Exam 32: A Macroeconomic Theory of the Open Economy

When Mexico suffered from capital flight in 1994, Mexico's net capital outflow

If there is a shortage in the market for foreign-currency exchange, what happens to the exchange rate and to net exports?

An increase in the U.S. interest rate discourages Americans from buying foreign assets and encourages foreigners to buy U.S. assets.

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 budget deficit do to the equilibrium values of the interest rate and the quantity of loanable funds?

Scenario 32-3 ​ Concerns raised about the declining U.S. shoe industry and unfair labor practices in foreign shoe factories lead the Congress and President to impose a quota on shoe imports. -Refer to Scenario 32-3. At a given exchange rate what does a quota do to desired net exports? As a result of this change which curve in the open-economy model shifts and which direction does it shift?

In the market for foreign-currency exchange, the source of the supply of dollars is _________. The supply curve is _________ because _____________.

Suppose that U.S. citizens start saving more. What does this imply about the supply of loanable funds and the equilibrium real interest rate? What happens to the real exchange rate?

If the real exchange rate for the dollar is above the equilibrium level, the quantity of dollars supplied in the market for foreign-currency exchange is