Question 1

State what, if anything, each of the following does to the supply or demand of loanable funds.
a. net capital outflow increases at each interest rate
b. domestic investment increases at each interest rate
c. the government deficit increases
d. private saving increases

Accepted Answer

a. the demand for loanable fun...

Question 2

In an open economy, national saving equals

Accepted Answer

A)   domestic investment plus net capital outflow.
B)   domestic investment minus net capital outflow.
C)   domestic investment.
D)   net capital outflow.E) B) and C)
F) A) and D)

Question 3

In 2009 Greece's budget deficit rose and people became worried about the ability of the Greek government to make payments on its debt. Which of the these events reduces a country's real exchange rate?

Accepted Answer

A)   an increase in the budget deficit, and increased concerns about the ability of the government to pay back its debt
B)   an increase in the budget deficit, but not increased concerns about the ability of the government to pay back its debt
C)   increased concerns about the ability of the government to pay back its debt, but not an increase in the budget deficit
D)   neither an increase in the budget deficit, nor increased concerns about the ability of the government to pay back its debtE) A) and B)
F) None of the above

Question 4

In the open-economy macroeconomic model, other things the same, an increase in the exchange rate raises the quantity of dollars supplied in the market for foreign-currency exchange.

Accepted Answer

A) True 
 B)False

Question 5

In the open-economy macroeconomic model, at the equilibrium real interest rate, the amount that people (including government) want to save exactly balances desired domestic investment.

Accepted Answer

A) True 
 B)False

Question 6

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) A) and D)
F) C) and D)

Question 7

An increase in the budget deficit

Accepted Answer

A)   reduces investment because the interest rate rises.
B)   reduces investment because the interest rate falls.
C)   raises investment because the interest rate rises.
D)   raises investment because the interest rate falls.E) A) and D)
F) None of the above

Question 8

If the demand for loanable funds shifts right, then

Accepted Answer

A)   the real interest rate and the equilibrium quantity of loanable funds both fall.
B)   the real interest rate falls and the equilibrium quantity of loanable funds rises.
C)   the real interest rate and the equilibrium quantity of loanable funds both rise.
D)   the real interest rate rises and the equilibrium quantify of loanable funds falls.E) C) and D)
F) B) and D)

Question 9

If the exchange rate falls, domestic goods become relatively expensive. This change in the affordability of domestic goods makes domestic goods attractive to domestic residents. So, _______ ______.

Accepted Answer

less, more...

Question 10

In the open economy macroeconomic model, the price that balances supply and demand in the market for foreign- currency exchange model is the

Accepted Answer

A)   nominal exchange rate.
B)   nominal interest rate.
C)   real exchange rate.
D)   real interest rate.E) B) and D)
F) All of the above

Question 11

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) A) and C)
F) None of the above

Question 12

Other things the same, which curve in the market for foreign-currency exchange shifts and which direction does it shift if net capital outflow rises?

Accepted Answer

The supply...

Question 13

In the open-economy macroeconomic model, other things the same, when a U.S. resident imports a foreign good, the demand for dollars in the foreign-currency exchange market decreases.

Accepted Answer

A) True 
 B)False

Question 14

If the United States imposes an import quota on clothing, then U.S. exports

Accepted Answer

A)   increase, U.S. imports increase, and U.S. net exports will not change.
B)   increase, U.S. imports decrease, and U.S. net exports increase.
C)   decrease, U.S. imports increase, and U.S. net exports decrease.
D)   decrease, U.S. imports decrease, and U.S. net exports will not change.E) A) and B)
F) B) and C)

Question 15

If government policy encouraged households to save more at each interest rate, then

Accepted Answer

A)   the real exchange rate and net exports would rise.
B)   the real exchange rate and net exports would fall.
C)   the real exchange rate would rise and net exports would fall.
D)   the real exchange rate would fall and net exports would rise.E) B) and C)
F) B) and D)

Question 16

Other things the same, if the U.S. interest rate rises, what happens to the net capital outflow of other countries?

Accepted Answer

As the U.S. real interest rate rises, U....

Question 17

Refer to Shoe Quota. What is a quota? What is a tariff?

Accepted Answer

A quota limits the quantity of...

Question 18

In an open economy, the supply of loanable funds comes from national saving.

Accepted Answer

A) True 
 B)False

Question 19

Other things the same, a decrease in the real interest rate

Accepted Answer

A)   decreases the quantity of loanable funds demanded.
B)   increases the quantity of loanable funds demand
C)   shifts the demand for loanable funds to the right.
D)   shifts the demand for loanable funds to the left.E) None of the above
F) B) and D)

Question 20

If the risk of buying U.S. assets rises because it is discovered that lending institutions had not carefully evaluated borrowers prior to lending them funds, then

Accepted Answer

A)   the real exchange rate and the interest rate will rise.
B)   the real exchange rate will rise and the interest rate will fall.
C)   the real exchange rate will fall and the interest rate will rise.
D)   the real exchange rate and the interest rate will fall.E) None of the above
F) C) and D)

Exam 32: A Macroeconomic Theory of the Open Economy

Other things the same, a decrease in the real interest rate

Correct AnswerverifiedShow Answer

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 U.S. interest rate rises, what happens to the net capital outflow of other countries?

Correct AnswerverifiedAs the U.S. real interest rate rises, U....View AnswerShow Answer

State what, if anything, each of the following does to the supply or demand of loanable funds. a. net capital outflow increases at each interest rate b. domestic investment increases at each interest rate c. the government deficit increases d. private saving increases

Correct Answerverifieda. the demand for loanable fun...View AnswerShow Answer

If the exchange rate falls, domestic goods become relatively expensive. This change in the affordability of domestic goods makes domestic goods attractive to domestic residents. So, _______ ______.

Correct Answerverifiedless, more...View AnswerShow Answer

If the United States imposes an import quota on clothing, then U.S. exports

Correct AnswerverifiedShow Answer

In 2009 Greece's budget deficit rose and people became worried about the ability of the Greek government to make payments on its debt. Which of the these events reduces a country's real exchange rate?

Correct AnswerverifiedShow Answer

If government policy encouraged households to save more at each interest rate, then

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, at the equilibrium real interest rate, the amount that people (including government) want to save exactly balances desired domestic investment.

Correct AnswerverifiedShow Answer

In the open economy macroeconomic model, the price that balances supply and demand in the market for foreign- currency exchange model is the

Correct AnswerverifiedShow Answer

Other things the same, which curve in the market for foreign-currency exchange shifts and which direction does it shift if net capital outflow rises?

Correct AnswerverifiedThe supply...View AnswerShow Answer

In an open economy, national saving equals

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If the budget deficit increases, then

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If the risk of buying U.S. assets rises because it is discovered that lending institutions had not carefully evaluated borrowers prior to lending them funds, then

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In an open economy, the supply of loanable funds comes from national saving.

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If the demand for loanable funds shifts right, then

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An increase in the budget deficit

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Refer to Shoe Quota. What is a quota? What is a tariff?

Correct AnswerverifiedA quota limits the quantity of...View AnswerShow Answer

In the open-economy macroeconomic model, other things the same, when a U.S. resident imports a foreign good, the demand for dollars in the foreign-currency exchange market decreases.

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, other things the same, an increase in the exchange rate raises the quantity of dollars supplied in the market for foreign-currency exchange.

Correct AnswerverifiedShow Answer

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As the U.S. real interest rate rises, U....
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a. the demand for loanable fun...
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If the exchange rate falls, domestic goods become relatively expensive. This change in the affordability of domestic goods makes domestic goods attractive to domestic residents. So, _ .

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The supply...
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A quota limits the quantity of...
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