Question 1

If people thought that many banks in a certain country were at or near the point of bankruptcy, then that country's interest rate

Accepted Answer

A)   and net exports would rise.
B)   would rise and its net exports would fall.
C)   would fall and its net exports would rise.
D)   and its net exports would fall.E) A) and B)
F) All of the above

Question 2

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 falls causing U.S. residents to import more
B)   the exchange rate falls causing U.S. residents to import less
C)   the exchange rate rises causing U.S. residents to import more
D)   the exchange rate rises causing U.S. residents to import lessE) A) and B)
F) None of the above

Question 3

Suppose a country experiences capital flight. Of the demand for loanable funds and the supply of currency in the market for foreign-currency exchange, which shifts right?

Accepted Answer

A)   only the demand for loanable funds
B)   only the supply of its currency in the market for foreign-currency exchange
C)   both curves shift right
D)   neither curve shifts rightE) A) and C)
F) A) and D)

Question 4

A U.S. grocery chain borrows money to buy a warehouse in Ohio and another in Italy. Borrowing for which warehouses)  is included in the demand for loanable funds in the U.S.?

Accepted Answer

A)   both the one in Ohio and the one in Italy
B)   only the one in Ohio
C)   only the one in Italy
D)   neither the one in Ohio nor the one in ItalyE) C) and D)
F) B) and D)

Question 5

In the open-economy macroeconomic model, if net capital outflow increases then

Accepted Answer

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

Question 6

If the budget deficit increases, then

Accepted Answer

A)   U.S. residents will want to purchase more foreign assets and foreign residents will want to purchase more U.S. assets
B)   U.S. residents will want to purchase more foreign assets and foreign residents will want to purchase fewer U.S. assets
C)   U.S. residents will want to purchase fewer foreign assets and foreign residents will want to purchase more U.S. assets
D)   U.S. residents will want to purchase fewer foreign assets and foreign residents will want to purchase fewer U.S. assetsE) B) and C)
F) A) and D)

Question 7

In the open-economy macroeconomic model, the market for loanable funds equates national saving with

Accepted Answer

A)   domestic investment.
B)   net capital outflow.
C)   the sum of national consumption and government spending.
D)   the sum of domestic investment and net capital outflow.E) B) and C)
F) All of the above

Question 8

When a country experiences capital flight, its net capital outflow,

Accepted Answer

A)   which is part of the demand for loanable funds, increases.
B)   which is part of the supply of loanable funds, increases.
C)   which is part of the demand for loanable funds, decreases.
D)   which is part of the supply of loanable funds, decreases.E) A) and B)
F) All of the above

Question 9

If policymakers impose import restrictions on clothing, the U.S. trade deficit will shrink.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

The interest rate fa...

Question 11

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

Question 12

If a country places tariffs on imported goods, then

Accepted Answer

A)   its currency appreciates which reduces exports.
B)   its currency appreciates which increases exports.
C)   its currency depreciates which reduces exports.
D)   its currency depreciates which increases exports.E) All of the above
F) A) and B)

Question 13

At the original exchange rate an import quota

Accepted Answer

A)   creates a surplus in the market for foreign-currency exchange, so the exchange rate rises.
B)   creates a surplus in the market for foreign-currency exchange, so the exchange rate falls.
C)   creates a shortage in the market for foreign-currency exchange, so the exchange rate rises.
D)   creates a shortage in the market for foreign-currency exchange, so the exchange rate falls.E) None of the above
F) A) and D)

Question 14

In equilibrium a country has a net capital outflow of $200 billion and domestic investment of $150 billion. What is the quantity of loanable funds demanded?

Accepted Answer

A)   $50 billion
B)   $150 billion
C)   $200 billion
D)   $350 billionE) B) and C)
F) All of the above

Question 15

In the open-economy macroeconomic model, net capital outflow rises if

Accepted Answer

A)   either the exchange rate rises or the real interest rate falls.
B)   either the exchange rate falls or the real interest rate rises.
C)   the real interest rate rises. Net capital outflow does not depend on the exchange rate.
D)   the real interest rate falls. Net capital outflow does not depend on the exchange rate.E) A) and B)
F) A) and C)

Question 16

What is the source of the demand for dollars in the market for foreign-currency exchange?

Accepted Answer

The answer of What is the source of the demand...

Question 17

If the French government increases its expenditures and reduces taxes, then France's interest rate

Accepted Answer

A)   and its exchange rate rise.
B)   rises and its exchange rate falls.
C)   falls and its exchange rate rises.
D)   and its exchange rate fall.E) A) and C)
F) B) and C)

Question 18

If for some reason Americans desired to decrease their purchases of foreign assets, then other things the same

Accepted Answer

A)   both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency exchange would fall.
B)   both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency would rise.
C)   the real exchange rate would rise and the quantity of dollars exchanged in the market for foreign-currency would fall.
D)   the real exchange rate would fall and the quantity of dollars exchanged in the market for foreign-currency would rise.E) A) and B)
F) A) and C)

Question 19

Refer to U.S. Investment Tax Credit. What happens to the interest rate, U.S. net capital outflow, and the net capital outflow of foreign countries?

Accepted Answer

The interest rate ri...

Question 20

Over the past three decades, the United States has

Accepted Answer

A)   generally had, or been very near to a trade balance.
B)   had trade deficits in about as many years as it has trade surpluses.
C)   persistently had a trade deficit.
D)   persistently had a trade surplus.E) B) and C)
F) None of the above

Exam 19: A Macroeconomic Theory of the Open Economy

A U.S. grocery chain borrows money to buy a warehouse in Ohio and another in Italy. Borrowing for which warehouses) is included in the demand for loanable funds in the U.S.?

Correct AnswerverifiedShow Answer

When a country experiences capital flight, its net capital outflow,

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, net capital outflow rises if

Correct AnswerverifiedShow Answer

Refer to U.S. Investment Tax Credit. What happens to the interest rate, U.S. net capital outflow, and the net capital outflow of foreign countries?

Correct AnswerverifiedThe interest rate ri...View AnswerShow Answer

Suppose a country experiences capital flight. Of the demand for loanable funds and the supply of currency in the market for foreign-currency exchange, which shifts right?

Correct AnswerverifiedShow Answer

A rise in the budget deficit

Correct AnswerverifiedShow Answer

If policymakers impose import restrictions on clothing, the U.S. trade deficit will shrink.

Correct AnswerverifiedShow Answer

At the original exchange rate an import quota

Correct AnswerverifiedShow Answer

If for some reason Americans desired to decrease their purchases of foreign assets, then other things the same

Correct AnswerverifiedShow Answer

What is the source of the demand for dollars in the market for foreign-currency exchange?

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, the market for loanable funds equates national saving with

Correct AnswerverifiedShow Answer

In equilibrium a country has a net capital outflow of $200 billion and domestic investment of $150 billion. What is the quantity of loanable funds demanded?

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, if net capital outflow increases then

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedThe interest rate fa...View AnswerShow Answer

If the French government increases its expenditures and reduces taxes, then France's interest rate

Correct AnswerverifiedShow Answer

Over the past three decades, the United States has

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

If a country places tariffs on imported goods, then

Correct AnswerverifiedShow Answer

If people thought that many banks in a certain country were at or near the point of bankruptcy, then that country's interest rate

Correct AnswerverifiedShow Answer

If the budget deficit increases, then

Correct AnswerverifiedShow Answer

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The interest rate ri...
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The interest rate fa...
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