Question 1

In the open-economy macroeconomic model,net exports equal the quantity of dollars demanded in the foreign-currency exchange market.

Accepted Answer

A) True 
 B)False

Question 2

According to the open-economy macroeconomic model,import quotas increase which of the following

Accepted Answer

A)  net exports and net capital outflow 
B)  net exports but not net capital outflow. 
C)  net capital outflow but not net exports. 
D)  neither net exports nor net capital outflow. 
A)  net exports and net capital outflow 
B)  net exports but not net capital outflow. 
C)  net capital outflow but not net exports. 
D)  neither net exports nor net capital outflow.

Question 3

In the open-economy macroeconomic model,the key determinant of net capital outflow is the

Accepted Answer

A)  nominal exchange rate. 
B)  nominal interest rate. 
C)  real exchange rate. 
D)  real interest rate. 
A)  nominal exchange rate. 
B)  nominal interest rate. 
C)  real exchange rate. 
D)  real interest rate.

Question 4

Other things the same,a lower real interest rate decreases the quantity of

Accepted Answer

A)  loanable funds demanded. 
B)  loanable funds supplied. 
C)  domestic investment. 
D)  net capital outflow. 
A)  loanable funds demanded. 
B)  loanable funds supplied. 
C)  domestic investment. 
D)  net capital outflow.

Question 5

When Mexico suffered from capital flight in 1994,U.S.demand for loanable funds

Accepted Answer

A)  and U.S.net capital outflow rose. 
B)  and U.S.net capital outflow fell. 
C)  fell and U.S.net capital outflow rose. 
D)  rose and U.S.net capital outflow fell. 
A)  and U.S.net capital outflow rose. 
B)  and U.S.net capital outflow fell. 
C)  fell and U.S.net capital outflow rose. 
D)  rose and U.S.net capital outflow fell.

Question 6

If the exchange rate rises,domestic goods become relatively ______ expensive.This change in the affordability of domestic goods makes domestic goods _____ attractive to foreigners.So,_______ ______.

Accepted Answer

more,less,

Question 7

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. 
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.

Question 8

A limit on the quantity of a good produced abroad that can be purchased domestically is called a(n)

Accepted Answer

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

Question 9

In the open-economy macroeconomic model,the key determinant of net capital outflow is

Accepted Answer

A)  the real exchange rate.When the real exchange rate rises,net capital outflow rises. 
B)  the real exchange rate.When the real exchange rate rises,net capital outflow falls. 
C)  the real interest rate.When the real interest rate rises,net capital outflow rises. 
D)  the real interest rate.When the real interest rate rises,net capital outflow falls. 
A)  the real exchange rate.When the real exchange rate rises,net capital outflow rises. 
B)  the real exchange rate.When the real exchange rate rises,net capital outflow falls. 
C)  the real interest rate.When the real interest rate rises,net capital outflow rises. 
D)  the real interest rate.When the real interest rate rises,net capital outflow falls.

Question 10

Other things the same,an increase in the U.S.real interest rate induces

Accepted Answer

A)  Americans to buy more foreign assets,which increases U.S.net capital outflow. 
B)  Americans to buy more foreign assets,which reduces U.S.net capital outflow. 
C)  foreigners to buy more U.S.assets,which reduces U.S.net capital outflow. 
D)  foreigners to buy more U.S.assets,which increases U.S.net capital outflow. 
A)  Americans to buy more foreign assets,which increases U.S.net capital outflow. 
B)  Americans to buy more foreign assets,which reduces U.S.net capital outflow. 
C)  foreigners to buy more U.S.assets,which reduces U.S.net capital outflow. 
D)  foreigners to buy more U.S.assets,which increases U.S.net capital outflow.

Question 11

How are the identities S = NCO + I and NCO = NX related to the foreign currency exchange market and the loanable funds market?

Accepted Answer

S is national saving,which is the source

Question 12

Other things the same,if the real interest rate in a country falls,domestic residents will desire to purchase

Accepted Answer

A)  more capital goods and more foreign bonds. 
B)  more capital goods but fewer foreign bonds. 
C)  more foreign bonds but fewer capital goods. 
D)  fewer capital goods and fewer foreign bonds. 
A)  more capital goods and more foreign bonds. 
B)  more capital goods but fewer foreign bonds. 
C)  more foreign bonds but fewer capital goods. 
D)  fewer capital goods and fewer foreign bonds.

Question 13

When the U.S.real interest rate falls,owning U.S.assets becomes

Accepted Answer

A)  less attractive and so U.S.net capital outflow rises. 
B)  less attractive and so U.S.net capital outflow falls. 
C)  more attractive and so U.S.net capital outflow rises. 
D)  more attractive and so U.S.net capital outflow falls. 
A)  less attractive and so U.S.net capital outflow rises. 
B)  less attractive and so U.S.net capital outflow falls. 
C)  more attractive and so U.S.net capital outflow rises. 
D)  more attractive and so U.S.net capital outflow falls.

Question 14

If the quantity of loanable funds supplied is greater than the quantity demanded,then

Accepted Answer

A)  there is a shortage of loanable funds and the interest rate will fall. 
B)  there is a shortage of loanable funds and the interest rate will rise. 
C)  there is a surplus of loanable funds and the interest rate will fall. 
D)  there is a surplus of loanable funds and the interest rate will rise. 
A)  there is a shortage of loanable funds and the interest rate will fall. 
B)  there is a shortage of loanable funds and the interest rate will rise. 
C)  there is a surplus of loanable funds and the interest rate will fall. 
D)  there is a surplus of loanable funds and the interest rate will rise.

Question 15

If Argentina suffers from capital flight,Argentinean domestic investment and Argentinean net exports will both decline.

Accepted Answer

A) True 
 B)False

Question 16

Many U.S.business leaders argue that the current state of U.S.net exports is the result of

Accepted Answer

A)  U.S.export subsidies. 
B)  free trade policies of foreign governments. 
C)  unproductive U.S.workers. 
D)  unfair foreign competition. 
A)  U.S.export subsidies. 
B)  free trade policies of foreign governments. 
C)  unproductive U.S.workers. 
D)  unfair foreign competition.

Question 17

If the government of Kenya implemented a policy that decreased national saving,its real exchange rate would

Accepted Answer

A)  depreciate and Kenyan net exports would rise. 
B)  depreciate and Kenyan net exports would fall. 
C)  appreciate and Kenyan net exports would rise. 
D)  appreciate and Kenyan net exports would fall. 
A)  depreciate and Kenyan net exports would rise. 
B)  depreciate and Kenyan net exports would fall. 
C)  appreciate and Kenyan net exports would rise. 
D)  appreciate and Kenyan net exports would fall.

Question 18

Suppose the U.S.government institutes a "Buy American" campaign,in order to encourage spending on domestic goods.What effect will this have on the U.S.trade balance?

Accepted Answer

Such a campaign will increase the demand

Question 19

In the open-economy macroeconomic model,other things the same,an increase in the exchange rate raises the quantity of dollars supplied in the market for foreign-currency exchange.

Accepted Answer

A) True 
 B)False

Question 20

An increase in the government budget deficit shifts the demand for loanable funds to the right.

Accepted Answer

A) True 
 B)False

Exam 32: A Macroeconomic Theory of the Open Economy

In the open-economy macroeconomic model,net exports equal the quantity of dollars demanded in the foreign-currency exchange market.

According to the open-economy macroeconomic model,import quotas increase which of the following

In the open-economy macroeconomic model,the key determinant of net capital outflow is the

Other things the same,a lower real interest rate decreases the quantity of

When Mexico suffered from capital flight in 1994,U.S.demand for loanable funds

If the exchange rate rises,domestic goods become relatively ______ expensive.This change in the affordability of domestic goods makes domestic goods _____ attractive to foreigners.So,_______ ______.

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

A limit on the quantity of a good produced abroad that can be purchased domestically is called a(n)

In the open-economy macroeconomic model,the key determinant of net capital outflow is

Other things the same,an increase in the U.S.real interest rate induces

How are the identities S = NCO + I and NCO = NX related to the foreign currency exchange market and the loanable funds market?

Other things the same,if the real interest rate in a country falls,domestic residents will desire to purchase

When the U.S.real interest rate falls,owning U.S.assets becomes

If the quantity of loanable funds supplied is greater than the quantity demanded,then

If Argentina suffers from capital flight,Argentinean domestic investment and Argentinean net exports will both decline.

Many U.S.business leaders argue that the current state of U.S.net exports is the result of

If the government of Kenya implemented a policy that decreased national saving,its real exchange rate would

Suppose the U.S.government institutes a "Buy American" campaign,in order to encourage spending on domestic goods.What effect will this have on the U.S.trade balance?

In the open-economy macroeconomic model,other things the same,an increase in the exchange rate raises the quantity of dollars supplied in the market for foreign-currency exchange.

An increase in the government budget deficit shifts the demand for loanable funds to the right.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply,demand,and Government Policies

Consumers,producers,and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Market for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving,investment,and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

If the exchange rate rises,domestic goods become relatively ____ expensive.This change in the affordability of domestic goods makes domestic goods _ attractive to foreigners.So,_ __.