Question 1

If U.S. net exports are positive, then net capital outflow is

Accepted Answer

A) positive, so foreign assets bought by Americans are greater than American assets bought by foreigners. 
B) positive, so American assets bought by foreigners are greater than foreign assets bought by Americans. 
C) negative, so foreign assets bought by Americans are greater than American assets bought by foreigners. 
D) negative, so American assets bought by foreigners are greater than foreign assets bought by Americans. 
A) positive, so foreign assets bought by Americans are greater than American assets bought by foreigners. 
B) positive, so American assets bought by foreigners are greater than foreign assets bought by Americans. 
C) negative, so foreign assets bought by Americans are greater than American assets bought by foreigners. 
D) negative, so American assets bought by foreigners are greater than foreign assets bought by Americans.

Question 2

Which of the following would make the equilibrium real interest rate increase and the equilibrium quantity of funds decrease?

Accepted Answer

A) The demand for loanable funds shifts right. 
B) The demand for loanable funds shifts left. 
C) The supply of loanable funds shifts right. 
D) The supply of loanable funds shifts left. 
A) The demand for loanable funds shifts right. 
B) The demand for loanable funds shifts left. 
C) The supply of loanable funds shifts right. 
D) The supply of loanable funds shifts left.

Question 3

Other things the same, a decrease in the real interest rate

Accepted Answer

A) increases the quantity of loanable funds demanded. 
B) shifts the demand for loanable funds curve to the right. 
C) decreases the quantity of loanable funds demanded. 
D) shifts the demand for loanable funds curve to the left. 
A) increases the quantity of loanable funds demanded. 
B) shifts the demand for loanable funds curve to the right. 
C) decreases the quantity of loanable funds demanded. 
D) shifts the demand for loanable funds curve to the left.

Question 4

When a country experiences capital flight its currency

Accepted Answer

A) appreciates and net exports rise. 
B) appreciates and net exports fall. 
C) depreciates and net exports rise. 
D) depreciates and net exports fall. 
A) appreciates and net exports rise. 
B) appreciates and net exports fall. 
C) depreciates and net exports rise. 
D) depreciates and net exports fall.

Question 5

Other things the same, in the open-economy macroeconomic model, which of the following would make China's net capital outflow increase?

Accepted Answer

A) an increase in U.S. interest rates 
B) an increase in Chinese interest rates 
C) an appreciation of the Chinese yuan 
D) None of the above is correct. 
A) an increase in U.S. interest rates 
B) an increase in Chinese interest rates 
C) an appreciation of the Chinese yuan 
D) None of the above is correct.

Question 6

In an open economy,

Accepted Answer

A) net capital outflow = imports. 
B) net capital outflow = net exports. 
C) net capital outflow = exports. 
D) None of the above is correct. 
A) net capital outflow = imports. 
B) net capital outflow = net exports. 
C) net capital outflow = exports. 
D) None of the above is correct.

Question 7

If the supply of loanable funds shifts right, then the equilibrium

Accepted Answer

A) interest rate falls, so domestic residents will want to purchase more foreign assets. 
B) interest rate falls, so domestic residents will want to purchase fewer foreign assets. 
C) interest rate rises, so domestic residents will want to purchase more foreign assets. 
D) interest rate rises, so domestic residents will want to purchase fewer foreign assets. 
A) interest rate falls, so domestic residents will want to purchase more foreign assets. 
B) interest rate falls, so domestic residents will want to purchase fewer foreign assets. 
C) interest rate rises, so domestic residents will want to purchase more foreign assets. 
D) interest rate rises, so domestic residents will want to purchase fewer foreign assets.

Question 8

The variable that links the market for loanable funds and the market for foreign-currency exchange is

Accepted Answer

A) net capital outflow. 
B) national saving. 
C) exports. 
D) domestic investment. 
A) net capital outflow. 
B) national saving. 
C) exports. 
D) domestic investment.

Question 9

In an open economy, national saving equals

Accepted Answer

A) domestic investment plus net capital outflow. 
B) domestic investment minus net capital outflow. 
C) domestic investment. 
D) net capital outflow. 
A) domestic investment plus net capital outflow. 
B) domestic investment minus net capital outflow. 
C) domestic investment. 
D) net capital outflow.

Question 10

Other things the same, if U.S. residents wanted to buy more foreign-made computers and foreign residents wanted to purchase more U.S. bonds then,

Accepted Answer

A) U.S. net exports and the exchange rate would rise. 
B) U.S. net exports would rise, but what would happen to the exchange rate is uncertain. 
C) U.S. net exports would fall, but what would happen to the exchange rate is uncertain. 
D) U.S. net exports and the exchange rate would fall. 
A) U.S. net exports and the exchange rate would rise. 
B) U.S. net exports would rise, but what would happen to the exchange rate is uncertain. 
C) U.S. net exports would fall, but what would happen to the exchange rate is uncertain. 
D) U.S. net exports and the exchange rate would fall.

Question 11

If people in the U.S. choose to save a smaller percentage of income, what will happen to the interest rate, net capital outflow, the exchange rate, and net exports?

Accepted Answer

The interest rate will rise, n

Question 12

At the equilibrium real interest rate in the open-economy macroeconomic model, the amount that people want to save equals the desired quantity of

Accepted Answer

A) net capital outflow. 
B) domestic investment. 
C) net capital outflow plus domestic investment. 
D) foreign currency supplied. 
A) net capital outflow. 
B) domestic investment. 
C) net capital outflow plus domestic investment. 
D) foreign currency supplied.

Question 13

In the open-economy macroeconomic model, the purchase of a capital asset by domestic residents adds to the demand for loanable funds

Accepted Answer

A) only if the asset is located at home. 
B) only if the asset is located abroad. 
C) whether the asset is located at home or abroad. 
D) None of the above is correct. 
A) only if the asset is located at home. 
B) only if the asset is located abroad. 
C) whether the asset is located at home or abroad. 
D) None of the above is correct.

Question 14

If a country went from a government budget deficit to a surplus, national saving would

Accepted Answer

A) increase, shifting the supply of loanable funds right. 
B) increase, shifting the supply of loanable funds left. 
C) decrease, shifting the demand for loanable funds right. 
D) decrease, shifting the demand for loanable funds left. 
A) increase, shifting the supply of loanable funds right. 
B) increase, shifting the supply of loanable funds left. 
C) decrease, shifting the demand for loanable funds right. 
D) decrease, shifting the demand for loanable funds left.

Question 15

If the supply of loanable funds curve shifts right, then the equilibrium

Accepted Answer

A) interest rate and level of net capital outflows rise. 
B) interest rate rises and the equilibrium level of net capital outflow falls. 
C) interest rate falls and the equilibrium level of net capital outflow rises. 
D) interest rate and level of net capital outflows fall. 
A) interest rate and level of net capital outflows rise. 
B) interest rate rises and the equilibrium level of net capital outflow falls. 
C) interest rate falls and the equilibrium level of net capital outflow rises. 
D) interest rate and level of net capital outflows fall.

Question 16

In the open-economy macroeconomic model, the quantity of dollars demanded in the market for foreign-currency exchange

Accepted Answer

A) depends on the real exchange rate. The quantity of dollars supplied in the foreign-exchange market depends on the real interest rate. 
B) depends on the real interest rate. The quantity of dollars supplied in the foreign-exchange market depends on the real exchange rate. 
C) and the quantity of dollars supplied in the market for foreign-currency exchange depend on the real exchange rate. 
D) and the quantity of dollars supplied in the market for foreign-currency exchange depend on the real interest rate. 
A) depends on the real exchange rate. The quantity of dollars supplied in the foreign-exchange market depends on the real interest rate. 
B) depends on the real interest rate. The quantity of dollars supplied in the foreign-exchange market depends on the real exchange rate. 
C) and the quantity of dollars supplied in the market for foreign-currency exchange depend on the real exchange rate. 
D) and the quantity of dollars supplied in the market for foreign-currency exchange depend on the real interest rate.

Question 17

The imposition of an import quota shifts

Accepted Answer

A) the supply of currency right, so the exchange rate falls. 
B) the supply of currency left, so the exchange rate rises. 
C) the demand for currency right, so the exchange rate rises. 
D) the demand for currency left, so the exchange rate falls. 
A) the supply of currency right, so the exchange rate falls. 
B) the supply of currency left, so the exchange rate rises. 
C) the demand for currency right, so the exchange rate rises. 
D) the demand for currency left, so the exchange rate falls.

Question 18

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

Accepted Answer

A) increased U.S. interest rates and increased the real exchange rate of the dollar. 
B) increased U.S. interest rates and decreased the real exchange rate of the dollar. 
C) decreased U.S. interest rates and increased the real exchange rate of the dollar. 
D) decreased U.S. interest rates and decreased the real exchange rate of the dollar. 
A) increased U.S. interest rates and increased the real exchange rate of the dollar. 
B) increased U.S. interest rates and decreased the real exchange rate of the dollar. 
C) decreased U.S. interest rates and increased the real exchange rate of the dollar. 
D) decreased U.S. interest rates and decreased the real exchange rate of the dollar.

Question 19

Other things the same, if the U.S. real exchange rate depreciated, then U.S. net exports would

Accepted Answer

A) fall and the quantity of dollars demanded in the market for foreign-currency exchange would fall. 
B) fall and the quantity of dollars demanded in the market for foreign-currency exchange would rise. 
C) rise and the quantity of dollars demanded in the market for foreign-currency exchange would fall. 
D) rise and the quantity of dollars demanded in the market for foreign-currency exchange would rise. 
A) fall and the quantity of dollars demanded in the market for foreign-currency exchange would fall. 
B) fall and the quantity of dollars demanded in the market for foreign-currency exchange would rise. 
C) rise and the quantity of dollars demanded in the market for foreign-currency exchange would fall. 
D) rise and the quantity of dollars demanded in the market for foreign-currency exchange would rise.

Question 20

In the open-economy macroeconomic model, if the supply of loanable funds increases, then the interest rate

Accepted Answer

A) and the real exchange rate increase. 
B) and the real exchange rate decrease. 
C) increases and the real exchange rate decreases. 
D) decreases and the real exchange rate increases. 
A) and the real exchange rate increase. 
B) and the real exchange rate decrease. 
C) increases and the real exchange rate decreases. 
D) decreases and the real exchange rate increases.

Exam 32: A Macroeconomic Theory of the Open Economy

If U.S. net exports are positive, then net capital outflow is

Which of the following would make the equilibrium real interest rate increase and the equilibrium quantity of funds decrease?

Other things the same, a decrease in the real interest rate

When a country experiences capital flight its currency

Other things the same, in the open-economy macroeconomic model, which of the following would make China's net capital outflow increase?

In an open economy,

If the supply of loanable funds shifts right, then the equilibrium

The variable that links the market for loanable funds and the market for foreign-currency exchange is

In an open economy, national saving equals

Other things the same, if U.S. residents wanted to buy more foreign-made computers and foreign residents wanted to purchase more U.S. bonds then,

If people in the U.S. choose to save a smaller percentage of income, what will happen to the interest rate, net capital outflow, the exchange rate, and net exports?

At the equilibrium real interest rate in the open-economy macroeconomic model, the amount that people want to save equals the desired quantity of

In the open-economy macroeconomic model, the purchase of a capital asset by domestic residents adds to the demand for loanable funds

If a country went from a government budget deficit to a surplus, national saving would

If the supply of loanable funds curve shifts right, then the equilibrium

In the open-economy macroeconomic model, the quantity of dollars demanded in the market for foreign-currency exchange

The imposition of an import quota shifts

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

Other things the same, if the U.S. real exchange rate depreciated, then U.S. net exports would

In the open-economy macroeconomic model, if the supply of loanable funds increases, then the interest rate

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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