Question 1

What happens to each of the following if the supply of loanable funds shifts left?
a. the interest rate
b. net capital outflow
c. the exchange rate

Accepted Answer

The interest rate ri...

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

Question 3

An increase in the budget deficit

Accepted Answer

A)   raises net exports and domestic investment.
B)   raises net exports and reduces domestic investment.
C)   reduces net exports and raises domestic investment.
D)   reduces net exports and domestic investment.E) All of the above
F) B) and C)

Question 4

If there is a surplus of loanable funds, the quantity demanded is

Accepted Answer

A)   greater than the quantity supplied and the interest rate will rise.
B)   greater than the quantity supplied and the interest rate will fall.
C)   less than the quantity supplied and the interest rate will rise.
D)   less than the quantity supplied and the interest rate will fall.E) None of the above
F) A) and B)

Question 5

A country has national saving of $80 billion, government expenditures of $40 billion, domestic investment of $50 billion, and net capital outflow of $30 billion. What is its supply of loanable funds?

Accepted Answer

A)   $30 billion
B)   $40 billion
C)   $50 billion
D)   $80 billionE) A) and B)
F) A) and C)

Question 6

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

Question 7

In 2002, the United States placed higher tariffs on imports of steel. According to the open-economy macroeconomic model this policy should have

Accepted Answer

A)   reduced imports into the United States and made U.S. net exports rise.
B)   reduced imports into the United States and made the net supply of dollars in the foreign exchange market shift right.
C)   reduced imports of steel into the United States, but reduced U.S. exports of other goods by an equal amount.
D)   reduced imports of steel into the United States and increased U.S. exports of other goods by an equal amount.E) B) and C)
F) A) and D)

Question 8

Which of the following will not change the U.S. real interest rate?

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

Question 9

A firm produces construction equipment, some of which it exports. Which of the following effects of an increase in the government budget deficit would likely reduce the quantity of equipment it sells?

Accepted Answer

A)   the change in the interest rate and the change in the exchange rate
B)   the change in the interest rate but not the change in the exchange rate
C)   the change in the exchange rate but not the change in the interest rate
D)   neither the change in the interest rate nor the change in the exchange rateE) B) and C)
F) All of the above

Question 10

When Mexico suffered from capital flight in 1994, Mexico's net exports

Accepted Answer

A)   decreased.
B)   did not change.
C)   increased.
D)   decreased until the peso appreciated, then increased.E) C) and D)
F) B) and C)

Question 11

In the open-economy macroeconomic model, if there is currently a surplus in the foreign exchange market, the quantity of desired net exports will increase as the market moves to equilibrium.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A)   the exchange rate appreciates making domestic goods relatively more expensive.
B)   the exchange rate appreciates making domestic goods relatively less expensive.
C)   the exchange rate depreciates making domestic goods relatively more expensive.
D)   the exchange rate depreciates making domestic goods relatively less expensive.E) All of the above
F) A) and B)

Question 13

Which of the following would shift the demand for dollars in the market for foreign currency exchange to the right?

Accepted Answer

A)   foreign citizens want to buy more U.S. goods and services at a given exchange rate
B)   foreign citizens want to buy fewer U.S. goods and services at a given exchange rate
C)   foreign citizens want to buy more U.S. bonds
D)   foreign citizens want to by fewer U.S. bondsE) B) and C)
F) A) and B)

Question 14

When the real exchange rate for the dollar depreciates, U.S. goods become

Accepted Answer

A)   less expensive relative to foreign goods, which makes exports rise and imports fall.
B)   less expensive relative to foreign goods, which makes exports fall and imports rise.
C)   more expensive relative to foreign goods, which makes exports rise and imports fall.
D)   more expensive relative to foreign goods, which makes exports fall and imports rise.E) B) and C)
F) All of the above

Question 15

Which of the following would not be a consequence of an increase in the U.S. government budget deficit?

Accepted Answer

A)   the U.S. trade balance rises
B)   the U.S. interest rate rises
C)   domestic investment in the U.S. falls
D)   the real exchange rate of the U.S. dollar appreciatesE) C) and D)
F) A) and D)

Question 16

Figure 32-2 
-Refer to Figure 32-2. What are the equilibrium values of the real exchange rate and net exports?

Accepted Answer

A)   1, 300
B)   .8, 400
C)   .6, 500
D)   None of the above are correct.E) All of the above
F) B) and C)

Question 17

Which of the following is the most likely response to a decrease in the U.S. real interest rate?

Accepted Answer

A)   a U.S. company decides to expand its factory
B)   a U.S. citizen decides to purchase fewer foreign bonds
C)   a German mutual fund decides to increase its deposits at a U.S. bank
D)   All of the above are consistent.E) B) and C)
F) A) and D)

Question 18

Which of the following can explain a decrease in the U.S. real exchange rate?

Accepted Answer

A)   the U.S. government budget deficit falls
B)   the U.S. impose import quotas
C)   the default risk of U.S. assets falls
D)   All of the above are correct.E) All of the above
F) None of the above

Question 19

If the demand for dollars in the market for foreign-currency exchange shifts right, 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 20

An increase in the budget deficit causes net capital outflow to

Accepted Answer

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

Exam 14: A Macroeconomic Theory of the Open Economy

What happens to each of the following if the supply of loanable funds shifts left? a. the interest rate b. net capital outflow c. the exchange rate

Correct AnswerverifiedThe interest rate ri...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is the most likely response to a decrease in the U.S. real interest rate?

Correct AnswerverifiedShow Answer

A firm produces construction equipment, some of which it exports. Which of the following effects of an increase in the government budget deficit would likely reduce the quantity of equipment it sells?

Correct AnswerverifiedShow Answer

Which of the following would not be a consequence of an increase in the U.S. government budget deficit?

Correct AnswerverifiedShow Answer

If there is a surplus of loanable funds, the quantity demanded is

Correct AnswerverifiedShow Answer

A country has national saving of $80 billion, government expenditures of $40 billion, domestic investment of $50 billion, and net capital outflow of $30 billion. What is its supply of loanable funds?

Correct AnswerverifiedShow Answer

An increase in the budget deficit

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following will not change the U.S. real interest rate?

Correct AnswerverifiedShow Answer

When Mexico suffered from capital flight in 1994, Mexico's net exports

Correct AnswerverifiedShow Answer

In 2002, the United States placed higher tariffs on imports of steel. According to the open-economy macroeconomic model this policy should have

Correct AnswerverifiedShow Answer

An increase in the budget deficit causes net capital outflow to

Correct AnswerverifiedShow Answer

Figure 32-2 -Refer to Figure 32-2. What are the equilibrium values of the real exchange rate and net exports?

Correct AnswerverifiedShow Answer

When the real exchange rate for the dollar depreciates, U.S. goods become

Correct AnswerverifiedShow Answer

Which of the following would shift the demand for dollars in the market for foreign currency exchange to the right?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, if there is currently a surplus in the foreign exchange market, the quantity of desired net exports will increase as the market moves to equilibrium.

Correct AnswerverifiedShow Answer

Which of the following can explain a decrease in the U.S. real exchange rate?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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