Exam 32: A Macroeconomic Theory of the Open Economy

In the open-economy macroeconomic model, other things the same, an increase in the exchange rate raises the quantity of dollars supplied in the market for foreign-currency exchange.

In the open-economy macroeconomic model, the market for loanable funds equates national saving with

Other things the same, a decrease in the U.K. real interest rate induces

In an open economy, the source for the demand for loanable funds is

In the open-economy macroeconomic model, the price that balances supply and demand in the market for foreign-currency exchange is the

An import quota imposed by the U.S. would reduce U.S. imports, but have no impact on U.S. exports.

What happens to domestic investment as the real interest rate rises? Explain your answer.

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?

A large and sudden movement of funds out of a country is called

Over the past two decades, the U.S. has persistently exported more goods and services than it has imported.

At the equilibrium real interest rate in the open-economy macroeconomic model,

If a country experiences capital flight, which of the following curves shift right?

An increase in a country's real interest rate reduces that country's net capital outflow.

In the open-economy macroeconomic model, at the equilibrium real interest rate, the amount that people (including government) want to save exactly balances desired domestic investment.

Other things the same, in the open-economy macroeconomic model, if the real exchange rate rises, the

An increase in the government budget deficit shifts the supply of domestic currency in the market for foreign exchange to the right.

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. Because of depositors reactions what happened to net capital outflow?

Explain how a decrease in the demand for capital goods in the U.S. can lead to a change in the U.S. exchange rate.

In the open economy model, the supply of loanable funds comes from national saving and net capital outflow.

A U.S. grocery chain borrows money to buy a warehouse in Ohio and another in Italy. Borrowing for which warehouse(s) is included in the demand for loanable funds in the United States?