Question 1

The real exchange rate measures the

Accepted Answer

A) price of domestic currency relative to foreign currency. 
B) price of domestic goods relative to the price of foreign goods. 
C) rate of domestic and foreign interest. 
D) None of the above is correct. 
A) price of domestic currency relative to foreign currency. 
B) price of domestic goods relative to the price of foreign goods. 
C) rate of domestic and foreign interest. 
D) None of the above is correct.

Question 2

If a government started with a budget deficit and moved to a surplus,domestic investment

Accepted Answer

A) and the real exchange rate would rise. 
B) and the real exchange rate would fall. 
C) would rise and the real exchange rate would fall. 
D) would fall and the real exchange rate would rise. 
A) and the real exchange rate would rise. 
B) and the real exchange rate would fall. 
C) would rise and the real exchange rate would fall. 
D) would fall and the real exchange rate would rise.

Question 3

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

Accepted Answer

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

Question 4

Over the past decade,the United States has persistently exported more goods and services than it has imported.

Accepted Answer

A) True 
 B)False

Question 5

If a government increases its budget deficit,then interest rates

Accepted Answer

A) and domestic investment rise. 
B) and domestic investment falls. 
C) rise and domestic investment falls. 
D) fall and domestic investment rises. 
A) and domestic investment rise. 
B) and domestic investment falls. 
C) rise and domestic investment falls. 
D) fall and domestic investment rises.

Question 6

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

Accepted Answer

A) and net exports decreased. 
B) and net exports increased. 
C) increased while net exports decreased. 
D) decreased while net exports increased. 
A) and net exports decreased. 
B) and net exports increased. 
C) increased while net exports decreased. 
D) decreased while net exports increased.

Question 7

If U.S.citizens decide to purchase more foreign assets at each interest rate,the U.S.real interest rate

Accepted Answer

A) increases, the real exchange rate of the dollar appreciates, and U.S.net capital outflow decreases. 
B) increases, the real exchange rate of the dollar depreciates, and U.S.net capital outflow increases. 
C) decreases, the real exchange rate of the dollar depreciates, and U.S.net capital outflow decreases. 
D) decreases, the real exchange rate of the dollar appreciates, and U.S.net capital outflow increases. 
A) increases, the real exchange rate of the dollar appreciates, and U.S.net capital outflow decreases. 
B) increases, the real exchange rate of the dollar depreciates, and U.S.net capital outflow increases. 
C) decreases, the real exchange rate of the dollar depreciates, and U.S.net capital outflow decreases. 
D) decreases, the real exchange rate of the dollar appreciates, and U.S.net capital outflow increases.

Question 8

If the real interest rate were above the equilibrium rate,there would be a shortage of loanable funds.

Accepted Answer

A) True 
 B)False

Question 9

What do trade policies do to the standard of living?

Accepted Answer

Trade policies reduce both imports and e

Question 10

If net exports are positive,then

Accepted Answer

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

Question 11

If U.S.citizens decide to save a larger fraction of their incomes,the real interest rate

Accepted Answer

A) decreases, the real exchange rate of the dollar depreciates, and U.S.net capital outflow increases. 
B) decreases, the real exchange rate of the dollar appreciates, and U.S.net capital outflow decreases. 
C) increases, the real exchange rate of the dollar appreciates, and U.S.net capital outflow decreases. 
D) increases, the real exchange rate of the dollar depreciates, and U.S.net capital outflow increases. 
A) decreases, the real exchange rate of the dollar depreciates, and U.S.net capital outflow increases. 
B) decreases, the real exchange rate of the dollar appreciates, and U.S.net capital outflow decreases. 
C) increases, the real exchange rate of the dollar appreciates, and U.S.net capital outflow decreases. 
D) increases, the real exchange rate of the dollar depreciates, and U.S.net capital outflow increases.

Question 12

From 2001 to 2004 the U.S.budget went from surplus to deficit.This 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 13

According to the open-economy macroeconomic model,an increase in the U.S.government budget surplus increases U.S.net capital outflow,causes the real exchange rate of the dollar to depreciate,and increases U.S.net exports.

Accepted Answer

A) True 
 B)False

Question 14

The diagram below represents the market for loanable funds and the market for foreign-currency exchange in Mexico. Use the diagram to answer the following questions.
Figure 32-6
  
-Refer to Figure 32-6.Which of the following is consistent with capital flight from Mexico?

Accepted Answer

A) The real exchange rate of the peso appreciates from E₀ to E₁. 
B) The real exchange rate of the peso depreciates from E₀ to E₁. 
C) The real exchange rate of the peso appreciates from E₁ to E₀. 
D) The real exchange rate of the peso depreciates from E₁ to E₀. 
A) The real exchange rate of the peso appreciates from E₀ to E₁. 
B) The real exchange rate of the peso depreciates from E₀ to E₁. 
C) The real exchange rate of the peso appreciates from E₁ to E₀. 
D) The real exchange rate of the peso depreciates from E₁ to E₀.

Question 15

Trade policies

Accepted Answer

A) affect a country's overall trade balance, but affect all firms and industries the same. 
B) affect a country's overall trade balance, but affect some firms or industries differently than others. 
C) do not affect a country's overall trade balance, but affect some firms or industries differently than others. 
D) do not affect either a country's overall trade balance or specific firms or industries. 
A) affect a country's overall trade balance, but affect all firms and industries the same. 
B) affect a country's overall trade balance, but affect some firms or industries differently than others. 
C) do not affect a country's overall trade balance, but affect some firms or industries differently than others. 
D) do not affect either a country's overall trade balance or specific firms or industries.

Question 16

Which of the following is correct in an open economy?

Accepted Answer

A) S = I 
B) S = NX + NCO 
C) S = NCO 
D) S = I + NCO 
A) S = I 
B) S = NX + NCO 
C) S = NCO 
D) S = I + NCO

Question 17

In 1995 House Speaker Newt Gingrich threatened to send the United States into default on its debt.During the day of this announcement,U.S.interest rates rose and the real exchange rate of the U.S.dollar depreciated.Which of these changes is consistent with the results of the open-economy macroeconomic model?

Accepted Answer

A) the increase in U.S.interest rates 
B) the depreciation of the real exchange rate of the U.S.dollar 
C) Both a and b are consistent. 
D) Neither a nor b are consistent. 
A) the increase in U.S.interest rates 
B) the depreciation of the real exchange rate of the U.S.dollar 
C) Both a and b are consistent. 
D) Neither a nor b are consistent.

Exam 32: A Macroeconomic Theory of the Open Economy

The real exchange rate measures the

If a government started with a budget deficit and moved to a surplus,domestic investment

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

Over the past decade,the United States has persistently exported more goods and services than it has imported.

If a government increases its budget deficit,then interest rates

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

If U.S.citizens decide to purchase more foreign assets at each interest rate,the U.S.real interest rate

If the real interest rate were above the equilibrium rate,there would be a shortage of loanable funds.

What do trade policies do to the standard of living?

If net exports are positive,then

If U.S.citizens decide to save a larger fraction of their incomes,the real interest rate

From 2001 to 2004 the U.S.budget went from surplus to deficit.This should have

According to the open-economy macroeconomic model,an increase in the U.S.government budget surplus increases U.S.net capital outflow,causes the real exchange rate of the dollar to depreciate,and increases U.S.net exports.

The diagram below represents the market for loanable funds and the market for foreign-currency exchange in Mexico. Use the diagram to answer the following questions. Figure 32-6 -Refer to Figure 32-6.Which of the following is consistent with capital flight from Mexico?

Trade policies

Which of the following is correct in an open economy?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

Supply, demand, and Government Policies

Consumers, producers, and the Efficiency of Markets

Application: 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

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

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 Trade Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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