Question 1

If the U.S. government went from a budget deficit to a budget surplus then the real interest rate

Accepted Answer

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

Question 2

In an open economy, the supply of loanable funds comes from national saving.

Accepted Answer

A) True 
 B)False  True

Question 3

Because a government budget deficit represents

Accepted Answer

A) negative public saving, it increases national saving. 
B) positive public saving, it increases national saving. 
C) positive public saving, it decreases national saving. 
D) negative public saving, it decreases national saving. 
A) negative public saving, it increases national saving. 
B) positive public saving, it increases national saving. 
C) positive public saving, it decreases national saving. 
D) negative public saving, it decreases national saving. D

Question 4

If a country's government moves from a budget deficit to a budget surplus, which curve in the market for loanable funds shifts and which direction does it shift? What happens to the interest rate?

Accepted Answer

The supply of loanab

Question 5

In an open economy, the demand for loanable funds comes from both domestic investment and net capital outflow.

Accepted Answer

A) True 
 B)False

Question 6

In the market for foreign-currency exchange, capital flight shifts the

Accepted Answer

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

Question 7

Trade policies

Accepted Answer

A) alter the trade balance because they alter imports of the country that implemented them. 
B) alter the trade balance because they alter net capital outflow of the country that implemented them. 
C) do not alter the trade balance because they cannot alter the national saving or domestic investment of the country that implements them. 
D) do not alter the trade balance because they cannot alter the real exchange rate of the currency of the country that implements them. 
A) alter the trade balance because they alter imports of the country that implemented them. 
B) alter the trade balance because they alter net capital outflow of the country that implemented them. 
C) do not alter the trade balance because they cannot alter the national saving or domestic investment of the country that implements them. 
D) do not alter the trade balance because they cannot alter the real exchange rate of the currency of the country that implements them.

Question 8

During the financial crisis it was proposed that firms be provided with a tax credit for investment projects. Such a tax credit would shift

Accepted Answer

A) both the demand for loanable funds and the supply of dollars in the market for foreign-currency exchange right. 
B) the demand for loanable funds right and shift the supply of dollars in the market for foreign-currency exchange left. 
C) the demand for loanable funds left and shift the supply of dollars in the market for foreign-currency exchange right. 
D) both the demand for loanable funds and the supply of dollars in the market for foreign-currency exchange left. 
A) both the demand for loanable funds and the supply of dollars in the market for foreign-currency exchange right. 
B) the demand for loanable funds right and shift the supply of dollars in the market for foreign-currency exchange left. 
C) the demand for loanable funds left and shift the supply of dollars in the market for foreign-currency exchange right. 
D) both the demand for loanable funds and the supply of dollars in the market for foreign-currency exchange left.

Question 9

Figure 32-3
Refer to the following diagram of the open-economy macroeconomic model to answer the questions that follow.
​
Graph (a)
Graph (b)     Graph (c)   ​
-Refer to Figure 32-3. Suppose that the government goes from a budget surplus to a budget deficit. The effects of the change could be illustrated by shifting the

Accepted Answer

A) demand curve in panel a to the right and the demand curve in graph (c) to the left. 
B) demand curve in panel a to the left and the supply curve in graph (c) to the left. 
C) supply curve in panel a to the right and the demand curve in graph (c) to the right. 
D) supply curve in panel a to the left and the supply curve in graph (c) to the left. 
A) demand curve in panel a to the right and the demand curve in graph (c) to the left. 
B) demand curve in panel a to the left and the supply curve in graph (c) to the left. 
C) supply curve in panel a to the right and the demand curve in graph (c) to the right. 
D) supply curve in panel a to the left and the supply curve in graph (c) to the left.

Question 10

What effect do protectionist policies have on the trade deficit?

Accepted Answer

Protectionist policies increase the dema

Question 11

A country has I = $200 billion, S = $400 billion, and purchased $600 billion of foreign assets, how many of its assets did foreigners purchase?

Accepted Answer

A) $0 
B) $200 billion 
C) $400 billion 
D) $800 billion 
A) $0 
B) $200 billion 
C) $400 billion 
D) $800 billion

Question 12

If the demand for loanable funds shifts right, then the real interest rate

Accepted Answer

A) and the equilibrium quantity of loanable funds both fall. 
B) falls and the equilibrium quantity of loanable funds rises. 
C) and the equilibrium quantity of loanable funds both rise. 
D) rises and the equilibrium quantify of loanable funds falls. 
A) and the equilibrium quantity of loanable funds both fall. 
B) falls and the equilibrium quantity of loanable funds rises. 
C) and the equilibrium quantity of loanable funds both rise. 
D) rises and the equilibrium quantify of loanable funds falls.

Question 13

Scenario 32-4
​
In 2011 Greek citizens were concerned about the size of government debt. Fearful that the government might be unable to fulfill its promise to insure depositors in Greek banks against losses created by bank failures, depositors moved funds out of Greek banks.
-Refer to Scenario 32-4. What happened to domestic investment? Why?

Accepted Answer

Domestic investment

Question 14

What do trade policies do to the standard of living?

Accepted Answer

Trade policies reduce both imports and e

Question 15

Figure 32-1   ​
-Refer to Figure 32-1. If the real interest rate is 7 percent, the quantity of loanable funds demanded is

Accepted Answer

A) $70 billion, and the quantity supplied is $10 billion. 
B) $10 billion, and the quantity supplied is $70 billion. 
C) $10 billion, and the quantity supplied is $10 billion. 
A) $70 billion, and the quantity supplied is $10 billion. 
B) $10 billion, and the quantity supplied is $70 billion. 
C) $10 billion, and the quantity supplied is $10 billion.

Question 16

In 2002, the United States placed higher tariffs on imports of steel. According to the open-economy macroeconomic model this policy reduced imports

Accepted Answer

A) into the United States and made U.S.net exports rise. 
B) into the United States and made the net supply of dollars in the foreign exchange market shift right. 
C) of steel into the United States, but reduced U.S.exports of other goods by an equal amount. 
D) of steel into the United States and increased U.S.exports of other goods by an equal amount. 
A) into the United States and made U.S.net exports rise. 
B) into the United States and made the net supply of dollars in the foreign exchange market shift right. 
C) of steel into the United States, but reduced U.S.exports of other goods by an equal amount. 
D) of steel into the United States and increased U.S.exports of other goods by an equal amount.

Question 17

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

Accepted Answer

investment

Question 18

Other things the same, when the real exchange rate of the dollar appreciates, U.S. goods become more desirable to U.S. residents, but less desirable to foreign residents.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) both the real exchange rate and the quantity of dollars exchanged in the market for foreign currency would fall. 
B) both the real exchange rate and the quantity of dollars exchanged in the market for foreign currency would rise. 
C) the real exchange rate would rise and the quantity of dollars exchanged in the market for foreign currency would fall. 
D) the real exchange rate would fall and the quantity of dollars exchanged in the market for foreign currency would rise. 
A) both the real exchange rate and the quantity of dollars exchanged in the market for foreign currency would fall. 
B) both the real exchange rate and the quantity of dollars exchanged in the market for foreign currency would rise. 
C) the real exchange rate would rise and the quantity of dollars exchanged in the market for foreign currency would fall. 
D) the real exchange rate would fall and the quantity of dollars exchanged in the market for foreign currency would rise.

Question 20

Scenario 32-1
​
During a recession government revenues from the income tax fall and government transfers rise as the reduction in income and the rise in unemployment raise the number of people who qualify for benefits.
-Refer to Scenario 32-1. What does this change in the deficit do to net capital outflows? Defend your answer.

Accepted Answer

Net capital outflow falls because the do

Exam 32: A Macroeconomic Theory of the Open Economy

If the U.S. government went from a budget deficit to a budget surplus then the real interest rate

In an open economy, the supply of loanable funds comes from national saving.

Because a government budget deficit represents

If a country's government moves from a budget deficit to a budget surplus, which curve in the market for loanable funds shifts and which direction does it shift? What happens to the interest rate?

In an open economy, the demand for loanable funds comes from both domestic investment and net capital outflow.

In the market for foreign-currency exchange, capital flight shifts the

Trade policies

During the financial crisis it was proposed that firms be provided with a tax credit for investment projects. Such a tax credit would shift

What effect do protectionist policies have on the trade deficit?

A country has I = $200 billion, S = $400 billion, and purchased $600 billion of foreign assets, how many of its assets did foreigners purchase?

If the demand for loanable funds shifts right, then the real interest rate

What do trade policies do to the standard of living?

Figure 32-1 ​ -Refer to Figure 32-1. If the real interest rate is 7 percent, the quantity of loanable funds demanded is

In 2002, the United States placed higher tariffs on imports of steel. According to the open-economy macroeconomic model this policy reduced imports

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

Other things the same, when the real exchange rate of the dollar appreciates, U.S. goods become more desirable to U.S. residents, but less desirable to foreign residents.

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

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 Nations 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

Figure 32-1 -Refer to Figure 32-1. If the real interest rate is 7 percent, the quantity of loanable funds demanded is