Question 1

In the open-economy macroeconomic model, if the U.S. interest rate rises, then U.S.

Accepted Answer

A) net capital outflow rises, so the supply of dollars in the market for foreign exchange shifts right. 
B) net capital outflow rises, so the demand for dollars in the market for foreign exchange shifts right. 
C) net capital outflow falls, so the supply of dollars in the market for foreign exchange shifts left. 
D) net capital outflow falls, so the demand for dollars in the market for foreign exchange shifts left. 
A) net capital outflow rises, so the supply of dollars in the market for foreign exchange shifts right. 
B) net capital outflow rises, so the demand for dollars in the market for foreign exchange shifts right. 
C) net capital outflow falls, so the supply of dollars in the market for foreign exchange shifts left. 
D) net capital outflow falls, so the demand for dollars in the market for foreign exchange shifts left.

Question 2

Other things the same, when a Canadian company imports bicycles from the U.S., the open-economy macroeconomic model treats this transaction as part of the demand for dollars in the U.S. foreign-currency exchange market.

Accepted Answer

A) True 
 B)False

Question 3

In the open-economy macroeconomic model, as the exchange rate rises,

Accepted Answer

A) desired net exports fall, so the quantity of dollars supplied rise. 
B) desired net exports fall, so the quantity of dollars demanded falls. 
C) desired net exports rise ,so the quantity of dollars supplied falls. 
D) desired net exports rise, so the quantity of dollars demanded rises. 
A) desired net exports fall, so the quantity of dollars supplied rise. 
B) desired net exports fall, so the quantity of dollars demanded falls. 
C) desired net exports rise ,so the quantity of dollars supplied falls. 
D) desired net exports rise, so the quantity of dollars demanded rises.

Question 4

A firm produces construction equipment, some of which it sells to domestic businesses and some of which it exports. Which of the following effects of capital flight in the country where it produces would likely increase the quantity of equipment it sells?

Accepted Answer

A) both what happens to the interest rate and what happens to the exchange rate 
B) what happens to the interest rate but not what happens to the exchange rate 
C) what happens to the exchange rate but not what happens to the interest rate 
D) neither what happens to the interest rate nor what happens to the interest rate. 
A) both what happens to the interest rate and what happens to the exchange rate 
B) what happens to the interest rate but not what happens to the exchange rate 
C) what happens to the exchange rate but not what happens to the interest rate 
D) neither what happens to the interest rate nor what happens to the interest rate.

Question 5

Other things the same, if the U.S. interest rate rises, what happens to the net capital outflow of other countries?

Accepted Answer

As the U.S. real interest rate rises, U.

Question 6

What is the source of the demand for loanable funds in the open-economy macroeconomic model ?

Accepted Answer

investment

Question 7

If the supply of dollars in the market for foreign-currency exchange shifts right, 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) falls 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) falls and the quantity of dollars exchanged rises. 
D) falls and the quantity of dollars exchanged does not change.

Question 8

In the open-economy macroeconomic model, the source of the supply of loanable funds is

Accepted Answer

A) personal saving 
B) public saving 
C) public saving + personal saving 
D) public saving + personal saving + net capital outflows 
A) personal saving 
B) public saving 
C) public saving + personal saving 
D) public saving + personal saving + net capital outflows

Question 9

Which of the following would cause the real exchange rate of the U.S. dollar to depreciate?

Accepted Answer

A) the U.S. government budget deficit decreases 
B) capital flight from foreign countries 
C) the U.S. imposes import quotas 
D) None of the above is correct. 
A) the U.S. government budget deficit decreases 
B) capital flight from foreign countries 
C) the U.S. imposes import quotas 
D) None of the above is correct.

Question 10

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

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 11

Which of the following happens in the market for loanable funds when there is capital flight?

Accepted Answer

A) the demand curve shifts right. 
B) the demand curve shifts left. 
C) the supply curve shifts right. 
D) the supply curve shifts left. 
A) the demand curve shifts right. 
B) the demand curve shifts left. 
C) the supply curve shifts right. 
D) the supply curve shifts left.

Question 12

Which of the following is most likely to increase the exports of a country?

Accepted Answer

A) The government gives subsidies to firms that export goods or services. 
B) The government reduces the size of the budget surplus. 
C) Political instability within the country increases modestly. 
D) None of the above will increase exports. 
A) The government gives subsidies to firms that export goods or services. 
B) The government reduces the size of the budget surplus. 
C) Political instability within the country increases modestly. 
D) None of the above will increase exports.

Question 13

If at a given real interest rate desired national saving is $140 billion, domestic investment is $90 billion, and net capital outflow is $60 billion, then at that real interest rate in the loanable funds market there is a

Accepted Answer

A) surplus. The real interest rate will rise. 
B) surplus. The real interest rate will fall. 
C) shortage. The real interest rate will rise. 
D) shortage. The real interest rate will fall. 
A) surplus. The real interest rate will rise. 
B) surplus. The real interest rate will fall. 
C) shortage. The real interest rate will rise. 
D) shortage. The real interest rate will fall.

Question 14

When a country experiences capital flight, which of the following rise?

Accepted Answer

A) its real interest rate and its real exchange rate 
B) its real interest rate but not its real exchange rate 
C) its real exchange rate but not its real interest rate 
D) neither its real interest rate nor its foreign exchange rate 
A) its real interest rate and its real exchange rate 
B) its real interest rate but not its real exchange rate 
C) its real exchange rate but not its real interest rate 
D) neither its real interest rate nor its foreign exchange rate

Question 15

Other things the same, which of the following would cause the exchange rate to rise?

Accepted Answer

A) both an increase in the interest rate and an increase in foreign demand for U.S. goods and services. 
B) an increase in the interest rate, but not an increase in foreign demand for U.S. goods and services. 
C) an increase in foreign demand for U.S. goods and service, but not an increase in the U.S. interest rate. 
D) neither an increase in the U.S. interest rate nor an increase in the demand for U.S. goods and services. 
A) both an increase in the interest rate and an increase in foreign demand for U.S. goods and services. 
B) an increase in the interest rate, but not an increase in foreign demand for U.S. goods and services. 
C) an increase in foreign demand for U.S. goods and service, but not an increase in the U.S. interest rate. 
D) neither an increase in the U.S. interest rate nor an increase in the demand for U.S. goods and services.

Question 16

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

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 17

If the U.S. imposed an import quota on farm machinery, then sales of U.S. farm machinery equipment producers would

Accepted Answer

A) rise and the exports of other U.S. industries would rise. 
B) rise and the exports of other U.S. industries would fall. 
C) fall and the exports of other U.S. industries would rise. 
D) fall and the exports of other U.S. industries would fall. 
A) rise and the exports of other U.S. industries would rise. 
B) rise and the exports of other U.S. industries would fall. 
C) fall and the exports of other U.S. industries would rise. 
D) fall and the exports of other U.S. industries would fall.

Question 18

Which of the following leads to an increase in net exports in the long run?

Accepted Answer

A) either a decrease in the budget deficit or imposing an import quota 
B) a decrease in the budget deficit but not imposing an import quota 
C) imposing an import quota but not a decrease in the budget deficit 
D) neither a decrease in the budget deficit nor imposing an import quota 
A) either a decrease in the budget deficit or imposing an import quota 
B) a decrease in the budget deficit but not imposing an import quota 
C) imposing an import quota but not a decrease in the budget deficit 
D) neither a decrease in the budget deficit nor imposing an import quota

Question 19

If a county becomes less likely to default on its bonds, what happens to that country's interest rate and exchange rate? Explain.

Accepted Answer

A lower probability of default has the o

Question 20

Trade policies

Accepted Answer

A) affect a country's overall trade balance, but affect all firms and industries the same. 
B) affect a country's overall trade balance, but affect some firms or industries differently than others. 
C) do not affect a country's overall trade balance, but affect some firms or industries differently than others. 
D) do not affect either a country's overall trade balance or specific firms or industries. 
A) affect a country's overall trade balance, but affect all firms and industries the same. 
B) affect a country's overall trade balance, but affect some firms or industries differently than others. 
C) do not affect a country's overall trade balance, but affect some firms or industries differently than others. 
D) do not affect either a country's overall trade balance or specific firms or industries.

Exam 32: A Macroeconomic Theory of the Open Economy

In the open-economy macroeconomic model, if the U.S. interest rate rises, then U.S.

Other things the same, when a Canadian company imports bicycles from the U.S., the open-economy macroeconomic model treats this transaction as part of the demand for dollars in the U.S. foreign-currency exchange market.

In the open-economy macroeconomic model, as the exchange rate rises,

A firm produces construction equipment, some of which it sells to domestic businesses and some of which it exports. Which of the following effects of capital flight in the country where it produces would likely increase the quantity of equipment it sells?

Other things the same, if the U.S. interest rate rises, what happens to the net capital outflow of other countries?

What is the source of the demand for loanable funds in the open-economy macroeconomic model ?

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

In the open-economy macroeconomic model, the source of the supply of loanable funds is

Which of the following would cause the real exchange rate of the U.S. dollar to depreciate?

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

Which of the following happens in the market for loanable funds when there is capital flight?

Which of the following is most likely to increase the exports of a country?

If at a given real interest rate desired national saving is $140 billion, domestic investment is $90 billion, and net capital outflow is $60 billion, then at that real interest rate in the loanable funds market there is a

When a country experiences capital flight, which of the following rise?

Other things the same, which of the following would cause the exchange rate to rise?

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

If the U.S. imposed an import quota on farm machinery, then sales of U.S. farm machinery equipment producers would

Which of the following leads to an increase in net exports in the long run?

If a county becomes less likely to default on its bonds, what happens to that country's interest rate and exchange rate? Explain.

Trade policies

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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