Question 1

Suppose that the United States imposes an import quota on televisions.In the open-economy macroeconomic model this quota shifts the

Accepted Answer

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

Question 2

The value of net exports equals the value of

Accepted Answer

A)   national saving.
B)   public saving.
C)   national saving - net capital outflow.
D)   national saving - domestic investment.E) None of the above
F) A) and B)

Question 3

Figure 32-4 2 and E3,an increase in the budget deficit can be illustrated as a move to A)  r1 and E4. B)  r1 and E2. C)  r3 and E4. D)  r3 and E2." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 32-5.Starting from r2 and E3,an increase in the budget deficit can be illustrated as a move to

Accepted Answer

A)   r1 and E4.
B)   r1 and E2.
C)   r3 and E4.
D)   r3 and E2.E) A) and B)
F) B) and D)

Question 4

Which of the following is most likely to increase U.S.exports?

Accepted Answer

A)   The government gives subsidies to U.S.firms that export goods or services.
B)   The government reduces the size of the budget surplus.
C)   The United States unilaterally reduces its restrictions on foreign imports.
D)   Taxes on domestic saving rise.E) All of the above
F) A) and B)

Question 5

An increase in the budget deficit makes domestic interest rates

Accepted Answer

A)   rise because the supply of loanable funds shifts left.
B)   fall because the supply of loanable funds shifts left.
C)   rise because the demand for loanable funds shifts right.
D)   fall because the demand for loanable funds shifts right.E) A) and B)
F) B) and D)

Question 6

According to the open-economy macroeconomic model,if the United States moved from a government budget deficit to a government budget surplus,U.S.real interest rates would increase and the real exchange rate of the U.S.dollar would appreciate.

Accepted Answer

A) True 
 B)False

Question 7

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 8

Figure 32-7 0 and E1.Which of the following new equilibrium is consistent with capital flight? A)  ro and E0 B)  r1 and E0 C)  r1 and E1 D)  None of the above is correct." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 32-7.Suppose the Mexican economy starts at r0 and E1.Which of the following new equilibrium is consistent with capital flight?

Accepted Answer

A)   ro and E0
B)   r1 and E0
C)   r1 and E1
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 9

A country has national saving of $60 billion,government expenditures of $30 billion,domestic investment of $40 billion,and net capital outflow of $20 billion.What is its supply of loanable funds?

Accepted Answer

A)   $30 billion
B)   $60 billion
C)   $70 billion
D)   $100 billionE) B) and C)
F) All of the above

Question 10

If Kenya experienced capital flight,the supply of Kenyan schillings in the market for foreign-currency exchange would shift

Accepted Answer

A)   left,which would make the real exchange rate of the Kenyan schilling appreciate.
B)   left,which would make the real exchange rate of the Kenyan schilling depreciate.
C)   right,which would make the real exchange rate of the Kenyan schilling appreciate.
D)   right,which would make the real exchange rate of the Kenyan schilling depreciate.E) None of the above
F) A) and B)

Question 11

A tax on imported goods is called a(n)

Accepted Answer

A)   excise tax.
B)   tariff.
C)   import quota.
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 12

Suppose that the Turkish government budget deficit increases.What curves in the open-economy macroeconomic model shift? Explain why each curve shifts the direction it does.

Accepted Answer

The supply of Turkish loanable funds cur...

Question 13

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

Question 14

In the open-economy macroeconomic model,if a country's interest rate rises,its net capital outflow

Accepted Answer

A)   rises and the real exchange rate rises.
B)   falls and the real exchange rate falls.
C)   rises and the real exchange rate falls.
D)   falls and the real exchange rate rises.E) A) and B)
F) B) and D)

Question 15

When a country imposes a trade restriction,the real exchange rate of that country's currency appreciates.

Accepted Answer

A) True 
 B)False

Question 16

If the supply of dollars in the market for foreign-currency exchange shifts right,then the exchange rate

Accepted Answer

A)   rises and the quantity of dollars exchanged falls.
B)   rises and the quantity of dollars exchanged does not change.
C)   falls and the quantity of dollars exchanged rises.
D)   falls and the quantity of dollars exchanged does not change.E) A) and B)
F) A) and C)

Question 17

In the open-economy macroeconomic model,a higher U.S.real exchange rate makes

Accepted Answer

A)   U.S.goods more expensive relative to foreign goods and reduces the quantity of dollars supplied.
B)   U.S.goods more expensive relative to foreign goods and reduces the quantity of dollars demanded.
C)   foreign goods more expensive relative to U.S.goods and reduces the quantity of dollars supplied.
D)   foreign goods more expensive relative to U.S.goods and reduces the quantity of dollars demanded.E) None of the above
F) C) and D)

Question 18

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 B)
F) A) and C)

Question 19

Which of the following would both raise the U.S.exchange rate?

Accepted Answer

A)   capital flight from other countries to the U.S.occurs and the U.S.moves from budget surplus to budget deficit
B)   capital flight from other countries to the U.S.occurs and the U.S.moves from budget deficit to budget surplus
C)   capital flight from the U.S.to other countries occurs,the U.S.moves from budget surplus to budget deficit
D)   capital flight from U.S.to other countries occurs,the U.S.moves from budget deficit to budget surplusE) A) and B)
F) None of the above

Question 20

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 B)
F) None of the above

Exam 32: A Macroeconomic Theory of the Open Economy

A tax on imported goods is called a(n)

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

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In the open-economy macroeconomic model,if a country's interest rate rises,its net capital outflow

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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

In an open economy,national saving equals

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Figure 32-7 -Refer to Figure 32-7.Suppose the Mexican economy starts at r0 and E1.Which of the following new equilibrium is consistent with capital flight?

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If the supply of dollars in the market for foreign-currency exchange shifts right,then the exchange rate

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The value of net exports equals the value of

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According to the open-economy macroeconomic model,if the United States moved from a government budget deficit to a government budget surplus,U.S.real interest rates would increase and the real exchange rate of the U.S.dollar would appreciate.

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A country has national saving of $60 billion,government expenditures of $30 billion,domestic investment of $40 billion,and net capital outflow of $20 billion.What is its supply of loanable funds?

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Suppose that the Turkish government budget deficit increases.What curves in the open-economy macroeconomic model shift? Explain why each curve shifts the direction it does.

Correct AnswerverifiedThe supply of Turkish loanable funds cur...View AnswerShow Answer

Which of the following is most likely to increase U.S.exports?

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If Kenya experienced capital flight,the supply of Kenyan schillings in the market for foreign-currency exchange would shift

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Suppose that the United States imposes an import quota on televisions.In the open-economy macroeconomic model this quota shifts the

Correct AnswerverifiedShow Answer

Which of the following would both raise the U.S.exchange rate?

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Figure 32-4 -Refer to Figure 32-5.Starting from r2 and E3,an increase in the budget deficit can be illustrated as a move to

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In the open-economy macroeconomic model,a higher U.S.real exchange rate makes

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When a country imposes a trade restriction,the real exchange rate of that country's currency appreciates.

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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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An increase in the budget deficit makes domestic interest rates

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a.
the demand for loanable fun...
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Figure 32-7 -Refer to Figure 32-7.Suppose the Mexican economy starts at r₀ and E₁.Which of the following new equilibrium is consistent with capital flight?

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The supply of Turkish loanable funds cur...
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Figure 32-4 -Refer to Figure 32-5.Starting from r₂ and E₃,an increase in the budget deficit can be illustrated as a move to

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