2025 Fall 1 BADM 7200E (Online) /Module 5: The Large Open Economy, Inflation, and
Unemployment Exam Questions and Answers
Module 5 Homework Assignment
Status Finished
Started Thursday, September 25, 2025, 6:06 PM
Completed Friday, September 26, 2025, 10:03 PM
Duration 1 day 3 hours
Grade 88.00 out of 100.00
Question 1
Correct 4.00 points out of 4.00
In a large open economy with a floating exchange rate, such as in the United States, in the short run a monetary
contraction:
Select one:
raises the interest rate, lowers investment and income, but does not affect the exchange rate.
raises the exchange rate, lowers net exports and income, but does not affect the interest rate.
initially raises the exchange rate, causing arbitrageurs to sell dollars and return the money supply to its initial level.
raises the interest rate and lowers investment and income, but also raises the exchange rate and lowers net exports.
The correct answer is: raises the interest rate and lowers investment and income, but also raises the exchange rate and
lowers net exports.
Question 2
Correct 4.00 points out of 4.00
In a short-run model of a large open economy with a floating exchange rate, net capital outflow as the domestic
interest rate increases and is just equal to the in net exports.
Select one:
decreases; increase
decreases; decrease
increases; increase
increases; decrease
The correct answer is: decreases; decrease
, Question 3
Correct 4.00 points out of 4.00
In a short-run model of a large open economy, after net capital outflow is substituted for net exports in the IS
curve:
Select one:
the larger the absolute value of the responsiveness of net capital outflow with respect to the interest rate, the flatter the IS curve.
the larger the absolute value of the responsiveness of net capital outflow with respect to the interest rate, the steeper the IS curve.
if both domestic investment and net capital outflow are very responsive to the interest rate, they will tend to cancel each other out.
the slope of the IS curve depends only on the interest responsiveness of investment and the marginal propensity to consume.
The correct answer is: the larger the absolute value of the responsiveness of net capital outflow with respect to the
interest rate, the flatter the IS curve.
Question 4
Correct 4.00 points out of 4.00
In a short-run model of a large open economy with a floating exchange rate:
Select one:
net exports determine the exchange rate, which in turn determines net capital outflow.
net exports determine net capital outflow, which determines the interest rate.
the interest rate is determined in the IS–LM framework, and this value determines net capital outflow; then the exchange rate adjusts to make
net exports equal net capital outflow.
the interest rate determines investment and net capital outflow, which are equal within the IS–LM framework; the exchange rate then
determines net exports.
The correct answer is: the interest rate is determined in the IS–LM framework, and this value determines net capital
outflow; then the exchange rate adjusts to make net exports equal net capital outflow.
Unemployment Exam Questions and Answers
Module 5 Homework Assignment
Status Finished
Started Thursday, September 25, 2025, 6:06 PM
Completed Friday, September 26, 2025, 10:03 PM
Duration 1 day 3 hours
Grade 88.00 out of 100.00
Question 1
Correct 4.00 points out of 4.00
In a large open economy with a floating exchange rate, such as in the United States, in the short run a monetary
contraction:
Select one:
raises the interest rate, lowers investment and income, but does not affect the exchange rate.
raises the exchange rate, lowers net exports and income, but does not affect the interest rate.
initially raises the exchange rate, causing arbitrageurs to sell dollars and return the money supply to its initial level.
raises the interest rate and lowers investment and income, but also raises the exchange rate and lowers net exports.
The correct answer is: raises the interest rate and lowers investment and income, but also raises the exchange rate and
lowers net exports.
Question 2
Correct 4.00 points out of 4.00
In a short-run model of a large open economy with a floating exchange rate, net capital outflow as the domestic
interest rate increases and is just equal to the in net exports.
Select one:
decreases; increase
decreases; decrease
increases; increase
increases; decrease
The correct answer is: decreases; decrease
, Question 3
Correct 4.00 points out of 4.00
In a short-run model of a large open economy, after net capital outflow is substituted for net exports in the IS
curve:
Select one:
the larger the absolute value of the responsiveness of net capital outflow with respect to the interest rate, the flatter the IS curve.
the larger the absolute value of the responsiveness of net capital outflow with respect to the interest rate, the steeper the IS curve.
if both domestic investment and net capital outflow are very responsive to the interest rate, they will tend to cancel each other out.
the slope of the IS curve depends only on the interest responsiveness of investment and the marginal propensity to consume.
The correct answer is: the larger the absolute value of the responsiveness of net capital outflow with respect to the
interest rate, the flatter the IS curve.
Question 4
Correct 4.00 points out of 4.00
In a short-run model of a large open economy with a floating exchange rate:
Select one:
net exports determine the exchange rate, which in turn determines net capital outflow.
net exports determine net capital outflow, which determines the interest rate.
the interest rate is determined in the IS–LM framework, and this value determines net capital outflow; then the exchange rate adjusts to make
net exports equal net capital outflow.
the interest rate determines investment and net capital outflow, which are equal within the IS–LM framework; the exchange rate then
determines net exports.
The correct answer is: the interest rate is determined in the IS–LM framework, and this value determines net capital
outflow; then the exchange rate adjusts to make net exports equal net capital outflow.
