Question 1

In the open-economy macroeconomic model,if investment demand increases,then

Accepted Answer

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

Question 2

Which of the following will decrease U.S.net capital outflow?

Accepted Answer

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

Question 3

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

Question 4

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

Question 5

Other things the same,people in the U.S.would want to save more if the real interest rate in the U.S.

Accepted Answer

A)   fell.The increased saving would increase the quantity of loanable funds demanded.
B)   fell.The increased saving would increase the quantity of loanable funds supplied.
C)   rose.The increased saving would increase the quantity of loanable funds demanded.
D)   rose.The increased saving would increase the quantity of loanable funds supplied.E) None of the above
F) C) and D)

Question 6

If the U.S.government went from a budget deficit to a budget surplus then

Accepted Answer

A)   the interest rate and the real exchange rate would increase.
B)   the interest rate and the real exchange rate would decrease.
C)   the interest rate would increase and the real exchange rate would decrease.
D)   the interest rate would decrease and the real exchange rate would increase.E) B) and C)
F) A) and B)

Question 7

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 C)
F) C) and D)

Question 8

If a government started with a budget deficit and moved to a surplus,domestic investment

Accepted Answer

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

Question 9

Other things the same,a higher real exchange rate raises net exports.

Accepted Answer

A) True 
 B)False

Question 10

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 B)
F) A) and C)

Question 11

At the equilibrium real interest rate in the open-economy macroeconomic model,the equilibrium quantity of loanable funds equals

Accepted Answer

A)   net capital outflow.
B)   domestic investment.
C)   foreign currency supplied.
D)   national saving.E) A) and D)
F) C) and D)

Question 12

If the U.S.government increased its deficit,then

Accepted Answer

A)   U.S.bonds would pay higher interest but a dollar would purchase fewer foreign goods.
B)   U.S.bonds would pay higher interest and a dollar would purchase more foreign goods.
C)   U.S.bonds would pay lower interest and a dollar would purchase fewer foreign goods..
D)   U.S.bonds would pay lower interest but a dollar would purchase more foreign goods.E) B) and C)
F) A) and B)

Question 13

Which of the following is a consistent response to an increase in the U.S.real interest rate?

Accepted Answer

A)   a London bank purchases a U.S.bond instead of a Japanese bond it had considered purchasing.
B)   U.S.firms decide to buy more capital goods
C)   a U.S.citizen decides to put less money in his savings account than he had planned.
D)   All of the above are consistent.E) A) and B)
F) A) and C)

Question 14

In the open-economy macroeconomic model,the real exchange rate does not affect net capital outflow.

Accepted Answer

A) True 
 B)False

Question 15

Other things the same,an increase in the U.S.real interest rate

Accepted Answer

A)   raises net capital outflow which decreases the quantity of loanable funds demanded.
B)   raises net capital outflow which increases the quantity of loanable funds demanded.
C)   lowers net capital outflow which decreases the quantity of loanable funds demanded.
D)   lowers net capital outflow which increases the quantity of loanable funds demanded.E) B) and C)
F) None of the above

Question 16

A rise in the budget deficit

Accepted Answer

A)   shifts both the supply of loanable funds in the market for loanable funds and the supply of dollars in the market for foreign-currency exchange right.
B)   shifts both the supply of loanable funds in the market for loanable fund and the supply of dollars in the market for foreign-currency exchange left.
C)   shifts both the demand for loanable funds in the market for loanable funds and the demand for dollars in the market for foreign-currency exchange right.
D)   shifts both the demand for loanable funds in the market for loanable funds and the demand for dollars in the market for foreign-currency exchange left.E) B) and C)
F) C) and D)

Question 17

If a government increases its budget deficit,then the real exchange rate

Accepted Answer

A)   and domestic investment rise.
B)   and domestic investment fall.
C)   rises and domestic investment falls.
D)   falls and domestic investment rises.E) B) and D)
F) B) and C)

Question 18

According to the open-economy macroeconomic model,import quotas increase which of the following

Accepted Answer

A)   net exports and net capital outflow
B)   net exports but not net capital outflow.
C)   net capital outflow but not net exports.
D)   neither net exports nor net capital outflow.E) A) and D)
F) None of the above

Question 19

In the 1980s,both the U.S.government budget and U.S.trade deficits increased.

Accepted Answer

A) True 
 B)False

Question 20

If the government of Kenya implemented a policy that decreased national saving,its real exchange rate would

Accepted Answer

A)   depreciate and Kenyan net exports would rise.
B)   depreciate and Kenyan net exports would fall.
C)   appreciate and Kenyan net exports would rise.
D)   appreciate and Kenyan net exports would fall.E) A) and D)
F) C) and D)

Exam 32: A Macroeconomic Theory of the Open Economy

If a government started with a budget deficit and moved to a surplus,domestic investment

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If the U.S.government increased its deficit,then

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In the open-economy macroeconomic model,the real exchange rate does not affect net capital outflow.

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If a government increases its budget deficit,then the real exchange rate

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If the government of Kenya implemented a policy that decreased national saving,its real exchange rate would

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Other things the same,an increase in the U.S.real interest rate

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In the open-economy macroeconomic model,if investment demand increases,then

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Which of the following is a consistent response to an increase in the U.S.real interest rate?

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

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Other things the same,people in the U.S.would want to save more if the real interest rate in the U.S.

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

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Other things the same,a higher real exchange rate raises net exports.

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If the U.S.government went from a budget deficit to a budget surplus then

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According to the open-economy macroeconomic model,import quotas increase which of the following

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

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A rise in the budget deficit

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

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In the 1980s,both the U.S.government budget and U.S.trade deficits increased.

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At the equilibrium real interest rate in the open-economy macroeconomic model,the equilibrium quantity of loanable funds equals

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Which of the following will decrease U.S.net capital outflow?

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