Question 1

If net exports are positive, then

Accepted Answer

A)   exports are greater than imports.
B)   net capital outflow is negative.
C)   Both of the above are correct.
D)   Neither of the above is correct.E) B) and C)
F) B) and D)

Question 2

Depositors Move Funds out of Greek Banks.
In 2011 Greek citizens were concerned about the size of government debt. Fearful that the government might be unable to fulfill its promise to insure depositors in Greek banks against losses created by bank failures, depositors moved funds out of Greek banks.
-Refer to Depositors Move Funds Out of Greek Banks. Which curve in the domestic loanable funds market shifted and which direction did it shift?

Accepted Answer

The demand...

Question 3

If the U.S. imposes a quota on cotton, then

Accepted Answer

A)   both exports and imports of other goods will rise.
B)   exports of other goods will rise and imports of other goods will fall.
C)   exports of other goods will fall and imports of other goods will rise.
D)   both imports and exports of other goods will fall.E) C) and D)
F) A) and B) C

Question 4

When a country suffers from capital flight, the exchange rate

Accepted Answer

A)   depreciates, because demand in the market for foreign-currency exchange shifts left.
B)   depreciates, because supply in the market for foreign-currency exchange shifts right.
C)   appreciates, because demand in the market for foreign-currency exchange shifts right.
D)   appreciates, because supply in the market for foreign-currency exchange shifts left.E) B) and C)
F) A) and C) B

Question 5

When fear of default on bonds issued by U.S. corporations decline, then

Accepted Answer

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

Question 6

If policymakers impose import restrictions on clothing, the U.S. trade deficit will shrink.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following would cause the real exchange rate of the U.S. dollar to depreciate?

Accepted Answer

A)   the U.S. government budget deficit decreases
B)   capital flight from foreign countries
C)   the U.S. imposes import quotas
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 8

In the open-economy macroeconomic model, if the supply of loanable funds increases, then the interest rate

Accepted Answer

A)   and the real exchange rate increase.
B)   and the real exchange rate decrease.
C)   increases and the real exchange rate decreases.
D)   decreases and the real exchange rate increases.E) A) and D)
F) B) and D)

Question 9

A country has private saving of $100 billion, public saving of -$30 billion, domestic investment of $50 billion, and net capital outflow of $20 billion. What is its supply of loanable funds?

Accepted Answer

A)   $50 billion
B)   $70 billion
C)   $90 billion
D)   $120 billionE) B) and D)
F) B) and C)

Question 10

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) C) and D)
F) B) and C)

Question 11

Budget Reform
Due to concerns about a rising level of debt relative to GDP, Congress and the President cut expenditures and raise taxes.
-Refer to Budget Reform. In the market for loanable funds which curves does this policy change shift? Which direction does it shift?

Accepted Answer

Since the budget def...

Question 12

Because depreciation of the real exchange rate of the dollar increases U.S. net exports, the demand curve for dollars in the foreign-currency exchange market is downward sloping.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is included in the supply of U.S. dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

Accepted Answer

A)   a U.S. bank loans dollars to Tom to buy a U.S. made motorcycle
B)   a U.S. tire maker wants to build a new factory in China
C)   a U.S. company wants to import goods to sell in its retail stores
D)   All of the above are correct.E) B) and D)
F) A) and D)

Question 14

Other things the same, which of the following would a rise in the real interest rate raise: desired investment spending, desired national saving, desired net capital outflow?

Accepted Answer

desired na...

Question 15

Suppose that the U.S. imposes an import quota on lumber. The quota makes the real exchange rate of the U.S. dollar

Accepted Answer

A)   appreciate but does not change the real interest rate in the United States.
B)   appreciate and the real interest rate in the United States increase.
C)   depreciate and the real interest rate in the United States decrease.
D)   depreciate but does not change the real interest rate in the United States.E) None of the above
F) C) and D)

Question 16

At the original exchange rate an import quota

Accepted Answer

A)   creates a surplus in the market for foreign-currency exchange, so the exchange rate rises.
B)   creates a surplus in the market for foreign-currency exchange, so the exchange rate falls.
C)   creates a shortage in the market for foreign-currency exchange, so the exchange rate rises.
D)   creates a shortage in the market for foreign-currency exchange, so the exchange rate falls.E) C) and D)
F) A) and D)

Question 17

If there is a surplus in the U.S. loanable funds market, then the interest rate

Accepted Answer

A)   rises, which increases quantity of loanable funds demanded.
B)   rises, which decreases the quantity of loanable funds demanded.
C)   falls, which increases the quantity of loanable funds demanded.
D)   falls, which decreases the quantity of loanable funds demanded.E) C) and D)
F) A) and D)

Question 18

Other things the same, a decrease in the interest rate

Accepted Answer

A)   reduces domestic investment which reduces the quantity of loanable funds supplied.
B)   reduces domestic investment which reduces the quantity of loan funds demanded.
C)   raises domestic investment which raises the quantity of loanable funds supplied.
D)   raises domestic investment which raises the quantity of loanable funds demanded.E) None of the above
F) A) and B)

Question 19

Imposing an import quota causes the domestic real exchange rate to

Accepted Answer

A)   appreciate, which increases foreign demand for domestic goods.
B)   appreciate, which decreases foreign demand for domestic goods.
C)   depreciate, which increases foreign demand for domestic goods.
D)   depreciate, which decreases foreign demand for domestic goods.E) A) and D)
F) A) and B)

Question 20

Shoe Quota
Concerns raised about the declining U.S. shoe industry and unfair labor practices in foreign shoe factories lead the Congress and President to impose a quota on shoe imports.
-Refer to Shoe Quota. What is a quota? What is a tariff?

Accepted Answer

A quota limits the quantity of a good produced abroad that can be sold domestically.
A tariff is a tax on imported goods.

Exam 14: A Macroeconomic Theory of the Open Economy

If net exports are positive, then

Correct Answer
verified

Correct Answer
verified
The demand...
View Answer

If the U.S. imposes a quota on cotton, then

Correct Answer
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C

When a country suffers from capital flight, the exchange rate

Correct Answer
verified
B

When fear of default on bonds issued by U.S. corporations decline, then

Correct Answer
verified

If policymakers impose import restrictions on clothing, the U.S. trade deficit will shrink.

Correct Answer
verified

Which of the following would cause the real exchange rate of the U.S. dollar to depreciate?

Correct Answer
verified

In the open-economy macroeconomic model, if the supply of loanable funds increases, then the interest rate

Correct Answer
verified

A country has private saving of $100 billion, public saving of -$30 billion, domestic investment of $50 billion, and net capital outflow of $20 billion. What is its supply of loanable funds?

Correct Answer
verified

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

Correct Answer
verified

Budget Reform Due to concerns about a rising level of debt relative to GDP, Congress and the President cut expenditures and raise taxes. -Refer to Budget Reform. In the market for loanable funds which curves does this policy change shift? Which direction does it shift?

Correct Answer
verified
Since the budget def...
View Answer

Because depreciation of the real exchange rate of the dollar increases U.S. net exports, the demand curve for dollars in the foreign-currency exchange market is downward sloping.

Correct Answer
verified

Which of the following is included in the supply of U.S. dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

Correct Answer
verified

Other things the same, which of the following would a rise in the real interest rate raise: desired investment spending, desired national saving, desired net capital outflow?

Correct Answer
verified
desired na...
View Answer

Suppose that the U.S. imposes an import quota on lumber. The quota makes the real exchange rate of the U.S. dollar

Correct Answer
verified

At the original exchange rate an import quota

Correct Answer
verified

If there is a surplus in the U.S. loanable funds market, then the interest rate

Correct Answer
verified

Other things the same, a decrease in the interest rate

Correct Answer
verified

Imposing an import quota causes the domestic real exchange rate to

Correct Answer
verified

Shoe Quota Concerns raised about the declining U.S. shoe industry and unfair labor practices in foreign shoe factories lead the Congress and President to impose a quota on shoe imports. -Refer to Shoe Quota. What is a quota? What is a tariff?

Correct Answer
verified
A quota limits the quantity of a good produced abroad that can be sold domestically. A tariff is a tax on imported goods.

Exam 14: A Macroeconomic Theory of the Open Economy

If net exports are positive, then

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe demand...View AnswerShow Answer

If the U.S. imposes a quota on cotton, then

Correct AnswerverifiedC

When a country suffers from capital flight, the exchange rate

Correct AnswerverifiedB

When fear of default on bonds issued by U.S. corporations decline, then

Correct AnswerverifiedShow Answer

If policymakers impose import restrictions on clothing, the U.S. trade deficit will shrink.

Correct AnswerverifiedShow Answer

Which of the following would cause the real exchange rate of the U.S. dollar to depreciate?

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, if the supply of loanable funds increases, then the interest rate

Correct AnswerverifiedShow Answer

A country has private saving of $100 billion, public saving of -$30 billion, domestic investment of $50 billion, and net capital outflow of $20 billion. What is its supply of loanable funds?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Budget Reform Due to concerns about a rising level of debt relative to GDP, Congress and the President cut expenditures and raise taxes. -Refer to Budget Reform. In the market for loanable funds which curves does this policy change shift? Which direction does it shift?

Correct AnswerverifiedSince the budget def...View AnswerShow Answer

Because depreciation of the real exchange rate of the dollar increases U.S. net exports, the demand curve for dollars in the foreign-currency exchange market is downward sloping.

Correct AnswerverifiedShow Answer

Which of the following is included in the supply of U.S. dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

Correct AnswerverifiedShow Answer

Other things the same, which of the following would a rise in the real interest rate raise: desired investment spending, desired national saving, desired net capital outflow?

Correct Answerverifieddesired na...View AnswerShow Answer

Suppose that the U.S. imposes an import quota on lumber. The quota makes the real exchange rate of the U.S. dollar

Correct AnswerverifiedShow Answer

At the original exchange rate an import quota

Correct AnswerverifiedShow Answer

If there is a surplus in the U.S. loanable funds market, then the interest rate

Correct AnswerverifiedShow Answer

Other things the same, a decrease in the interest rate

Correct AnswerverifiedShow Answer

Imposing an import quota causes the domestic real exchange rate to

Correct AnswerverifiedShow Answer

Shoe Quota Concerns raised about the declining U.S. shoe industry and unfair labor practices in foreign shoe factories lead the Congress and President to impose a quota on shoe imports. -Refer to Shoe Quota. What is a quota? What is a tariff?

Correct AnswerverifiedA quota limits the quantity of a good produced abroad that can be sold domestically. A tariff is a tax on imported goods.

Correct Answer
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Correct Answer
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The demand...
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C

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B

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Since the budget def...
View Answer

Correct Answer
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Correct Answer
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desired na...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
verified
A quota limits the quantity of a good produced abroad that can be sold domestically. A tariff is a tax on imported goods.