Question 1

In the open-economy macroeconomic model, if the supply of loanable funds increases, net capital outflow

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

Question 2

When Mexico suffered from capital flight in 1994, the U.S. real interest rate

Accepted Answer

A)   rose and the real exchange rate of the dollar appreciated.
B)   rose and the real exchange rate of the dollar depreciated.
C)   fell and the real exchange rate of the dollar appreciated.
D)   fell and the real exchange rate of the dollar depreciated.E) None of the above
F) All of the above

Question 3

In the open economy macroeconomic model, the amount of dollars demanded in the market for foreign-currency exchange at a given real exchange rate increases if

Accepted Answer

A)   either U.S. imports or exports increase.
B)   either U.S. imports or exports decrease.
C)   either U.S. imports increase or U.S. exports decrease.
D)   either U.S. imports decrease or U.S. exports increase.E) B) and D)
F) B) and C)

Question 4

Although trade policies do not affect a country's overall trade balance, they do affect specific firms and industries.

Accepted Answer

A) True 
 B)False

Question 5

When the U.S. real exchange rate appreciates, U.S. goods become

Accepted Answer

A)   more attractive to consumers in the U.S. and abroad.
B)   more attractive to consumers in the U.S. and less attractive to consumers abroad.
C)   less attractive to consumers in the U.S. and abroad.
D)   less attractive to consumers in the U.S. and more attractive to consumers abroad.E) B) and C)
F) A) and C)

Question 6

In the open-economy macroeconomic model, a decrease in the domestic interest rate shifts

Accepted Answer

A)   demand in the market for foreign-currency exchange to the right.
B)   demand in the market for foreign-currency exchange to the left.
C)   supply in the market for foreign-currency exchange to the right.
D)   supply in the market for foreign-currency exchange to the left.E) C) and D)
F) A) and B)

Question 7

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

Question 8

In the open-economy macroeconomic model, the supply of loanable funds comes from

Accepted Answer

A)   national saving. Demand comes from only domestic investment.
B)   national saving. Demand comes from domestic investment and net capital outflow.
C)   Only net capital outflow. Demand for loanable funds comes from national saving.
D)   domestic investment and net capital outflow. Demand for loanable funds comes from national saving.E) All of the above
F) B) and D)

Question 9

If the U.S. were to impose import quotas

Accepted Answer

A)   the demand for loanable funds and the demand for dollars in the market for foreign-currency exchange would both increase.
B)   nether the demand for loanable funds nor the demand for dollars in the market for foreign-currency exchange would increase.
C)   the demand for loanable funds would increase, but the demand for dollars in the market for foreign-currency exchange would not.
D)   the demand for dollars in the market for foreign-currency exchange would increase, but the demand for loanable funds would not.E) All of the above
F) B) and C)

Question 10

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

Question 11

If a U.S. resident purchases a foreign bond, her transactions are included

Accepted Answer

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

Question 12

Other things the same, as the real interest rate falls

Accepted Answer

A)   domestic investment and net capital outflow both rise.
B)   domestic investment and net capital outflow both fall.
C)   domestic investment rises and net capital outflow falls.
D)   domestic investment falls and net capital outflow rises.E) A) and D)
F) C) and D)

Question 13

If at a given real interest rate desired national saving were $50 billion, domestic investment were $40 billion, and net capital outflow were $20 billion, then at that real interest rate in the loanable funds market there would be a

Accepted Answer

A)   surplus. The real interest rate would rise.
B)   surplus. The real interest rate would fall.
C)   shortage. The real interest rate would rise.
D)   shortage. The interest rate would fall.E) A) and B)
F) C) and D)

Question 14

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

Question 15

In which case(s)  does(do)  a country's demand for loanable funds shift right?

Accepted Answer

A)   both an increase in the budget deficit and capital flight
B)   an increase in the budget deficit, but not capital flight
C)   capital flight, but not an increase in the budget deficit
D)   neither an increase in the budget deficit nor capital flightE) B) and C)
F) A) and D)

Exam 14: A Macroeconomic Theory of the Open Economy

In which case(s) does(do) a country's demand for loanable funds shift right?

Correct Answer
verified

If a U.S. resident purchases a foreign bond, her transactions are included

Correct Answer
verified

Although trade policies do not affect a country's overall trade balance, they do affect specific firms and industries.

Correct Answer
verified

In the open-economy macroeconomic model, a decrease in the domestic interest rate shifts

Correct Answer
verified

In the open-economy macroeconomic model, if the supply of loanable funds increases, net capital outflow

Correct Answer
verified

If at a given real interest rate desired national saving were $50 billion, domestic investment were $40 billion, and net capital outflow were $20 billion, then at that real interest rate in the loanable funds market there would be a

Correct Answer
verified

A tax on imported goods is called a(n)

Correct Answer
verified

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

Correct Answer
verified

In the open economy macroeconomic model, the amount of dollars demanded in the market for foreign-currency exchange at a given real exchange rate increases if

Correct Answer
verified

When the U.S. real exchange rate appreciates, U.S. goods become

Correct Answer
verified

If the U.S. were to impose import quotas

Correct Answer
verified

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?

Correct Answer
verified

When Mexico suffered from capital flight in 1994, the U.S. real interest rate

Correct Answer
verified

In the open-economy macroeconomic model, the supply of loanable funds comes from

Correct Answer
verified

Other things the same, as the real interest rate falls

Correct Answer
verified

Exam 14: A Macroeconomic Theory of the Open Economy

In which case(s) does(do) a country's demand for loanable funds shift right?

Correct AnswerverifiedShow Answer

If a U.S. resident purchases a foreign bond, her transactions are included

Correct AnswerverifiedShow Answer

Although trade policies do not affect a country's overall trade balance, they do affect specific firms and industries.

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, a decrease in the domestic interest rate shifts

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, if the supply of loanable funds increases, net capital outflow

Correct AnswerverifiedShow Answer

If at a given real interest rate desired national saving were $50 billion, domestic investment were $40 billion, and net capital outflow were $20 billion, then at that real interest rate in the loanable funds market there would be a

Correct AnswerverifiedShow Answer

A tax on imported goods is called a(n)

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the open economy macroeconomic model, the amount of dollars demanded in the market for foreign-currency exchange at a given real exchange rate increases if

Correct AnswerverifiedShow Answer

When the U.S. real exchange rate appreciates, U.S. goods become

Correct AnswerverifiedShow Answer

If the U.S. were to impose import quotas

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

When Mexico suffered from capital flight in 1994, the U.S. real interest rate

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, the supply of loanable funds comes from

Correct AnswerverifiedShow Answer

Other things the same, as the real interest rate falls

Correct AnswerverifiedShow Answer

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