Question

QUESTION 1

1. Which of the following is a positive entry into Australia's financial account?

   		An Australian firm sells coal to a German firm.
   		An Australian investor buys a Japanese bond.
   		An Australian firm buys and builds a factory in Indonesia.
   		A Chinese investor buys an Australian government bond.
   		An Australian firm buys a German corporate bond.

1 points   

QUESTION 2

1. Suppose that Australia's price level is 125, the British price level is 100, and the nominal exchange rate of pounds to the dollar is £0.60/A$1, then the real exchange rate of pounds to the dollar is:

   		0.60.
   		0.75.
   		0.33.
   		0.48.
   		0.80

1 points   

QUESTION 3

1. According to the saving and investment equation, if net foreign investment falls by $35 million:

   		national savings minus domestic investment (i.e. S – I) will fall by $35 million.
   		domestic investment will fall by $35 million.
   		national savings will rise by $35 million.
   		consumption will fall by $35 million.
   		national savings minus domestic investment (i.e. S – I) will rise by $35 million.

1 points   

QUESTION 4

1. A current account surplus implies:

   		Domestic savings < domestic investment
   		Domestic savings > domestic investment
   		Negative net foreign investment.
   		Imports > exports
   		A financial account surplus.

1 points   

QUESTION 5

1. In an open economy, monetary policy, in the short run, has:

   		an impact on aggregate demand as well as aggregate supply.
   		no impact on aggregated demand.
   		the same impact on aggregate demand as compared to a closed economy.
   		a smaller impact on aggregate demand as compared to a closed economy.
   		a larger impact on aggregate demand as compared to a closed economy.

Answer 1

1. Which of the following is a positive entry into Australia's financial account?

A Chinese investor buys an Australian government bond.

2. Real exchange rate can be determined using the following formula

Real exchange rate = 0.75

3. Here the net foreign investment falls by $ 35 million thus, national saving minus domestic investment will fall be $ 35 million.

4. Current account surplus means that the country is a net lender to the rest of the world. This, will be true when domestic saving is greater than domestic investment.

5. A larger impact on aggregate demand as compared to closed economy.