Question 1

Other things the same, if the real interest rate in a country falls, domestic residents will desire to purchase

Accepted Answer

A)   more capital goods and more foreign bonds.
B)   more capital goods but fewer foreign bonds.
C)   more foreign bonds but fewer capital goods.
D)   fewer capital goods and fewer foreign bonds.E) None of the above
F) All of the above

Question 2

If a country's budget deficit decreases, then the exchange rate

Accepted Answer

A)   rises, which raises net exports.
B)   rises, which reduces net exports.
C)   falls, which raises net exports.
D)   falls, which reduces net exports.E) A) and D)
F) A) and B)

Question 3

Which of the following is consistent with moving from a shortage to equilibrium in the market for foreign currency exchange?

Accepted Answer

A)   the exchange rate falls so foreign residents want to buy more U.S. goods and services
B)   the exchange rate falls so foreign residents want to buy fewer U.S. goods and services
C)   the exchange rate rises so foreign residents want to buy more U.S. goods and services
D)   the exchange rate rises so foreign residents want to buy fewer U.S. goods and servicesE) None of the above
F) B) and D)

Question 4

If the budget deficit increases, then

Accepted Answer

A)   U.S. residents will want to purchase more foreign assets and foreign residents will want to purchase more U.S. assets
B)   U.S. residents will want to purchase more foreign assets and foreign residents will want to purchase fewer U.S. assets
C)   U.S. residents will want to purchase fewer foreign assets and foreign residents will want to purchase more U.S. assets
D)   U.S. residents will want to purchase fewer foreign assets and foreign residents will want to purchase fewer U.S. assetsE) A) and C)
F) None of the above

Question 5

Suppose a presidential candidate promises to increase the government budget surplus and claims that doing so will stop U.S. citizens from investing in foreign companies and increase the value of the dollar. Evaluate this candidate's promise.

Accepted Answer

An increase in the government budget sur...

Question 6

In the open-economy macroeconomic model, other things the same, which of the following both make the exchange rate fall?

Accepted Answer

A)   U.S. investment demand falls and foreign demand for U.S. goods falls
B)   U.S. investment demand falls and foreign demand for U.S. goods rises
C)   U.S. investment demand rises and foreign demand for U.S. goods falls
D)   U.S. investment demand rises and foreign demand for U.S. goods risesE) A) and B)
F) A) and C)

Question 7

If the budget deficit increases, then

Accepted Answer

A)   an increase in the interest rate increases net capital outflow.
B)   an increase in the interest rate decreases net capital outflow.
C)   a decrease in the interest rate increases net capital outflow.
D)   a decrease in the interest rate decreases net capital outflow.E) B) and C)
F) None of the above

Question 8

Which of the following is included in the demand for dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

Accepted Answer

A)   a company in Canada wants to buy oranges from the U.S
B)   a Japanese banks want to buy bonds from the U.S. government
C)   a U.S. citizen wants to buy stock a German company is selling
D)   None of the above is correct.E) A) and C)
F) B) and C)

Question 9

In the open­economy macroeconomic model, if a country's supply of loanable funds shifts right, then

Accepted Answer

A)   net capital outflow rises, so the exchange rate rises.
B)   net capital outflow rises, so the exchange rate falls.
C)   net capital outflow falls, so the exchange rate rises.
D)   net capital outflow falls, so the exchange rate falls.E) All of the above
F) None of the above

Question 10

Trade policies

Accepted Answer

A)   alter the trade balance because they alter imports of the country that implemented them.
B)   alter the trade balance because they alter net capital outflow of the country that implemented them.
C)   do not alter the trade balance because they cannot alter the national saving or domestic investment of the country that implements them.
D)   do not alter the trade balance because they cannot alter the real exchange rate of the currency of the country that implements them.E) A) and B)
F) All of the above

Question 11

If for some reason Americans desired to increase their purchases of foreign assets, then other things the same

Accepted Answer

A)   both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency exchange would fall.
B)   both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency would rise.
C)   the real exchange rate would rise and the quantity of dollars exchanged in the market for foreign-currency would fall.
D)   the real exchange rate would fall and the quantity of dollars exchanged in the market for foreign-currency would rise.E) B) and D)
F) All of the above

Question 12

Suppose the U.S. supply of loanable funds shifts left. This will

Accepted Answer

A)   increase U.S. net capital outflow and increase the quantity of loanable funds demanded.
B)   increase U.S. net capital outflow and decrease the quantity of loanable funds demanded.
C)   decrease U.S. net capital outflow and increase the quantity of loanable funds demanded.
D)   decrease U.S. net capital outflow and decrease the quantity of loanable funds demanded.E) A) and D)
F) A) and C)

Question 13

If a U.S. resident purchases a foreign bond, her transactions are included

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 14

If U.S. residents want to buy more foreign bonds, then in the market for foreign-currency exchange the exchange rate

Accepted Answer

A)   and the quantity of dollars traded rises.
B)   rises and the quantity of dollars traded falls.
C)   falls and the quantity of dollars traded rises.
D)   and the quantity of dollars traded falls.E) B) and C)
F) A) and D)

Question 15

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 B)
F) A) and C)

Question 16

In the open-economy macroeconomic model, equilibrium in the market for foreign-currency exchange is determined by the equality between the supply of dollars which comes from

Accepted Answer

A)   U.S. national saving and the demand for dollars for U.S. net exports.
B)   U.S. net capital outflow and the demand for dollars for U.S. net exports.
C)   domestic investment and the demand for U.S. net exports.
D)   foreign demand for U.S. goods and services and U.S. demand for foreign goods and services.E) None of the above
F) A) and C)

Question 17

Other things the same, as the real interest rate falls

Accepted Answer

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

Question 18

In an open economy, the demand for loanable funds comes from both domestic investment and net capital outflow.

Accepted Answer

A) True 
 B)False

Question 19

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) All of the above
F) None of the above

Question 20

A rise in the government budget deficit

Accepted Answer

A)   increases the interest rate so in the market for foreign-currency exchange, supply shifts right.
B)   increases the interest rate so in the market for foreign-currency exchange, supply shifts left.
C)   decreases the interest rate so in the market for foreign-currency exchange, supply shifts left.
D)   decreases the interest rate so in the market for foreign-currency exchange supply shifts right.E) None of the above
F) All of the above

Exam 14: A Macroeconomic Theory of the Open Economy

If a country's budget deficit decreases, then the exchange rate

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Trade policies

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If the budget deficit increases, then

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A rise in the government budget deficit

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In the open-economy macroeconomic model, other things the same, which of the following both make the exchange rate fall?

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In the open-economy macroeconomic model, equilibrium in the market for foreign-currency exchange is determined by the equality between the supply of dollars which comes from

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Suppose the U.S. supply of loanable funds shifts left. This will

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In the open­economy macroeconomic model, if a country's supply of loanable funds shifts right, then

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

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Other things the same, if the real interest rate in a country falls, domestic residents will desire to purchase

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If U.S. residents want to buy more foreign bonds, then in the market for foreign-currency exchange the exchange rate

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Suppose a presidential candidate promises to increase the government budget surplus and claims that doing so will stop U.S. citizens from investing in foreign companies and increase the value of the dollar. Evaluate this candidate's promise.

Correct AnswerverifiedAn increase in the government budget sur...View AnswerShow Answer

If a country raises its budget deficit, then its

Correct AnswerverifiedShow Answer

Which of the following is consistent with moving from a shortage to equilibrium in the market for foreign currency exchange?

Correct AnswerverifiedShow Answer

In an open economy, the demand for loanable funds comes from both domestic investment and net capital outflow.

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Which of the following is included in the demand for dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

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If a U.S. resident purchases a foreign bond, her transactions are included

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Other things the same, as the real interest rate falls

Correct AnswerverifiedShow Answer

If for some reason Americans desired to increase their purchases of foreign assets, then other things the same

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If the budget deficit increases, then

Correct AnswerverifiedShow Answer

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In the openeconomy macroeconomic model, if a country's supply of loanable funds shifts right, then

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An increase in the government budget sur...
View Answer

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