Question

14. According to the open-economy macroeconomic model, which of the following statements is (are) correct?
(x) In the open-economy macroeconomic model, if for some reason foreign citizens want to purchase more U.S. goods and services at each exchange rate, then the demand for dollars in the market for foreign-currency exchange shifts right.
(y) If foreign citizens want to buy fewer U.S. bonds, then the demand for U.S. dollars in the market for foreign currency exchange will shift to the right
(z) If the real exchange rate for the dollar is below the equilibrium level, the quantity of dollars supplied in the market for foreign-currency exchange is less than the quantity demanded and the dollar will appreciate.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (x) only
15. which of the following statements is (are) correct?
(x) A trade policy is a government policy that directly influences the quantity of goods and services that a country imports or exports.
(y) An “import quota”.is a limit on the quantity of a good that can be produced abroad and sold domestically.
(z) A tax on imported goods is called a tariff.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (x) only

Answer 1

14.

In an open economy macroeconomic model, when a foreigner tends to buy more of US goods and services, US exports increases and also the net exports. As a result, the net cash outflow increases if the foreigner tends to pay for the goods in terms of foreign assets and as a result US aquires more of the foreign assets. If the real exchange rate for the dollars falls below the equilibrium level, the cost of US goods and services becomes more expensive in relation to the foreign goods. This means that the quantity of dollars supplied in the market in exchange for the foreign currency and so the dollar will appreciate.

The answer here would be

C. (X) and (Z) only.

15.

A trade policy is nothing but a government policy which comprises of the regulations and the agreements governing the imports and exports of goods and services to and from the foreign countries. An import quota refers to the physical limit set on the quantity of goods that can be imported into the country during a given period of time. A tariff is nothing but a tax which is imposed on imported goods and services. Let us conclude that all the three statements are correct.

The answer is

A. (x), (y) and (z)