Question 1

What happens to each of the following if the supply of loanable funds shifts left?
A. the interest rate
B. net capital outflow
C. the exchange rate

Accepted Answer

The interest rate ri

Question 2

In the open-economy macroeconomic model, equilibrium in the market for foreign-currency exchange is determined by the equality between the supply of dollars which comes from

Accepted Answer

A) U.S. national saving and the demand for dollars for U.S. net exports. 
B) U.S. net capital outflow and the demand for dollars for U.S. net exports. 
C) domestic investment and the demand for U.S. net exports. 
D) foreign demand for U.S. goods and services and U.S. demand for foreign goods and services. 
A) U.S. national saving and the demand for dollars for U.S. net exports. 
B) U.S. net capital outflow and the demand for dollars for U.S. net exports. 
C) domestic investment and the demand for U.S. net exports. 
D) foreign demand for U.S. goods and services and U.S. demand for foreign goods and services.

Question 3

According to the open-economy macroeconomic model, if the U.S. government budget deficit increases, then both U.S. domestic investment and U.S. net capital outflow decrease.

Accepted Answer

A) True 
 B)False

Question 4

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. 
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.

Question 5

The open-economy macroeconomic model includes

Accepted Answer

A) only the market for loanable funds. 
B) only the market for foreign-currency exchange. 
C) both the market for loanable funds and the market for foreign-currency exchange. 
D) neither the market for loanable funds nor the market for foreign-currency exchange. 
A) only the market for loanable funds. 
B) only the market for foreign-currency exchange. 
C) both the market for loanable funds and the market for foreign-currency exchange. 
D) neither the market for loanable funds nor the market for foreign-currency exchange.

Question 6

Other things the same, if the interest rate falls, then

Accepted Answer

A) firms will want to borrow more, which increases the quantity of loanable funds demanded. 
B) firms will want to borrow less, which decreases the quantity of loanable funds demanded. 
C) firms will want to borrow more, which increase the quantity of loanable funds supplied. 
D) firms will want to borrow less, which decreases the quantity of loanable funds supplied. 
A) firms will want to borrow more, which increases the quantity of loanable funds demanded. 
B) firms will want to borrow less, which decreases the quantity of loanable funds demanded. 
C) firms will want to borrow more, which increase the quantity of loanable funds supplied. 
D) firms will want to borrow less, which decreases the quantity of loanable funds supplied.

Question 7

If the U.S. raised its tariff on tires, then at the original exchange rate there would be a

Accepted Answer

A) surplus in the market for foreign-currency exchange, so the real exchange rate would appreciate. 
B) surplus in the market for foreign-currency exchange, so the real exchange rate would depreciate. 
C) shortage in the market for foreign-currency exchange, so the real exchange rate would appreciate. 
D) shortage in the market for foreign-currency exchange, so the real exchange rate would depreciate. 
A) surplus in the market for foreign-currency exchange, so the real exchange rate would appreciate. 
B) surplus in the market for foreign-currency exchange, so the real exchange rate would depreciate. 
C) shortage in the market for foreign-currency exchange, so the real exchange rate would appreciate. 
D) shortage in the market for foreign-currency exchange, so the real exchange rate would depreciate.

Question 8

Figure 32-2  
-Refer to Figure 32-2. If the real exchange rate is 1, then there is a

Accepted Answer

A) surplus of 100 so the real exchange rate will fall. 
B) surplus of 100 so the real exchange rate will rise. 
C) shortage of 100 so the real exchange rate will fall. 
D) shortage of 100 so the real exchange rate will rise. 
A) surplus of 100 so the real exchange rate will fall. 
B) surplus of 100 so the real exchange rate will rise. 
C) shortage of 100 so the real exchange rate will fall. 
D) shortage of 100 so the real exchange rate will rise.

Question 9

A U.S.-imposed quota on automobiles would shift

Accepted Answer

A) both the demand and supply curves in the market for foreign-currency exchange right. 
B) Both the demand and supply curves in the market for foreign-currency exchange right. 
C) only the demand curve in the market for foreign-currency exchange right. 
D) only the supply curve in the market for foreign-currency exchange right. 
A) both the demand and supply curves in the market for foreign-currency exchange right. 
B) Both the demand and supply curves in the market for foreign-currency exchange right. 
C) only the demand curve in the market for foreign-currency exchange right. 
D) only the supply curve in the market for foreign-currency exchange right.

Question 10

Figure 32-2  
-Refer to Figure 32-2. At what real exchange rate is the quantity of dollars demanded equal to 500?

Accepted Answer

A) 1 
B) .8 
C) .6 
D) None of the above are correct. 
A) 1 
B) .8 
C) .6 
D) None of the above are correct.

Question 11

If U.S. citizens decide to purchase more foreign assets at each interest rate, the U.S. real interest rate

Accepted Answer

A) increases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases. 
B) increases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases. 
C) decreases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow decreases. 
D) decreases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow increases. 
A) increases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases. 
B) increases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases. 
C) decreases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow decreases. 
D) decreases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow increases.

Question 12

A country produces two goods, soda and chips. It currently exports soda and imports chips. If it were to impose a tariff on chips,

Accepted Answer

A) both imports of chips and exports of sodas would rise. 
B) imports of chips would rise, but exports of sodas would fall. 
C) imports of chips would fall, but exports of sodas would rise. 
D) both imports of chips and exports of sodas would fall. 
A) both imports of chips and exports of sodas would rise. 
B) imports of chips would rise, but exports of sodas would fall. 
C) imports of chips would fall, but exports of sodas would rise. 
D) both imports of chips and exports of sodas would fall.

Question 13

Which of the following would do the most to reduce a trade deficit?

Accepted Answer

A) increase domestic saving 
B) increase domestic political stability and respect of property rights 
C) other countries reduce their trade restrictions 
D) raise tariffs 
A) increase domestic saving 
B) increase domestic political stability and respect of property rights 
C) other countries reduce their trade restrictions 
D) raise tariffs

Question 14

In the open-economy macroeconomic model, if the supply of loanable funds shifts right, then

Accepted Answer

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

Question 15

Figure 32-1  
-Refer to Figure 32-1. If the real interest rate is 6 percent, the quantity of loanable funds demanded is

Accepted Answer

A) $20 billion, and the quantity supplied is $40 billion. 
B) $20 billion, and the quantity supplied is $60 billion. 
C) $60 billion, and the quantity supplied is $20 billion. 
D) $60 billion, and the quantity supplied is $40 billion. 
A) $20 billion, and the quantity supplied is $40 billion. 
B) $20 billion, and the quantity supplied is $60 billion. 
C) $60 billion, and the quantity supplied is $20 billion. 
D) $60 billion, and the quantity supplied is $40 billion.

Question 16

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. 
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.

Question 17

What do trade policies do to the standard of living?

Accepted Answer

Trade policies reduce both imports and e

Question 18

Which of the following decrease if the U.S. imposes an import quota on computer components?

Accepted Answer

A) U.S. exports and U.S. imports 
B) U.S. exports but not U.S. imports 
C) U.S. imports but not U.S. exports 
D) neither U.S. exports nor U.S. imports 
A) U.S. exports and U.S. imports 
B) U.S. exports but not U.S. imports 
C) U.S. imports but not U.S. exports 
D) neither U.S. exports nor U.S. imports

Question 19

Which of the following contains a list only of things that increase when the budget deficit of the U.S. decreases?

Accepted Answer

A) U.S. supply of loanable funds, U.S. net capital outflow, U.S. domestic investment 
B) U.S. supply of loanable funds, U.S. exports, the real exchange rate of the dollar 
C) U.S. interest rates, the real exchange rate of the dollar, U.S. domestic investment 
D) the real exchange rate of the dollar, U.S. net capital outflow, U.S. net exports 
A) U.S. supply of loanable funds, U.S. net capital outflow, U.S. domestic investment 
B) U.S. supply of loanable funds, U.S. exports, the real exchange rate of the dollar 
C) U.S. interest rates, the real exchange rate of the dollar, U.S. domestic investment 
D) the real exchange rate of the dollar, U.S. net capital outflow, U.S. net exports

Question 20

When a country suffers from capital flight, the demand for loanable funds in that country shifts

Accepted Answer

A) right, which increases interest rates in that country. 
B) right, which decreases interest rates in that country. 
C) left, which increases interest rates in that country. 
D) left, which decreases interest rates in that country. 
A) right, which increases interest rates in that country. 
B) right, which decreases interest rates in that country. 
C) left, which increases interest rates in that country. 
D) left, which decreases interest rates in that country.

Exam 32: A Macroeconomic Theory of the Open Economy

What happens to each of the following if the supply of loanable funds shifts left? A. the interest rate B. net capital outflow C. the exchange rate

In the open-economy macroeconomic model, equilibrium in the market for foreign-currency exchange is determined by the equality between the supply of dollars which comes from

According to the open-economy macroeconomic model, if the U.S. government budget deficit increases, then both U.S. domestic investment and U.S. net capital outflow decrease.

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

The open-economy macroeconomic model includes

Other things the same, if the interest rate falls, then

If the U.S. raised its tariff on tires, then at the original exchange rate there would be a

Figure 32-2 -Refer to Figure 32-2. If the real exchange rate is 1, then there is a

A U.S.-imposed quota on automobiles would shift

Figure 32-2 -Refer to Figure 32-2. At what real exchange rate is the quantity of dollars demanded equal to 500?

If U.S. citizens decide to purchase more foreign assets at each interest rate, the U.S. real interest rate

A country produces two goods, soda and chips. It currently exports soda and imports chips. If it were to impose a tariff on chips,

Which of the following would do the most to reduce a trade deficit?

In the open-economy macroeconomic model, if the supply of loanable funds shifts right, then

Figure 32-1 -Refer to Figure 32-1. If the real interest rate is 6 percent, the quantity of loanable funds demanded is

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

What do trade policies do to the standard of living?

Which of the following decrease if the U.S. imposes an import quota on computer components?

Which of the following contains a list only of things that increase when the budget deficit of the U.S. decreases?

When a country suffers from capital flight, the demand for loanable funds in that country shifts

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

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