Question 1

How could the exchange rate influence the competitiveness of a country's exports?

a. If a country experiences a depreciation of its currency in terms of another currency (foreign), the price of exports abroad will be higher in foreign currency

b. If a country experiences an appreciation of its domestic currency in terms of another currency (foreign), the price of exports abroad will be the same in foreign currency

c. If a country experiences an appreciation of its domestic currency in terms of another currency (foreign), the price of exports abroad will be lower in foreign currency

d. If a country experiences a depreciation of its domestic currency in terms of another currency (foreign), the price of exports abroad will be lower in foreign currency

Question 2

Besides exchange rate movements (depreciation and appreciation), what else does impact exports and imports?

a. Higher domestic and international income (Y and Y*) lead to higher domestic imports and higher domestic exports

b. Lower domestic and international income (Y and Y*) lead to lower domestic imports and lower domestic exports

c. Lower domestic income (Y) leads to lower domestic exports and higher domestic imports

d. Lower international income (Y*) leads to higher domestic exports

Question 3

How does Keynes multiplier work?

a. If government expenditure increases by US$10 billion, the final impact on domestic GDP tends to be lower as income will decrease, leading also to lower household consumption, hence multiplying the final impact of the original US$10bn

b. If government expenditure increases by US$10 billion, the final impact on domestic GDP will be the same as government expenditure is part of the GDP

c. If government expenditure increases by US$10 billion, the final impact on domestic GDP tends to be higher as income will increase, leading also to an increase in household consumption, hence multiplying the final impact of the original US$10bn

d. If government expenditure increases by US$10 billion, the final impact on domestic GDP tends to be higher as income will decrease, leading also to a decrease in household consumption, hence decreasing the final impact of the original US$10bn