Question 1

Net capital outflow represents the quantity of dollars supplied in the foreign-currency exchange market.

Accepted Answer

A) True 
 B)False

Question 2

When a country imposes a trade restriction, the real exchange rate of that country's currency appreciates.

Accepted Answer

A) True 
 B)False

Question 3

Capital flight raises both a country's exchange rate and its interest rate.

Accepted Answer

A) True 
 B)False

Question 4

In the open-economy macroeconomic model, the real exchange rate does not affect net capital outflow.

Accepted Answer

A) True 
 B)False

Question 5

Capital flight shifts the demand for loanable funds to the left.

Accepted Answer

A) True 
 B)False

Question 6

Capital flight shifts the NCO curve to the left.

Accepted Answer

A) True 
 B)False

Question 7

In the open-economy macroeconomic model, if there is currently a surplus in the foreign exchange market, the quantity of desired net exports will increase as the market moves to equilibrium.

Accepted Answer

A) True 
 B)False

Question 8

What is the source of the demand for dollars in the market for foreign-currency exchange?

Accepted Answer

The answer of What is the source of the demand...

Question 9

If real interest rates rose less in U.K. than in the United States, then other things the same

Accepted Answer

A) U.S.citizens would buy fewer U.K.bonds and British people would buy fewer U.S.bonds. 
B) U.S.citizens would buy fewer U.K.bonds and British people would buy more U.S.bonds. 
C) U.S.citizens would buy more U.K.bonds and British people would buy more U.S.bonds. 
D) U.S.citizens would buy more U.K.bonds and British people would buy fewer U.S.bonds. 
A) U.S.citizens would buy fewer U.K.bonds and British people would buy fewer U.S.bonds. 
B) U.S.citizens would buy fewer U.K.bonds and British people would buy more U.S.bonds. 
C) U.S.citizens would buy more U.K.bonds and British people would buy more U.S.bonds. 
D) U.S.citizens would buy more U.K.bonds and British people would buy fewer U.S.bonds.

Question 10

As the interest rate rises, it is possible that net capital outflow could move from a positive to a negative value.

Accepted Answer

A) True 
 B)False

Question 11

Figure 32-5
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 32-5. Suppose that initially the economy is in equilibrium at r1 (point d) and e3 (point i). If the government removes import quotas, the exchange rate will move to

Accepted Answer

A) e5. 
B) e4. 
C) e2. 
D) e1. 
A) e5. 
B) e4. 
C) e2. 
D) e1.

Question 12

When the government budget deficit increases, national saving decreases.

Accepted Answer

A) True 
 B)False

Question 13

Why do higher real interest rates lead to lower net capital outflow?

Accepted Answer

Higher domestic interest rates make dome

Question 14

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. Which curve in the domestic loanable funds market shifted and which direction did it shift?

Accepted Answer

The demand

Question 15

A tax credit for purchases of capital goods causes the interest rate to increase and the exchange rate to appreciate.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

The answer of What is the source of the supply...

Question 17

Figure 32-5
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 32-5. If the interest rate were initially at r2 and an import quota were imposed, the interest rate would

Accepted Answer

A) stay at r2. 
B) decrease because supply would shift right. 
C) increase because supply would shift left. 
D) decrease because demand would shift left. 
A) stay at r2. 
B) decrease because supply would shift right. 
C) increase because supply would shift left. 
D) decrease because demand would shift left.

Question 18

Figure 32-4
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 32-4. In the market for foreign-currency exchange, the effects of an increase in the budget surplus shown in graph (c) can be illustrated as a move from j to

Accepted Answer

A) g. 
B) h. 
C) i. 
D) k. 
A) g. 
B) h. 
C) i. 
D) k.

Question 19

Figure 32-2  
-Refer to Figure 32-2. If the real exchange rate is 1, then there is a

Accepted Answer

A) surplus of 100 so the real exchange rate will fall. 
B) surplus of 100 so the real exchange rate will rise. 
C) shortage of 100 so the real exchange rate will fall. 
D) shortage of 100 so the real exchange rate will rise. 
A) surplus of 100 so the real exchange rate will fall. 
B) surplus of 100 so the real exchange rate will rise. 
C) shortage of 100 so the real exchange rate will fall. 
D) shortage of 100 so the real exchange rate will rise.

Question 20

If for some reason U.S. residents increase their purchases of foreign assets, then all else constant which curve in the market for foreign-currency exchange shifts and which direction does it shift? What happens to the exchange rate?

Accepted Answer

The supply of dollar

Exam 32: A Macroeconomic Theory of the Open Economy

Net capital outflow represents the quantity of dollars supplied in the foreign-currency exchange market.

When a country imposes a trade restriction, the real exchange rate of that country's currency appreciates.

Capital flight raises both a country's exchange rate and its interest rate.

In the open-economy macroeconomic model, the real exchange rate does not affect net capital outflow.

Capital flight shifts the demand for loanable funds to the left.

Capital flight shifts the NCO curve to the left.

In the open-economy macroeconomic model, if there is currently a surplus in the foreign exchange market, the quantity of desired net exports will increase as the market moves to equilibrium.

What is the source of the demand for dollars in the market for foreign-currency exchange?

If real interest rates rose less in U.K. than in the United States, then other things the same

As the interest rate rises, it is possible that net capital outflow could move from a positive to a negative value.

When the government budget deficit increases, national saving decreases.

Why do higher real interest rates lead to lower net capital outflow?

A tax credit for purchases of capital goods causes the interest rate to increase and the exchange rate to appreciate.

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

Figure 32-5 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 32-5. If the interest rate were initially at r2 and an import quota were imposed, the interest rate would

Figure 32-2 -Refer to Figure 32-2. If the real exchange rate is 1, then there is a

If for some reason U.S. residents increase their purchases of foreign assets, then all else constant which curve in the market for foreign-currency exchange shifts and which direction does it shift? What happens to the exchange 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 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 32-5 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 32-5. If the interest rate were initially at r₂ and an import quota were imposed, the interest rate would