Exam 32: A Macroeconomic Theory of the Open Economy

In 1995 House Speaker Newt Gingrich threatened to send the United States into default on its debt. During the day of this announcement, U.S. interest rates rose and the real exchange rate of the U.S. dollar depreciated. Which of these changes is consistent with the results of the open-economy macroeconomic model?

If for some reason Americans desired to decrease their purchases of foreign assets, then other things the same

Which of the following make(s) demand for U.S. dollars in the market for foreign-currency exchange higher than otherwise?

Other things the same, if the expected return on U.S. assets increases, the

Refer to Budget Reform. This policy change causes net capital outflow to change. How is this change in net capital outflow shown in the market for foreign-currency exchange? What happens to the exchange rate?

-Refer to Figure 32-6. If the economy were initially in equilibrium at r1 and e3 and the government removes import quotas, the exchange rate moves to

An increase in a country's budget surplus shifts its

If at a given exchange rate foreign citizens want to buy fewer U.S bonds, then the

An open economy has GDP of $1,200 billion, consumption expenditures of $900 billion government expenditures of $400 billion, domestic investment of $100 billion, and net exports of -$200 billion. What is its demand for loanable funds?

Which of the following would both raise the U.S. exchange rate?

A country has national saving of $100 billion, government expenditures of $30 billion, domestic investment of $80 billion, and net capital outflow of $20 billion. What is its demand for loanable funds?