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Macroeconomics, 6e (Blanchard/Johnson)
Chapter 19: The Goods Market in an Open Economy
19.1 Multiple Choice Questions
1) Which of the following represents the demand for domestic goods?
A) C + I + G
B) C + I + G + X
C) C + I + G - εIM
D) C + I + G + X + εIM
E) C + I + G + X — IM/ε
Answer: E
Diff: 1
2) Which of the following represents the domestic demand for goods?
A) C + I + G
B) C + I + G + X
C) C + I + G — IM/ε
D) C + I + G + X - εM/ε
E) C + I + G + X + εIM
Answer: A
Diff: 1
3) The expression, IM, represents the value of imports in terms of
A) foreign currency.
B) domestic currency.
C) foreign goods.
D) domestic goods.
E) exports.
Answer: C
Diff: 2
4) The quantity of imports will increase when there is
A) a reduction in the real exchange rate.
B) an increase in domestic output.
C) an increase in foreign output.
D) all of the above
E) none of the above
Answer: B
Diff: 1
5) Exports will decrease when there is
A) an increase in the real exchange rate.
B) an increase in domestic output.
C) an increase in foreign output.
D) all of the above
E) none of the above
Answer: A
Diff: 2
6) Which of the following occurs when the goods market is in equilibrium?
A) domestic output (Y) equals the demand for domestic goods.
B) Y equals the domestic demand for goods.
C) Y equals the domestic demand for domestic goods.
D) net exports equals 0.
E) demand for domestic goods equals the domestic demand for goods.
Answer: A
Diff: 2
7) 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
Answer: D
Diff: 2
8) In an open economy, which of the following will cause an increase in the size of the multiplier?
A) a reduction in the marginal propensity to import.
B) a reduction foreign output.
C) an increase in the marginal propensity to save.
D) all of the above
E) none of the above
Answer: A
Diff: 2
9) Suppose there is a reduction in fore
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