Question 1

What do trade policies do to the standard of living?

Accepted Answer

Trade policies reduce both imports and e...

Question 2

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 3

Explain how the relation between the real exchange rate and net exports explains the downward slope of the demand for foreign-currency exchange curve.

Accepted Answer

When the domestic real exchange rate app...

Question 4

If a government has a budget surplus, then public saving

Accepted Answer

A)   is positive and increases national saving.
B)   is positive but decreases national saving.
C)   is negative and decreases national saving.
D)   is negative but increases national saving.E) B) and D)
F) C) and D)

Question 5

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)   net capital outflow and the real exchange rate will rise.
B)   net capital outflow will rise and the real exchange rate will fall.
C)   net capital outflow will fall and the real exchange rate will rise.
D)   net capital outflow and the exchange rate will fall.E) A) and C)
F) A) and B)

Question 6

When the U.S. real interest rate falls

Accepted Answer

A)   U.S. purchases of foreign assets and foreign purchases of U.S. assets rise
B)   U.S. purchases of foreign assets rise and foreign purchases of U.S. assets fall
C)   U.S. purchases of foreign assets fall and foreign purchases of U.S. assets rise
D)   U.S. purchases of foreign assets and foreign purchases of U.S. assets fallE) A) and B)
F) B) and D)

Question 7

In an open economy, the source of the demand for loanable funds is

Accepted Answer

A)   national saving
B)   national saving + net capital outflow
C)   investment + the government budget deficit
D)   investment + net capital outflowE) A) and B)
F) A) and D)

Question 8

If a country makes political reforms so that people now believe this country's assets are less risky, what happens to its interest rate, its exchange rate, and its net exports?

Accepted Answer

Its interest rate fa...

Question 9

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 10

In the open-economy macroeconomic model, the supply of dollars in the market for foreign-currency exchange comes from

Accepted Answer

A)   national saving
B)   domestic investment
C)   net exports
D)   net capital outflowE) B) and C)
F) A) and D)

Question 11

Figure 32-5
Refer to this diagram of the open-economy macroeconomic model to answer the questions below. 
-Refer to Figure 32-5. In the market for foreign-currency exchange, the effects of an increase in the budget surplus can be illustrated as a move from j to

Accepted Answer

A)   g.
B)   h.
C)   i.
D)   k.E) A) and C)
F) A) and D)

Question 12

What happens to net capital outflow as the real interest rate falls? Explain your answer.

Accepted Answer

As the real interest rate falls, domesti...

Question 13

The variable that links the market for loanable funds and the market for foreign-currency exchange is

Accepted Answer

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

Question 14

Budget in Recession
During a recession government revenues from the income tax fall and government transfers rise as the reduction in income and the rise in unemployment raise the number of people who qualify for benefits.
-Refer to Budget in Recession. What does this change in the budget deficit do to the equilibrium values of the interest rate and the quantity of loanable funds?

Accepted Answer

Since the supply of loanable f...

Question 15

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 C)
F) B) and D)

Question 16

If the demand for dollars in the market for foreign-currency exchange shifts left, then the exchange rate

Accepted Answer

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

Question 17

A country has output of $900 billion, consumption of $600 billion, government expenditures of $150 billion and investment of $120 billion. What is its supply of loanable funds?

Accepted Answer

A)   $30 billion
B)   $90 billion
C)   $120 billion
D)   $150 billionE) B) and C)
F) All of the above

Question 18

If the supply of loanable funds shifts left, 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 quantity of loanable funds falls.E) B) and D)
F) C) and D)

Question 19

Political events convince people that the assets of country x are now riskier. As a result of this change which curves in the open-economy macroeconomic model shift and which direction do they shift for country x?

Accepted Answer

The demand curve for loanable ...

Question 20

When a country suffers from capital flight, the demand for loanable funds in that country shifts

Accepted Answer

A)   right, which increases interest rates in that country.
B)   right, which decreases interest rates in that country.
C)   left, which increases interest rates in that country.
D)   left, which decreases interest rates in that country.E) C) and D)
F) All of the above

Exam 14: A Macroeconomic Theory of the Open Economy

When a country suffers from capital flight, the demand for loanable funds in that country shifts

Correct Answer
verified

What do trade policies do to the standard of living?

Correct Answer
verified
Trade policies reduce both imports and e...
View Answer

The variable that links the market for loanable funds and the market for foreign-currency exchange is

Correct Answer
verified

If a government has a budget surplus, then public saving

Correct Answer
verified

If the demand for dollars in the market for foreign-currency exchange shifts left, then the exchange rate

Correct Answer
verified

When the U.S. real interest rate falls

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified
Since the supply of loanable f...
View Answer

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

Correct Answer
verified

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 Answer
verified

Explain how the relation between the real exchange rate and net exports explains the downward slope of the demand for foreign-currency exchange curve.

Correct Answer
verified
When the domestic real exchange rate app...
View Answer

What happens to net capital outflow as the real interest rate falls? Explain your answer.

Correct Answer
verified
As the real interest rate falls, domesti...
View Answer

If the supply of loanable funds shifts left, then

Correct Answer
verified

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

Correct Answer
verified
As the U.S. real interest rate rises, U....
View Answer

A country has output of $900 billion, consumption of $600 billion, government expenditures of $150 billion and investment of $120 billion. What is its supply of loanable funds?

Correct Answer
verified

Political events convince people that the assets of country x are now riskier. As a result of this change which curves in the open-economy macroeconomic model shift and which direction do they shift for country x?

Correct Answer
verified
The demand curve for loanable ...
View Answer

If a country makes political reforms so that people now believe this country's assets are less risky, what happens to its interest rate, its exchange rate, and its net exports?

Correct Answer
verified
Its interest rate fa...
View Answer

Figure 32-5 Refer to this diagram of the open-economy macroeconomic model to answer the questions below. -Refer to Figure 32-5. In the market for foreign-currency exchange, the effects of an increase in the budget surplus can be illustrated as a move from j to

Correct Answer
verified

In an open economy, the source of the demand for loanable funds is

Correct Answer
verified

In the open-economy macroeconomic model, the supply of dollars in the market for foreign-currency exchange comes from

Correct Answer
verified

Exam 14: A Macroeconomic Theory of the Open Economy

When a country suffers from capital flight, the demand for loanable funds in that country shifts

Correct AnswerverifiedShow Answer

What do trade policies do to the standard of living?

Correct AnswerverifiedTrade policies reduce both imports and e...View AnswerShow Answer

The variable that links the market for loanable funds and the market for foreign-currency exchange is

Correct AnswerverifiedShow Answer

If a government has a budget surplus, then public saving

Correct AnswerverifiedShow Answer

If the demand for dollars in the market for foreign-currency exchange shifts left, then the exchange rate

Correct AnswerverifiedShow Answer

When the U.S. real interest rate falls

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedSince the supply of loanable f...View AnswerShow Answer

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

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

Explain how the relation between the real exchange rate and net exports explains the downward slope of the demand for foreign-currency exchange curve.

Correct AnswerverifiedWhen the domestic real exchange rate app...View AnswerShow Answer

What happens to net capital outflow as the real interest rate falls? Explain your answer.

Correct AnswerverifiedAs the real interest rate falls, domesti...View AnswerShow Answer

If the supply of loanable funds shifts left, then

Correct AnswerverifiedShow Answer

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

A country has output of $900 billion, consumption of $600 billion, government expenditures of $150 billion and investment of $120 billion. What is its supply of loanable funds?

Correct AnswerverifiedShow Answer

Political events convince people that the assets of country x are now riskier. As a result of this change which curves in the open-economy macroeconomic model shift and which direction do they shift for country x?

Correct AnswerverifiedThe demand curve for loanable ...View AnswerShow Answer

If a country makes political reforms so that people now believe this country's assets are less risky, what happens to its interest rate, its exchange rate, and its net exports?

Correct AnswerverifiedIts interest rate fa...View AnswerShow Answer

Figure 32-5 Refer to this diagram of the open-economy macroeconomic model to answer the questions below. -Refer to Figure 32-5. In the market for foreign-currency exchange, the effects of an increase in the budget surplus can be illustrated as a move from j to

Correct AnswerverifiedShow Answer

In an open economy, the source of the demand for loanable funds is

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, the supply of dollars in the market for foreign-currency exchange comes from

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
Trade policies reduce both imports and e...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Since the supply of loanable f...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
When the domestic real exchange rate app...
View Answer

Correct Answer
verified
As the real interest rate falls, domesti...
View Answer

Correct Answer
verified

Correct Answer
verified
As the U.S. real interest rate rises, U....
View Answer

Correct Answer
verified

Correct Answer
verified
The demand curve for loanable ...
View Answer

Correct Answer
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Its interest rate fa...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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