1. The government of country X is committed to fighting corruption and providing tax holidays for the investor to improve the business climate and reduce asset risk. These policies will …. increase both country's net exports and net capital outflows increase country's net exports but decrease country's net capital outflows decrease both net exports and net capital outflows decrease country's net exports but increase country's net capital outflows 2. Suppose that the Indonesia government went from a budget deficit to a budget surplus, then …. the interest rate and the real exchange rate would increase, while net capital outflow would decrease the interest rate and the real exchange rate would decrease, while net capital outflow would increase the interest rate would increase, while both the real exchange rate and net capital outflow would decrease the interest rate would decrease, while both the real exchange rate and net capital outflow would increase 3. When the real exchange rate for the Indonesian Rupiah depreciates, Indonesian goods will become …. more expensive relative to foreign goods, which makes exports fall while imports rise more expensive relative to foreign goods, which makes exports rise while imports fall less expensive relative to foreign goods, which makes exports fall while imports rise less expensive relative to foreign goods, which makes exports rise while imports fall 4. Which statement about the short-run economic condition is correct? Only real variable matters in the short run. Economic shock affects aggregate demand, but not aggregate supply. Change in money supply may affect real output. All the answers above are correct.

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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1. The government of country X is committed to fighting corruption and providing tax holidays for the investor to improve the business climate and reduce asset risk. These policies will ….

increase both country's net exports and net capital outflows
increase country's net exports but decrease country's net capital outflows
decrease both net exports and net capital outflows
decrease country's net exports but increase country's net capital outflows

2. Suppose that the Indonesia government went from a budget deficit to a budget surplus, then ….

the interest rate and the real exchange rate would increase, while net capital outflow would decrease
the interest rate and the real exchange rate would decrease, while net capital outflow would increase
the interest rate would increase, while both the real exchange rate and net capital outflow would decrease
the interest rate would decrease, while both the real exchange rate and net capital outflow would increase

3. When the real exchange rate for the Indonesian Rupiah depreciates, Indonesian goods will become ….

more expensive relative to foreign goods, which makes exports fall while imports rise
more expensive relative to foreign goods, which makes exports rise while imports fall
less expensive relative to foreign goods, which makes exports fall while imports rise
less expensive relative to foreign goods, which makes exports rise while imports fall

4. Which statement about the short-run economic condition is correct?

Only real variable matters in the short run.
Economic shock affects aggregate demand, but not aggregate supply.
Change in money supply may affect real output.
All the answers above are correct.

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