Question 1

The primary focus of the open-economy macroeconomic model is the determination of GDP and the price level.

Accepted Answer

A) True 
 B)False

Question 2

Other things the same, people in the U.S. would want to save more if the real interest rate in the U.S.

Accepted Answer

A) fell. The increased saving would increase the quantity of loanable funds demanded. 
B) fell. The increased saving would increase the quantity of loanable funds supplied. 
C) rose. The increased saving would increase the quantity of loanable funds demanded. 
D) rose. The increased saving would increase the quantity of loanable funds supplied. 
A) fell. The increased saving would increase the quantity of loanable funds demanded. 
B) fell. The increased saving would increase the quantity of loanable funds supplied. 
C) rose. The increased saving would increase the quantity of loanable funds demanded. 
D) rose. The increased saving would increase the quantity of loanable funds supplied.

Question 3

Refer to U.S. Investment Tax Credit. In the market for loanable funds which curve shifts and which direction does it shift?

Accepted Answer

The demand

Question 4

If the supply of dollars in the market for foreign-currency exchange shifts left, then the exchange rate

Accepted Answer

A) rises and the quantity of dollars exchanged falls. 
B) rises and the quantity of dollars exchanged does not change. 
C) rises and the quantity of dollars exchanged rises. 
D) falls and the quantity of dollars exchanged does not change. 
A) rises and the quantity of dollars exchanged falls. 
B) rises and the quantity of dollars exchanged does not change. 
C) rises and the quantity of dollars exchanged rises. 
D) falls and the quantity of dollars exchanged does not change.

Question 5

When a country imposes a trade restriction, the real exchange rate of that country's currency appreciates.

Accepted Answer

A) True 
 B)False

Question 6

In the open-economy macroeconomic model, the real exchange rate does not affect net capital outflow.

Accepted Answer

A) True 
 B)False

Question 7

Refer to Budget Reform. This policy change causes the exchange rate to change. What does the change in the exchange rate to do to net exports?

Accepted Answer

Because the exchange

Question 8

Imposing an import quota causes the domestic real exchange rate to

Accepted Answer

A) appreciate, which increases foreign demand for domestic goods. 
B) appreciate, which decreases foreign demand for domestic goods. 
C) depreciate, which increases foreign demand for domestic goods. 
D) depreciate, which decreases foreign demand for domestic goods. 
A) appreciate, which increases foreign demand for domestic goods. 
B) appreciate, which decreases foreign demand for domestic goods. 
C) depreciate, which increases foreign demand for domestic goods. 
D) depreciate, which decreases foreign demand for domestic goods.

Question 9

Which of the following is most likely to increase U.S. exports?

Accepted Answer

A) The government gives subsidies to U.S. firms that export goods or services. 
B) The government reduces the size of the budget surplus. 
C) The United States unilaterally reduces its restrictions on foreign imports. 
D) Taxes on domestic saving rise. 
A) The government gives subsidies to U.S. firms that export goods or services. 
B) The government reduces the size of the budget surplus. 
C) The United States unilaterally reduces its restrictions on foreign imports. 
D) Taxes on domestic saving rise.

Question 10

In the open-economy macroeconomic model, if a country's interest rate rises, its net capital outflow

Accepted Answer

A) rises and the real exchange rate rises. 
B) falls and the real exchange rate falls. 
C) rises and the real exchange rate falls. 
D) falls and the real exchange rate rises. 
A) rises and the real exchange rate rises. 
B) falls and the real exchange rate falls. 
C) rises and the real exchange rate falls. 
D) falls and the real exchange rate rises.

Question 11

When the real exchange rate for the dollar depreciates, U.S. goods become

Accepted Answer

A) less expensive relative to foreign goods, which makes exports rise and imports fall. 
B) less expensive relative to foreign goods, which makes exports fall and imports rise. 
C) more expensive relative to foreign goods, which makes exports rise and imports fall. 
D) more expensive relative to foreign goods, which makes exports fall and imports rise. 
A) less expensive relative to foreign goods, which makes exports rise and imports fall. 
B) less expensive relative to foreign goods, which makes exports fall and imports rise. 
C) more expensive relative to foreign goods, which makes exports rise and imports fall. 
D) more expensive relative to foreign goods, which makes exports fall and imports rise.

Question 12

Which of the following results if the U.S. removes an import quota on computer components?

Accepted Answer

A) U.S. exports and U.S. imports both increase 
B) U.S. exports increase but U.S. imports are unchanged 
C) U.S. imports increase but U.S. exports are unchanged 
D) None of the above are correct 
A) U.S. exports and U.S. imports both increase 
B) U.S. exports increase but U.S. imports are unchanged 
C) U.S. imports increase but U.S. exports are unchanged 
D) None of the above are correct

Question 13

In the long run import quotas do not affect the size of net exports.

Accepted Answer

A) True 
 B)False

Question 14

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 flight 
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 flight

Question 15

The open-economy macroeconomic model examines the determination of

Accepted Answer

A) the output growth rate and the real interest rate. 
B) unemployment and the exchange rate. 
C) the output growth rate and the inflation rate. 
D) the trade balance and the exchange rate. 
A) the output growth rate and the real interest rate. 
B) unemployment and the exchange rate. 
C) the output growth rate and the inflation rate. 
D) the trade balance and the exchange rate.

Question 16

In the open economy model, the supply of loanable funds comes from national saving and net capital outflow.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following would tend to shift the supply of dollars in the market for foreign-currency exchange in the open-economy macroeconomic model to the right?

Accepted Answer

A) the exchange rate rises 
B) the exchange rate falls 
C) the expected rate of return on U.S. assets rises 
D) the expected rate of return on U.S. assets falls 
A) the exchange rate rises 
B) the exchange rate falls 
C) the expected rate of return on U.S. assets rises 
D) the expected rate of return on U.S. assets falls

Question 18

When a country imposes an import quota, its

Accepted Answer

A) net exports rise and its real exchange rate appreciates. 
B) net exports rise and its real exchange rate depreciates. 
C) net exports fall and its real exchange rate depreciates 
D) None of the above is correct. 
A) net exports rise and its real exchange rate appreciates. 
B) net exports rise and its real exchange rate depreciates. 
C) net exports fall and its real exchange rate depreciates 
D) None of the above is correct.

Question 19

Capital flight increases a country's interest rate. This increase in the interest rate makes net capital outflow lower than it would be had the interest rate stayed the same.

Accepted Answer

A) True 
 B)False

Question 20

Which curve in the market for foreign-currency exchange shifts and which direction does it shift if the government budget deficit increases? Explain why an increase in the budget deficit shifts this curve.

Accepted Answer

The supply curve in the market for forei

Exam 32: A Macroeconomic Theory of the Open Economy

The primary focus of the open-economy macroeconomic model is the determination of GDP and the price level.

Other things the same, people in the U.S. would want to save more if the real interest rate in the U.S.

Refer to U.S. Investment Tax Credit. In the market for loanable funds which curve shifts and which direction does it shift?

If the supply of dollars in the market for foreign-currency exchange shifts left, then the exchange rate

When a country imposes a trade restriction, the real exchange rate of that country's currency appreciates.

In the open-economy macroeconomic model, the real exchange rate does not affect net capital outflow.

Refer to Budget Reform. This policy change causes the exchange rate to change. What does the change in the exchange rate to do to net exports?

Imposing an import quota causes the domestic real exchange rate to

Which of the following is most likely to increase U.S. exports?

In the open-economy macroeconomic model, if a country's interest rate rises, its net capital outflow

When the real exchange rate for the dollar depreciates, U.S. goods become

Which of the following results if the U.S. removes an import quota on computer components?

In the long run import quotas do not affect the size of net exports.

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

The open-economy macroeconomic model examines the determination of

In the open economy model, the supply of loanable funds comes from national saving and net capital outflow.

Which of the following would tend to shift the supply of dollars in the market for foreign-currency exchange in the open-economy macroeconomic model to the right?

When a country imposes an import quota, its

Capital flight increases a country's interest rate. This increase in the interest rate makes net capital outflow lower than it would be had the interest rate stayed the same.

Which curve in the market for foreign-currency exchange shifts and which direction does it shift if the government budget deficit increases? Explain why an increase in the budget deficit shifts this curve.

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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