Question 1

If the real interest rate were above the equilibrium rate, there would be a shortage of loanable funds.

Accepted Answer

A) True 
 B)False

Question 2

In the 1980s, the U.S. government budget deficit rose. At the same time the U.S. trade deficit grew larger, the real exchange rate of the dollar appreciated, and U.S. net capital outflow decreased. Which of these events is contrary to what the open-economy macroeconomic model predicts concerning the effects of an increase in the budget deficit?

Accepted Answer

A) the U.S. trade deficit grew 
B) the real exchange rate of the dollar appreciated 
C) U.S. net capital outflow fell 
D) None of the above is contrary to the predictions of the model. 
A) the U.S. trade deficit grew 
B) the real exchange rate of the dollar appreciated 
C) U.S. net capital outflow fell 
D) None of the above is contrary to the predictions of the model.

Question 3

An increase in the real interest rate in the United States changes the quantity of loanable funds demanded because

Accepted Answer

A) U.S. residents will want to buy more foreign assets. 
B) Foreign residents will want to buy more U.S. goods and services. 
C) U.S. firms will want to purchase fewer U.S. capital goods. 
D) All of the above are correct. 
A) U.S. residents will want to buy more foreign assets. 
B) Foreign residents will want to buy more U.S. goods and services. 
C) U.S. firms will want to purchase fewer U.S. capital goods. 
D) All of the above are correct.

Question 4

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

Accepted Answer

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

Question 5

If the U.S. were to impose import quotas

Accepted Answer

A) the demand for loanable funds and the demand for dollars in the market for foreign-currency exchange would both increase. 
B) nether the demand for loanable funds nor the demand for dollars in the market for foreign-currency exchange would increase. 
C) the demand for loanable funds would increase, but the demand for dollars in the market for foreign-currency exchange would not. 
D) the demand for dollars in the market for foreign-currency exchange would increase, but the demand for loanable funds would not. 
A) the demand for loanable funds and the demand for dollars in the market for foreign-currency exchange would both increase. 
B) nether the demand for loanable funds nor the demand for dollars in the market for foreign-currency exchange would increase. 
C) the demand for loanable funds would increase, but the demand for dollars in the market for foreign-currency exchange would not. 
D) the demand for dollars in the market for foreign-currency exchange would increase, but the demand for loanable funds would not.

Question 6

In the open-economy macroeconomic model, other things the same, which of the following both make the exchange rate fall?

Accepted Answer

A) U.S. investment demand falls and foreign demand for U.S. goods falls 
B) U.S. investment demand falls and foreign demand for U.S. goods rises 
C) U.S. investment demand rises and foreign demand for U.S. goods falls 
D) U.S. investment demand rises and foreign demand for U.S. goods rises 
A) U.S. investment demand falls and foreign demand for U.S. goods falls 
B) U.S. investment demand falls and foreign demand for U.S. goods rises 
C) U.S. investment demand rises and foreign demand for U.S. goods falls 
D) U.S. investment demand rises and foreign demand for U.S. goods rises

Question 7

If the people thought that many banks in a certain country were at or near the point of bankruptcy, then that country's real exchange rate

Accepted Answer

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

Question 8

In the open-economy macroeconomic model, the market for loanable funds equates national saving with

Accepted Answer

A) domestic investment. 
B) net capital outflow. 
C) the sum of national consumption and government spending. 
D) the sum of domestic investment and net capital outflow. 
A) domestic investment. 
B) net capital outflow. 
C) the sum of national consumption and government spending. 
D) the sum of domestic investment and net capital outflow.

Question 9

Which of the following would not be a consequence of an increase in the U.S. government budget deficit?

Accepted Answer

A) the U.S. trade balance rises 
B) the U.S. interest rate rises 
C) domestic investment in the U.S. falls 
D) the real exchange rate of the U.S. dollar appreciates 
A) the U.S. trade balance rises 
B) the U.S. interest rate rises 
C) domestic investment in the U.S. falls 
D) the real exchange rate of the U.S. dollar appreciates

Question 10

In the 1980s, both the U.S. government budget and U.S. trade deficits increased.

Accepted Answer

A) True 
 B)False

Question 11

Over the past three decades, the United States has

Accepted Answer

A) generally had, or been very near to a trade balance. 
B) had trade deficits in about as many years as it has trade surpluses. 
C) persistently had a trade deficit. 
D) persistently had a trade surplus. 
A) generally had, or been very near to a trade balance. 
B) had trade deficits in about as many years as it has trade surpluses. 
C) persistently had a trade deficit. 
D) persistently had a trade surplus.

Question 12

An economy recently had 800 billion euros of saving and 600 billion euros of net capital outflow. What was its investment? What was its quantity of loanable funds supplied?

Accepted Answer

200 billio

Question 13

A tax on imported goods is called a(n)

Accepted Answer

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

Question 14

What happens to the quantity of loanable funds supplied when the interest rate rises? Explain why this change happens.

Accepted Answer

The quantity of loanable funds

Question 15

From 2001 to 2004, the U.S. government went from a budget surplus to a budget deficit. According to the open-economy macroeconomic model, this should have decreased

Accepted Answer

A) both the supply of loanable funds and the supply of dollars in the market for foreign-currency exchange. 
B) neither the supply of loanable funds nor the supply of dollars in the market for foreign-currency exchange. 
C) the supply of loanable funds but not the supply of dollars in the market for foreign-currency exchange. 
D) the supply of dollars in the market for foreign-currency exchange, but not the supply of loanable funds. 
A) both the supply of loanable funds and the supply of dollars in the market for foreign-currency exchange. 
B) neither the supply of loanable funds nor the supply of dollars in the market for foreign-currency exchange. 
C) the supply of loanable funds but not the supply of dollars in the market for foreign-currency exchange. 
D) the supply of dollars in the market for foreign-currency exchange, but not the supply of loanable funds.

Question 16

A country has national saving of $80 billion, government expenditures of $40 billion, domestic investment of $50 billion, and net capital outflow of $30 billion. What is its supply of loanable funds?

Accepted Answer

A) $30 billion 
B) $40 billion 
C) $50 billion 
D) $80 billion 
A) $30 billion 
B) $40 billion 
C) $50 billion 
D) $80 billion

Question 17

The quantity of U.S. bonds foreigners want to buy is taken into account

Accepted Answer

A) in the U.S. supply of loanable funds and the supply of dollars in the market for foreign-currency exchange. 
B) in the U.S. supply of loanable funds and the demand for dollars in the market for foreign-currency exchange. 
C) in the U.S. demand for loanable funds and the supply of dollars in the market for foreign-currency exchange. 
D) in the U.S. demand for loanable funds and the demand for dollars in the market for foreign-currency exchange. 
A) in the U.S. supply of loanable funds and the supply of dollars in the market for foreign-currency exchange. 
B) in the U.S. supply of loanable funds and the demand for dollars in the market for foreign-currency exchange. 
C) in the U.S. demand for loanable funds and the supply of dollars in the market for foreign-currency exchange. 
D) in the U.S. demand for loanable funds and the demand for dollars in the market for foreign-currency exchange.

Question 18

Figure 32-1  
-Refer to Figure 32-1. If the real interest rate is 6 percent, there will be pressure for

Accepted Answer

A) the real interest rate to fall. 
B) the demand for loanable funds curve to shift left. 
C) the supply for loanable funds curve to shift right. 
D) All of the above are correct. 
A) the real interest rate to fall. 
B) the demand for loanable funds curve to shift left. 
C) the supply for loanable funds curve to shift right. 
D) All of the above are correct.

Question 19

Other things the same, if the Japanese real interest rate were to increase, Japanese net capital outflow

Accepted Answer

A) and net capital outflow of other countries would rise. 
B) and net capital outflow of other countries would fall. 
C) would rise, while net capital outflow of other countries would fall. 
D) would fall, while net capital outflow of other countries would rise. 
A) and net capital outflow of other countries would rise. 
B) and net capital outflow of other countries would fall. 
C) would rise, while net capital outflow of other countries would fall. 
D) would fall, while net capital outflow of other countries would rise.

Question 20

In which case(s) does(do) a country's supply of 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

Exam 32: A Macroeconomic Theory of the Open Economy

If the real interest rate were above the equilibrium rate, there would be a shortage of loanable funds.

An increase in the real interest rate in the United States changes the quantity of loanable funds demanded because

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

If the U.S. were to impose import quotas

In the open-economy macroeconomic model, other things the same, which of the following both make the exchange rate fall?

If the people thought that many banks in a certain country were at or near the point of bankruptcy, then that country's real exchange rate

In the open-economy macroeconomic model, the market for loanable funds equates national saving with

Which of the following would not be a consequence of an increase in the U.S. government budget deficit?

In the 1980s, both the U.S. government budget and U.S. trade deficits increased.

Over the past three decades, the United States has

An economy recently had 800 billion euros of saving and 600 billion euros of net capital outflow. What was its investment? What was its quantity of loanable funds supplied?

A tax on imported goods is called a(n)

What happens to the quantity of loanable funds supplied when the interest rate rises? Explain why this change happens.

From 2001 to 2004, the U.S. government went from a budget surplus to a budget deficit. According to the open-economy macroeconomic model, this should have decreased

A country has national saving of $80 billion, government expenditures of $40 billion, domestic investment of $50 billion, and net capital outflow of $30 billion. What is its supply of loanable funds?

The quantity of U.S. bonds foreigners want to buy is taken into account

Figure 32-1 -Refer to Figure 32-1. If the real interest rate is 6 percent, there will be pressure for

Other things the same, if the Japanese real interest rate were to increase, Japanese net capital outflow

In which case(s) does(do) a country's supply of loanable funds shift 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

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