37. Assume the Marshall-Lerner condition holds. Which of the following will cause an increasein net exports?A) an increase in government spendingB) an increase in investmentC) a reduction in foreign outputD) a reduction in the real exchange rateE) all of the above38. In an open economy, an increase in government spending will causeA) a reduction in domestic output.B) a reduction in imports.C) a reduction in net exports.D) all of the aboveE) none of the above39. Suppose that the rest of the world experiences an economic boom causing an increase inforeign output (Y*). This increase in Y* will not cause which of the following to occur?A) the domestic country's output to increaseB) the domestic country's consumption to increaseC) the domestic country's output to increase and its trade balance to worsen as imports increaseD) all of the aboveE) none of the above40. We will generally observe that the more open an economyA) the larger the effect of fiscal policy on output and the larger the effect of fiscal policy on thetrade position.B) the larger the effect of fiscal policy on output and the smaller the effect of fiscal policy on thetrade position.C) the smaller the effect of fiscal policy on output and the larger the effect of fiscal policy on thetrade position.D) the smaller the effect of fiscal policy on output and the smaller the effect of fiscal policy onthe trade position.41. Suppose policy makers want to increase Y and increase NX. Which of the following policieswould most likely achieve this?A) an increase in government spendingB) a real depreciationC) a reduction in taxes and an increase in the real exchange rateD) an increase in the real exchange rate42. Suppose policy makers want to increase NX and keep Y constant. Which of the followingpolicies would most likely achieve this?A) a reduction in government spendingB) a real depreciationC) a reduction in government spending and a reduction in the real exchange rateD) a reduction in the real exchange rate and a tax cut

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37. Assume the Marshall-Lerner condition holds. Which of the following will cause an increase in net exports? A) an increase in government spending B) an increase in investment C) a reduction in foreign output D) a reduction in the real exchange rate E) all of the above

37. Assume the Marshall-Lerner condition holds. Which of the following will cause an increase in net exports? A) an increase in government spending B) an increase in investment C) a reduction in foreign output D) a reduction in the real exchange rate E) all of the above

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter14: A Macroeconomic Theory Of The Open Economy

Section: Chapter Questions

Problem 7PA

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Question

37. Assume the Marshall-Lerner condition holds. Which of the following will cause an increase
in net exports?
A) an increase in government spending
B) an increase in investment
C) a reduction in foreign output
D) a reduction in the real exchange rate
E) all of the above
38. In an open economy, an increase in government spending will cause
A) a reduction in domestic output.
B) a reduction in imports.
C) a reduction in net exports.
D) all of the above
E) none of the above
39. Suppose that the rest of the world experiences an economic boom causing an increase in
foreign output (Y*). This increase in Y* will not cause which of the following to occur?
A) the domestic country's output to increase
B) the domestic country's consumption to increase
C) the domestic country's output to increase and its trade balance to worsen as imports increase
D) all of the above
E) none of the above
40. We will generally observe that the more open an economy
A) the larger the effect of fiscal policy on output and the larger the effect of fiscal policy on the
trade position.
B) the larger the effect of fiscal policy on output and the smaller the effect of fiscal policy on the
trade position.
C) the smaller the effect of fiscal policy on output and the larger the effect of fiscal policy on the
trade position.
D) the smaller the effect of fiscal policy on output and the smaller the effect of fiscal policy on
the trade position.
41. Suppose policy makers want to increase Y and increase NX. Which of the following policies
would most likely achieve this?
A) an increase in government spending
B) a real depreciation
C) a reduction in taxes and an increase in the real exchange rate
D) an increase in the real exchange rate
42. Suppose policy makers want to increase NX and keep Y constant. Which of the following
policies would most likely achieve this?
A) a reduction in government spending
B) a real depreciation
C) a reduction in government spending and a reduction in the real exchange rate
D) a reduction in the real exchange rate and a tax cut

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