Question 1

When a government increases its budget deficit, then that country's

Accepted Answer

A) supply of loanable funds shifts right. 
B) supply of loanable funds shifts left. 
C) demand for loanable funds shifts right. 
D) demand for loanable funds shifts left. 
A) supply of loanable funds shifts right. 
B) supply of loanable funds shifts left. 
C) demand for loanable funds shifts right. 
D) demand for loanable funds shifts left.

Question 2

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. bonds 
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. bonds

Question 3

In the open-economy macroeconomic model, net capital outflow links the markets for loanable funds and foreign-currency exchange.

Accepted Answer

A) True 
 B)False

Question 4

Other things the same, a decrease 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 5

When the U.S. real interest rate falls

Accepted Answer

A) U.S. purchases of foreign assets and foreign purchases of U.S. assets rise 
B) U.S. purchases of foreign assets rise and foreign purchases of U.S. assets fall 
C) U.S. purchases of foreign assets fall and foreign purchases of U.S. assets rise 
D) U.S. purchases of foreign assets and foreign purchases of U.S. assets fall 
A) U.S. purchases of foreign assets and foreign purchases of U.S. assets rise 
B) U.S. purchases of foreign assets rise and foreign purchases of U.S. assets fall 
C) U.S. purchases of foreign assets fall and foreign purchases of U.S. assets rise 
D) U.S. purchases of foreign assets and foreign purchases of U.S. assets fall

Question 6

A trade policy is a government policy

Accepted Answer

A) directed toward the goal of improving the tradeoff between equity and efficiency. 
B) that directly influences the quantity of goods and services that a country imports or exports. 
C) intended to exploit the tradeoff between inflation and unemployment by altering the budget deficit. 
D) concerning employment laws. 
A) directed toward the goal of improving the tradeoff between equity and efficiency. 
B) that directly influences the quantity of goods and services that a country imports or exports. 
C) intended to exploit the tradeoff between inflation and unemployment by altering the budget deficit. 
D) concerning employment laws.

Question 7

According to the open-economy macroeconomic model, if the United States moved from a government budget deficit to a government budget surplus, U.S. real interest rates would increase and the real exchange rate of the U.S. dollar would appreciate.

Accepted Answer

A) True 
 B)False

Question 8

Capital flight refers to

Accepted Answer

A) the movement of workers across international borders in response to exchange rate changes. 
B) the movement of funds between financial intermediaries when interest rates change. 
C) the ability of foreign direct investment to lift a country out of poverty. 
D) a large and sudden movement of funds out of a country. 
A) the movement of workers across international borders in response to exchange rate changes. 
B) the movement of funds between financial intermediaries when interest rates change. 
C) the ability of foreign direct investment to lift a country out of poverty. 
D) a large and sudden movement of funds out of a country.

Question 9

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

Accepted Answer

A) raises net capital outflow which decreases the quantity of loanable funds demanded. 
B) raises net capital outflow which increases the quantity of loanable funds demanded. 
C) lowers net capital outflow which decreases the quantity of loanable funds demanded. 
D) lowers net capital outflow which increases the quantity of loanable funds demanded. 
A) raises net capital outflow which decreases the quantity of loanable funds demanded. 
B) raises net capital outflow which increases the quantity of loanable funds demanded. 
C) lowers net capital outflow which decreases the quantity of loanable funds demanded. 
D) lowers net capital outflow which increases the quantity of loanable funds demanded.

Question 10

Capital flight raises a country's interest rate.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) national saving. 
B) private saving. 
C) domestic investment. 
D) the sum of domestic investment and net capital outflow. 
A) national saving. 
B) private saving. 
C) domestic investment. 
D) the sum of domestic investment and net capital outflow.

Question 12

Other things the same, a higher real interest rate raises the quantity of

Accepted Answer

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

Question 13

In the market for foreign-currency exchange, the source of the supply of dollars is _________. The supply curve is _________ because _____________.

Accepted Answer

net capital outflow,

Question 14

Which of the following is the correct way to show the effects of a newly imposed import quota?

Accepted Answer

A) shift the demand for loanable funds left, the supply of dollars in the market for foreign- currency exchange left, and the demand for dollars in the market for foreign-currency exchange right 
B) shift the demand for loanable funds left, the supply of dollars in the market for foreign- currency exchange right, and the demand for dollars in the market for foreign-currency exchange left 
C) shift the demand for dollars in the market for foreign-currency exchange to the right 
D) shift the supply of dollars in the market for foreign-currency exchange to the left 
A) shift the demand for loanable funds left, the supply of dollars in the market for foreign- currency exchange left, and the demand for dollars in the market for foreign-currency exchange right 
B) shift the demand for loanable funds left, the supply of dollars in the market for foreign- currency exchange right, and the demand for dollars in the market for foreign-currency exchange left 
C) shift the demand for dollars in the market for foreign-currency exchange to the right 
D) shift the supply of dollars in the market for foreign-currency exchange to the left

Question 15

In the open-economy macroeconomic model, which of the following increases net capital outflow?

Accepted Answer

A) a fall in the real exchange rate, but not a fall in the real interest rate 
B) a fall in the real interest rate, but not a fall in the real exchange rate 
C) both a fall in the real exchange rate and a fall in the real interest rate 
D) neither a fall in the real exchange rate nor a fall in the real interest rate 
A) a fall in the real exchange rate, but not a fall in the real interest rate 
B) a fall in the real interest rate, but not a fall in the real exchange rate 
C) both a fall in the real exchange rate and a fall in the real interest rate 
D) neither a fall in the real exchange rate nor a fall in the real interest rate

Question 16

In the open-economy macroeconomic model, other things the same, when a U.S. resident imports a foreign good, the demand for dollars in the foreign-currency exchange market decreases.

Accepted Answer

A) True 
 B)False

Question 17

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 18

In the open-economy macroeconomic model, the supply of dollars in the market for foreign-currency exchange comes from

Accepted Answer

A) national saving 
B) domestic investment 
C) net exports 
D) net capital outflow 
A) national saving 
B) domestic investment 
C) net exports 
D) net capital outflow

Question 19

Suppose that U.S. savers decide that holding Brazilian assets has become riskier. What happens to U.S. net capital outflow? What happens to the U.S. real interest rate?

Accepted Answer

U.S. net capital outflow decre

Question 20

In the open-economy macroeconomic model, if for some reason foreign citizens want to purchase more U.S. goods and services at each exchange rate, 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. 
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.

Exam 32: A Macroeconomic Theory of the Open Economy

When a government increases its budget deficit, then that country's

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

In the open-economy macroeconomic model, net capital outflow links the markets for loanable funds and foreign-currency exchange.

Other things the same, a decrease in the U.S. real interest rate induces

When the U.S. real interest rate falls

A trade policy is a government policy

According to the open-economy macroeconomic model, if the United States moved from a government budget deficit to a government budget surplus, U.S. real interest rates would increase and the real exchange rate of the U.S. dollar would appreciate.

Capital flight refers to

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

Capital flight raises a country's interest rate.

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

Other things the same, a higher real interest rate raises the quantity of

In the market for foreign-currency exchange, the source of the supply of dollars is _________. The supply curve is _________ because _____________.

Which of the following is the correct way to show the effects of a newly imposed import quota?

In the open-economy macroeconomic model, which of the following increases net capital outflow?

In the open-economy macroeconomic model, other things the same, when a U.S. resident imports a foreign good, the demand for dollars in the foreign-currency exchange market decreases.

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

In the open-economy macroeconomic model, the supply of dollars in the market for foreign-currency exchange comes from

Suppose that U.S. savers decide that holding Brazilian assets has become riskier. What happens to U.S. net capital outflow? What happens to the U.S. real interest rate?

In the open-economy macroeconomic model, if for some reason foreign citizens want to purchase more U.S. goods and services at each exchange rate, then

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

In the market for foreign-currency exchange, the source of the supply of dollars is _____. The supply curve is _ because _________.