Question 1

The quantity of U.S. bonds foreigners want to buy is taken into account

Accepted Answer

A)   in the U.S. supply of loanable funds and the supply of dollars in the market for foreign-currency exchange.
B)   in the U.S. supply of loanable funds and the demand for dollars in the market for foreign-currency exchange.
C)   in the U.S. demand for loanable funds and the supply of dollars in the market for foreign-currency exchange.
D)   in the U.S. demand for loanable funds and the demand for dollars in the market for foreign-currency exchange.E) A) and B)
F) A) and C)

Question 2

Which of the following is most likely to result if foreigners decide to withdraw the funds that they have loaned to the United States?

Accepted Answer

A)   U.S. net exports will rise
B)   U.S. net capital outflow will fall.
C)   U.S. domestic investment will rise
D)   the dollar will appreciateE) C) and D)
F) All of the above

Question 3

Which of the following contains a list only of things that decrease when the budget deficit of the U.S. increases?

Accepted Answer

A)   U.S. net exports, U.S. domestic investment, U.S. net capital outflow
B)   U.S. supply of loanable funds, U.S. interest rates, U.S. domestic investment
C)   U.S. imports, U.S. interest rates, the real exchange rate of the dollar
D)   None of the above is correct.E) None of the above
F) B) and D)

Question 4

When a country experiences capital flight, which of the following rise?

Accepted Answer

A)   its real interest rate and its real exchange rate
B)   its real interest rate but not its real exchange rate
C)   its real exchange rate but not its real interest rate
D)   neither its real interest rate nor its foreign exchange rateE) B) and C)
F) All of the above

Question 5

If at a given real interest rate desired national saving were $140 billion, domestic investment were $90 billion, and net capital outflow were $40 billion, then at that real interest rate in the loanable funds market there would be a

Accepted Answer

A)   surplus; the real interest rate would rise.
B)   surplus; the real interest rate would fall.
C)   shortage; the real interest rate would rise.
D)   shortage; the real interest rate would fall.E) C) and D)
F) B) and D)

Question 6

Which of the following would make both the equilibrium real interest rate and the equilibrium quantity of loanable funds decrease?

Accepted Answer

A)   The demand for loanable funds shifts right.
B)   The demand for loanable funds shifts left.
C)   The supply of loanable funds shifts right.
D)   The supply of loanable funds shifts left.E) None of the above
F) All of the above

Question 7

A trade policy is a government policy

Accepted Answer

A)   directed toward the goal of improving the tradeoff between equity and efficiency.
B)   that directly influences the quantity of goods and services that a country imports or exports.
C)   intended to exploit the tradeoff between inflation and unemployment by altering the budget deficit.
D)   concerning employment laws.E) A) and B)
F) All of the above

Question 8

In 1995 House Speaker Newt Gingrich threatened to send the United States into default on its debt. During the day of this announcement, U.S. interest rates rose and the real exchange rate of the U.S. dollar depreciated. Which of these changes is consistent with the results of the open-economy macroeconomic model?

Accepted Answer

A)   the increase in U.S. interest rates
B)   the depreciation of the real exchange rate of the U.S. dollar
C)   Both a and b are consistent.
D)   Neither a nor b are consistent.E) A) and D)
F) A) and C)

Question 9

The slope of the supply of loanable funds is based on an increase in

Accepted Answer

A)   only national saving when the interest rate rises.
B)   both national saving and net capital outflow when the interest rate rises.
C)   only national saving when the interest rate falls.
D)   both national saving and net capital outflow when the interest rate falls.E) C) and D)
F) A) and C)

Question 10

If a country raises its budget deficit, then its

Accepted Answer

A)   net capital outflow and net exports rise.
B)   net capital outflow rises and net exports fall.
C)   net capital outflow falls and net exports rise.
D)   net capital outflow and net exports fall.E) A) and D)
F) A) and C)

Question 11

If U.S. citizens decide to purchase more foreign assets at each interest rate, the U.S. real interest rate

Accepted Answer

A)   increases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases.
B)   increases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases.
C)   decreases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow decreases.
D)   decreases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow increases.E) A) and B)
F) None of the above

Question 12

Other things the same, a lower real interest rate decreases the quantity of

Accepted Answer

A)   loanable funds demanded.
B)   loanable funds supplied.
C)   domestic investment.
D)   net capital outflow.E) A) and C)
F) All of the above

Question 13

If C+I+G>Y, then net exports and net capital outflow are both less than zero.

Accepted Answer

A) True 
 B)False

Question 14

In 2002 it looked like the Argentinean government might default on its debt (which eventually it did) . The open-economy macroeconomic model predicts that this should have

Accepted Answer

A)   raised Argentinean interest rates and caused the Argentinean currency to appreciate.
B)   raised Argentinean interest rates and caused the Argentinean currency to depreciate.
C)   lowered Argentinean interest rates and caused the Argentinean currency to appreciate.
D)   lowered Argentinean interest rates and caused the Argentinean currency to depreciate.E) A) and C)
F) C) and D)

Question 15

In the open-economy macroeconomic model, at the equilibrium real interest rate, the amount that people (including government) want to save equals desired quantities of domestic investment and net capital outflow.

Accepted Answer

A) True 
 B)False

Question 16

In the open-economy macroeconomic model, if a country's interest rate falls, then its

Accepted Answer

A)   net capital outflow and its net exports rise.
B)   net capital outflow rises and its net exports fall.
C)   net capital outflow falls and its net exports rise.
D)   net capital outflow and its net exports fall.E) A) and C)
F) All of the above

Question 17

Figure 14-2
 
-Refer to Figure 14-2. At what real exchange rate is the quantity of dollars demanded equal to 100?

Accepted Answer

A)   1.4
B)   1
C)   .6
D)   None of the above are correct.E) B) and C)
F) C) and D)

Question 18

When the real exchange rate for the dollar depreciates, U.S. goods become

Accepted Answer

A)   less expensive relative to foreign goods, which makes exports rise and imports fall.
B)   less expensive relative to foreign goods, which makes exports fall and imports rise.
C)   more expensive relative to foreign goods, which makes exports rise and imports fall.
D)   more expensive relative to foreign goods, which makes exports fall and imports rise.E) B) and D)
F) B) and C)

Question 19

Suppose the U.S. imposes an import quota on steel. U.S. exports

Accepted Answer

A)   increase, the real exchange rate of the U.S. dollar appreciates, and U.S. net capital outflow increases.
B)   increase, the real exchange rate of the U.S. dollar depreciates, and U.S. net capital outflow is unchanged.
C)   decrease, the real exchange rate of the U.S. dollar appreciates, and U.S. net capital outflow is unchanged.
D)   decrease, the real exchange rate of the U.S. dollar depreciates, and U.S. net capital outflow decreases.E) B) and D)
F) None of the above

Question 20

If interest rates rose more in the U.S. than in Canada, then other things the same

Accepted Answer

A)   U.S. citizens would buy more Canadian bonds and Canadian citizens would buy more U.S. bonds.
B)   U.S. citizens would buy more Canadian bonds and Canadian citizens would buy fewer U.S. bonds.
C)   U.S. citizens would buy fewer Canadian bonds and Canadian citizens would buy more U.S. bonds.
D)   U.S. citizens would buy fewer Canadian bonds and Canadian citizens would buy fewer U.S. bonds.E) A) and C)
F) B) and C)

Exam 14: A Macroeconomic Theory of the Open Economy

Figure 14-2 -Refer to Figure 14-2. At what real exchange rate is the quantity of dollars demanded equal to 100?

Correct Answer
verified

If C+I+G>Y, then net exports and net capital outflow are both less than zero.

Correct Answer
verified

Suppose the U.S. imposes an import quota on steel. U.S. exports

Correct Answer
verified

If interest rates rose more in the U.S. than in Canada, then other things the same

Correct Answer
verified

The quantity of U.S. bonds foreigners want to buy is taken into account

Correct Answer
verified

Which of the following is most likely to result if foreigners decide to withdraw the funds that they have loaned to the United States?

Correct Answer
verified

If U.S. citizens decide to purchase more foreign assets at each interest rate, the U.S. real interest rate

Correct Answer
verified

The slope of the supply of loanable funds is based on an increase in

Correct Answer
verified

Which of the following would make both the equilibrium real interest rate and the equilibrium quantity of loanable funds decrease?

Correct Answer
verified

In the open-economy macroeconomic model, at the equilibrium real interest rate, the amount that people (including government) want to save equals desired quantities of domestic investment and net capital outflow.

Correct Answer
verified

If at a given real interest rate desired national saving were $140 billion, domestic investment were $90 billion, and net capital outflow were $40 billion, then at that real interest rate in the loanable funds market there would be a

Correct Answer
verified

A trade policy is a government policy

Correct Answer
verified

Other things the same, a lower real interest rate decreases the quantity of

Correct Answer
verified

Which of the following contains a list only of things that decrease when the budget deficit of the U.S. increases?

Correct Answer
verified

Correct Answer
verified

In the open-economy macroeconomic model, if a country's interest rate falls, then its

Correct Answer
verified

When the real exchange rate for the dollar depreciates, U.S. goods become

Correct Answer
verified

If a country raises its budget deficit, then its

Correct Answer
verified

In 2002 it looked like the Argentinean government might default on its debt (which eventually it did) . The open-economy macroeconomic model predicts that this should have

Correct Answer
verified

When a country experiences capital flight, which of the following rise?

Correct Answer
verified

Exam 14: A Macroeconomic Theory of the Open Economy

Figure 14-2 -Refer to Figure 14-2. At what real exchange rate is the quantity of dollars demanded equal to 100?

Correct AnswerverifiedShow Answer

If C+I+G>Y, then net exports and net capital outflow are both less than zero.

Correct AnswerverifiedShow Answer

Suppose the U.S. imposes an import quota on steel. U.S. exports

Correct AnswerverifiedShow Answer

If interest rates rose more in the U.S. than in Canada, then other things the same

Correct AnswerverifiedShow Answer

The quantity of U.S. bonds foreigners want to buy is taken into account

Correct AnswerverifiedShow Answer

Which of the following is most likely to result if foreigners decide to withdraw the funds that they have loaned to the United States?

Correct AnswerverifiedShow Answer

If U.S. citizens decide to purchase more foreign assets at each interest rate, the U.S. real interest rate

Correct AnswerverifiedShow Answer

The slope of the supply of loanable funds is based on an increase in

Correct AnswerverifiedShow Answer

Which of the following would make both the equilibrium real interest rate and the equilibrium quantity of loanable funds decrease?

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, at the equilibrium real interest rate, the amount that people (including government) want to save equals desired quantities of domestic investment and net capital outflow.

Correct AnswerverifiedShow Answer

If at a given real interest rate desired national saving were $140 billion, domestic investment were $90 billion, and net capital outflow were $40 billion, then at that real interest rate in the loanable funds market there would be a

Correct AnswerverifiedShow Answer

A trade policy is a government policy

Correct AnswerverifiedShow Answer

Other things the same, a lower real interest rate decreases the quantity of

Correct AnswerverifiedShow Answer

Which of the following contains a list only of things that decrease when the budget deficit of the U.S. increases?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, if a country's interest rate falls, then its

Correct AnswerverifiedShow Answer

When the real exchange rate for the dollar depreciates, U.S. goods become

Correct AnswerverifiedShow Answer

If a country raises its budget deficit, then its

Correct AnswerverifiedShow Answer

In 2002 it looked like the Argentinean government might default on its debt (which eventually it did) . The open-economy macroeconomic model predicts that this should have

Correct AnswerverifiedShow Answer

When a country experiences capital flight, which of the following rise?

Correct AnswerverifiedShow Answer

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