Question 1

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 German bank desires to purchase U.S. Treasury securities
B)  A firm in Canada wants to buy rice from a U.S. company.
C)  An U.S. citizen wants to buy a bond issued by a Swedish corporation.
D)  All of the above are correct.E) C) and D)
F) A) and B)

Question 2

Many U.S. business leaders argue that the current state of U.S. net exports is the result of

Accepted Answer

A)  U.S. export subsidies.
B)  free trade policies of foreign governments.
C)  unproductive U.S. workers.
D)  unfair foreign competition.E) All of the above
F) B) and D)

Question 3

A country has output of $700 billion, consumption of $500 billion, government expenditures of $100 and investment of $60 million. What is its supply of loanable funds?

Accepted Answer

A)  $140 billion
B)  $100 billion
C)  $60 billion
D)  $40 billionE) C) and D)
F) A) and D)

Question 4

The theory of purchasing-power parity implies that the demand curve for foreign-currency exchange is

Accepted Answer

A)  downward sloping.
B)  upward sloping.
C)  horizontal.
D)  vertical.E) A) and B)
F) C) and D)

Question 5

If U.S. citizens decide to save a larger fraction of their incomes, the real interest rate

Accepted Answer

A)  decreases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases.
B)  decreases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases.
C)  increases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases.
D)  increases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases.E) A) and B)
F) A) and C)

Question 6

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) A) and C)
F) All of the above

Question 7

If there is capital flight from the United States, then the demand for loanable funds

Accepted Answer

A)  and the supply of dollars in the foreign-exchange market shift right.
B)  and the supply of dollars in the foreign-exchange market shift left.
C)  shifts left while the supply of dollars in the foreign-exchange market shifts right.
D)  shifts right while the supply of dollars in the foreign-exchange market shifts left.E) A) and D)
F) B) and C)

Question 8

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

Accepted Answer

A)  U.S. supply of loanable funds, U.S. interest rates, U.S. domestic investment
B)  U.S. imports, U.S. interest rates, the real exchange rate of the dollar
C)  U.S. interest rates, the real exchange rate of the dollar, U.S. domestic investment
D)  the real exchange rate of the dollar, U.S. net capital outflow, U.S. net exportsE) A) and D)
F) All of the above

Question 9

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

Question 10

Other things the same, when a Canadian company imports bicycles from the U.S., the open-economy macroeconomic model treats this transaction as an increase in the quantity of dollars demanded in the U.S. foreign-currency exchange market.

Accepted Answer

A) True 
 B)False

Question 11

When the U.S. real interest rate falls, owning U.S. assets becomes

Accepted Answer

A)  more attractive to both U.S. and foreign residents.
B)  more attractive to U.S. residents and less attractive to foreign residents.
C)  less attractive to U.S. residents and more attractive to foreign residents.
D)  less attractive to both U.S. residents and foreign residents.E) B) and C)
F) A) and B)

Question 12

Figure 19-2 
-Refer to Figure 19-2. 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) None of the above
F) C) and D)

Question 13

Which of the following is the most accurate statement?

Accepted Answer

A)  Trade policy has neither microeconomic nor macroeconomic effects.
B)  Trade policy has similar microeconomic and macroeconomic effects.
C)  The effects of trade policy are more macroeconomic than microeconomic.
D)  The effects of trade policy are more microeconomic than macroeconomic.E) A) and C)
F) B) and D)

Question 14

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

Question 15

Other things the same, if foreigners desire to purchase more U.S. bonds then the demand for loanable funds shifts left.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is most likely to increase exports?

Accepted Answer

A)  a reduction in domestic political instability
B)  ending investment tax credits
C)  a reduction in the size of the government's budget surplus
D)  None of the above will increase exports.E) All of the above
F) B) and C)

Question 17

Which of the following would make the equilibrium real interest rate increase and the equilibrium quantity of 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) A) and C)
F) B) and C)

Question 18

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) A) and D)
F) All of the above

Question 19

The real exchange rate measures the

Accepted Answer

A)  price of domestic currency relative to foreign currency.
B)  price of domestic goods relative to the price of foreign goods.
C)  rate of domestic and foreign interest.
D)  None of the above is correct.E) A) and B)
F) A) and C)

Question 20

Other things the same, in the open-economy macroeconomic model, which of the following would make India's net capital outflow increase?

Accepted Answer

A)  a decrease in U.S. interest rates
B)  a decrease in Indian interest rates
C)  an appreciation of the Indian rupee
D)  None of the above is correct.E) A) and D)
F) All of the above

Exam 19: A Macroeconomic Theory of the Open Economy

Figure 19-2 -Refer to Figure 19-2. At what real exchange rate is the quantity of dollars demanded equal to 100?

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A rise in the government budget deficit

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The theory of purchasing-power parity implies that the demand curve for foreign-currency exchange is

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Many U.S. business leaders argue that the current state of U.S. net exports is the result of

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Which of the following is most likely to increase exports?

Correct AnswerverifiedShow Answer

When the U.S. real interest rate falls, owning U.S. assets becomes

Correct AnswerverifiedShow Answer

Other things the same, when a Canadian company imports bicycles from the U.S., the open-economy macroeconomic model treats this transaction as an increase in the quantity of dollars demanded in the U.S. foreign-currency exchange market.

Correct AnswerverifiedShow Answer

If U.S. citizens decide to save a larger fraction of their incomes, the real interest rate

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

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Other things the same, if foreigners desire to purchase more U.S. bonds then the demand for loanable funds shifts left.

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Other things the same, in the open-economy macroeconomic model, which of the following would make India's net capital outflow increase?

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

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

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Which of the following is the most accurate statement?

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The real exchange rate measures the

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

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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?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A country has output of $700 billion, consumption of $500 billion, government expenditures of $100 and investment of $60 million. What is its supply of loanable funds?

Correct AnswerverifiedShow Answer

If there is capital flight from the United States, then the demand for loanable funds

Correct AnswerverifiedShow Answer

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