, removes the export ban. This change in policy will cause the nation's currency to __, making the goods Ectenia imports_expensive. a. appreciate, less b. appreciate, more c. depreciate, less d. depreciate, more 5. A civil war abroad causes foreign investors to seek a safe haven for their funds in Canada, leading to Canadian interest rates and a Canadian dollar. a higher, weaker h higher, stronger c. lower, weaker d. lower, stronger 6. If business leaders in Great Britain become more con fident in their economy, their optimism will induce them to increase investment, causing the British pound to __and pushing the British trade balance toward a. appreciate, deficit b. appreciate, surplus c. depreciate, deficit d. depreciate, surplus

Answer 1

1. An increase in the world interest rate increases national saving only. Hence,option(D) is correct.

2. An appreciation of a nation's currency can be the result a decrease in net exports. Hence,option(B) is correct.

3. As government spending increases in an open economy. As a result, the supply of loanable funds from national saving falls leading to a reduced net capital outflow and appreciation real exchange rate. Hence,option (A) is correct.

4. This change in policy will cause the nation's currency to appreciate to making the goods Ectenia imports less expensive. Hence,option(A) is correct.

5. A civil war abroad causes foreign investors to seek a safe haven for their funds in Canada, leading to lower Canadian interest rates and a stronger Canadian dollar. Hence,option(D) is correct.

6.If business leaders in Great Britain become more on fident in their economy., their optimism will induce them to increase investment , causing the British pound to appreciate and pushing the British trade balance toward deficit. Hence,option(A) is correct.