4. (a) Analyse how output and net exports are determined in the open economy. In doing so, in addition to presenting the relevant graphs or equations, explain what the nominal and real exchange rates are. (b) In the context of the model in (a) above, analyse the effects of (i) a rise in world income, and (ii) a real appreciation of the domestic currency.

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Q2-16 In a system of fixed exchange rates, the automatic balance-of-payments adjustment process for a country with a balance of payments deficit would theoretically involve (among other things) ________ in the interest rate and ________ in national income. Select one: a. a decrease / a decrease b. a decrease / an increase c. an increase / an increase d. an increase / a decrease

Which of the following will enter as a credit in the U.S. balance-of-payments financial account? (a) The sale of an American baseball team to a Japanese industrialist (b) The sale of Japanese electronics to an American (c) The purchase of a Japanese automobile by a U.S. consumer (d) The purchase of a Japanese electronics plant by an American industrialist