Question 1

In the open-economy macroeconomic model, the market for loanable funds identity can be written as

Accepted Answer

A) S = NCO - I 
B) S = NCO 
C) S = I - NCO 
D) S = I + NCO 
A) S = NCO - I 
B) S = NCO 
C) S = I - NCO 
D) S = I + NCO

Question 2

An increase in real interest rates in the United States

Accepted Answer

A) discourages both U.S. and foreign residents from buying U.S. assets. 
B) encourages both U.S. and foreign residents to buy U.S. assets. 
C) encourages U.S. residents to buy U.S. assets, but discourages foreign residents from buying U.S. assets. 
D) encourages foreign residents to buy U.S. assets, but discourages U.S. residents from buying U.S. assets. 
A) discourages both U.S. and foreign residents from buying U.S. assets. 
B) encourages both U.S. and foreign residents to buy U.S. assets. 
C) encourages U.S. residents to buy U.S. assets, but discourages foreign residents from buying U.S. assets. 
D) encourages foreign residents to buy U.S. assets, but discourages U.S. residents from buying U.S. assets.

Question 3

An increase in the budget deficit

Accepted Answer

A) reduces investment because the interest rate rises. 
B) reduces investment because the interest rate falls. 
C) raises investment because the interest rate rises. 
D) raises investment because the interest rate falls. 
A) reduces investment because the interest rate rises. 
B) reduces investment because the interest rate falls. 
C) raises investment because the interest rate rises. 
D) raises investment because the interest rate falls.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Refer to Depositors Move Funds Out of Greek Banks. Which curve in the domestic loanable funds market shifted and which direction did it shift?

Accepted Answer

The demand

Question 6

If a country had capital flight, then the real exchange rate would

Accepted Answer

A) fall. To offset this fall the government could increase the budget deficit. 
B) fall. To offset this fall the government could decrease the budget deficit. 
C) rise. To offset this rise the government could increase the budget deficit. 
D) rise. To offset this rise the government could decrease the budget deficit. 
A) fall. To offset this fall the government could increase the budget deficit. 
B) fall. To offset this fall the government could decrease the budget deficit. 
C) rise. To offset this rise the government could increase the budget deficit. 
D) rise. To offset this rise the government could decrease the budget deficit.

Question 7

A country has output of $600 billion, consumption of $350 billion, government expenditures of $90 billion and investment of $60 billion. What is its supply of loanable funds?

Accepted Answer

A) $160 billion 
B) $150 billion 
C) $60 billion 
D) $30 billion 
A) $160 billion 
B) $150 billion 
C) $60 billion 
D) $30 billion

Question 8

A country has domestic investment of $200 billion. Its citizens purchase $600 of foreign assets and foreign citizens purchase $300 of its assets. What is national saving?

Accepted Answer

A) $400 billion 
B) $500 billion 
C) $600 billion 
D) $800 billion 
A) $400 billion 
B) $500 billion 
C) $600 billion 
D) $800 billion

Question 9

Refer to Budget Reform. In the market for loanable funds which curve(s) does this policy change shift? Which direction does it shift?

Accepted Answer

Since the budget def

Question 10

When the government budget deficit increases, national saving decreases.

Accepted Answer

A) True 
 B)False

Question 11

Other things the same, an increase in the U.S. interest rate causes the quantity of loanable funds supplied to

Accepted Answer

A) rise because net capital outflow and domestic investment rise. 
B) rise because national saving rises. 
C) fall because net capital outflow and domestic investment rise. 
D) fall because national saving falls. 
A) rise because net capital outflow and domestic investment rise. 
B) rise because national saving rises. 
C) fall because net capital outflow and domestic investment rise. 
D) fall because national saving falls.

Question 12

If U.S. citizens decide to save a smaller fraction of their incomes, U.S. domestic investment

Accepted Answer

A) increases, and U.S. net capital outflow increases. 
B) increases, and U.S. net capital outflow decreases. 
C) decreases, and U.S. net capital outflow increases. 
D) decreases, and U.S. net capital outflow decreases. 
A) increases, and U.S. net capital outflow increases. 
B) increases, and U.S. net capital outflow decreases. 
C) decreases, and U.S. net capital outflow increases. 
D) decreases, and U.S. net capital outflow decreases.

Question 13

An open economy has GDP of $1,000 billion, consumption of $650 billion, government expenditures of $150 billion, and domestic investment of $40 billion. What is its demand for loanable funds?

Accepted Answer

A) $40 billion 
B) $120 billion 
C) $160 billion 
D) $200 billion 
A) $40 billion 
B) $120 billion 
C) $160 billion 
D) $200 billion

Question 14

If a country has a positive net capital outflow, then

Accepted Answer

A) on net it is purchasing assets from abroad. This adds to its demand for domestically generated loanable funds. 
B) on net it is purchasing assets from abroad. This subtracts from its demand for domestically generated loanable funds. 
C) on net other countries are purchasing assets from it. This adds to its demand for domestically generated loanable funds. 
D) on net other countries are purchasing assets from it. This subtracts from its demand for domestically generated loanable funds. 
A) on net it is purchasing assets from abroad. This adds to its demand for domestically generated loanable funds. 
B) on net it is purchasing assets from abroad. This subtracts from its demand for domestically generated loanable funds. 
C) on net other countries are purchasing assets from it. This adds to its demand for domestically generated loanable funds. 
D) on net other countries are purchasing assets from it. This subtracts from its demand for domestically generated loanable funds.

Question 15

Other things the same, a higher real exchange rate raises net exports.

Accepted Answer

A) True 
 B)False

Question 16

A country has national saving of $50 billion, government expenditures of $30 billion, domestic investment of $10 billion, and net capital outflow of $40 billion. What is its supply of loanable funds?

Accepted Answer

A) $20 billion 
B) $30 billion 
C) $50 billion 
D) $60 billion 
A) $20 billion 
B) $30 billion 
C) $50 billion 
D) $60 billion

Question 17

If the exchange rate rises, foreign residents want to purchase ______ domestic goods and domestic residents want to purchase _____ foreign goods. In the market for foreign-currency exchange, these changes are shown as a _______ in the quantity of dollars ______.

Accepted Answer

fewer, mor

Question 18

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. 
A) g. 
B) h. 
C) i. 
D) k.

Question 19

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

Accepted Answer

A) more attractive to both U.S. and foreign residents. 
B) more attractive to U.S. residents and less attractive to foreign residents. 
C) less attractive to U.S. residents and more attractive to foreign residents. 
D) less attractive to both U.S. residents and foreign residents. 
A) more attractive to both U.S. and foreign residents. 
B) more attractive to U.S. residents and less attractive to foreign residents. 
C) less attractive to U.S. residents and more attractive to foreign residents. 
D) less attractive to both U.S. residents and foreign residents.

Question 20

If the government of Canada increased its budget deficit, then domestic investment

Accepted Answer

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

Exam 32: A Macroeconomic Theory of the Open Economy

In the open-economy macroeconomic model, the market for loanable funds identity can be written as

An increase in real interest rates in the United States

An increase in the budget deficit

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

Refer to Depositors Move Funds Out of Greek Banks. Which curve in the domestic loanable funds market shifted and which direction did it shift?

If a country had capital flight, then the real exchange rate would

A country has output of $600 billion, consumption of $350 billion, government expenditures of $90 billion and investment of $60 billion. What is its supply of loanable funds?

A country has domestic investment of $200 billion. Its citizens purchase $600 of foreign assets and foreign citizens purchase $300 of its assets. What is national saving?

Refer to Budget Reform. In the market for loanable funds which curve(s) does this policy change shift? Which direction does it shift?

When the government budget deficit increases, national saving decreases.

Other things the same, an increase in the U.S. interest rate causes the quantity of loanable funds supplied to

If U.S. citizens decide to save a smaller fraction of their incomes, U.S. domestic investment

An open economy has GDP of $1,000 billion, consumption of $650 billion, government expenditures of $150 billion, and domestic investment of $40 billion. What is its demand for loanable funds?

If a country has a positive net capital outflow, then

Other things the same, a higher real exchange rate raises net exports.

A country has national saving of $50 billion, government expenditures of $30 billion, domestic investment of $10 billion, and net capital outflow of $40 billion. What is its supply of loanable funds?

If the exchange rate rises, foreign residents want to purchase ______ domestic goods and domestic residents want to purchase _____ foreign goods. In the market for foreign-currency exchange, these changes are shown as a _______ in the quantity of dollars ______.

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

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

If the government of Canada increased its budget deficit, then domestic investment

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

Applications: 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 Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

If the exchange rate rises, foreign residents want to purchase ____ domestic goods and domestic residents want to purchase _ foreign goods. In the market for foreign-currency exchange, these changes are shown as a _ in the quantity of dollars __.