Question 1

In an open economy,

Accepted Answer

A) net capital outflow = imports. 
B) net capital outflow = net exports. 
C) net capital outflow = exports. 
D) None of the above is correct. 
A) net capital outflow = imports. 
B) net capital outflow = net exports. 
C) net capital outflow = exports. 
D) None of the above is correct.

Question 2

Suppose a presidential candidate promises to increase the government budget surplus and claims that doing so will stop U.S.citizens from investing in foreign companies and increase the value of the dollar.Evaluate this promise.

Accepted Answer

An increase in the government budget sur

Question 3

Which of the following would tend to shift the supply of dollars in the market for foreign-currency exchange of the open-economy macroeconomic model to the left?

Accepted Answer

A) The exchange rate rises. 
B) The exchange rate falls. 
C) The expected rate of return on U.S.assets rises. 
D) The expected rate of return on U.S.assets falls. 
A) The exchange rate rises. 
B) The exchange rate falls. 
C) The expected rate of return on U.S.assets rises. 
D) The expected rate of return on U.S.assets falls.

Question 4

If the United States imposes an import quota on clothing,U.S.exports

Accepted Answer

A) increase, U.S.imports increase, and U.S.net exports are unchanged. 
B) increase, U.S.imports decrease, and U.S.net exports increase. 
C) decrease, U.S.imports increase, and U.S.net exports decrease. 
D) decrease, U.S.imports decrease, and U.S.net exports are unchanged. 
A) increase, U.S.imports increase, and U.S.net exports are unchanged. 
B) increase, U.S.imports decrease, and U.S.net exports increase. 
C) decrease, U.S.imports increase, and U.S.net exports decrease. 
D) decrease, U.S.imports decrease, and U.S.net exports are unchanged.

Question 5

If the U.S.imposed an import quota on beef,then in the U.S.

Accepted Answer

A) exports and imports would rise. 
B) exports and imports would fall. 
C) exports would rise and imports would fall. 
D) exports would fall and imports would rise. 
A) exports and imports would rise. 
B) exports and imports would fall. 
C) exports would rise and imports would fall. 
D) exports would fall and imports would rise.

Question 6

When the real exchange rate for the dollar appreciates,U.S.goods become

Accepted Answer

A) less expensive relative to foreign goods, which makes exports rise and imports fall. 
B) less expensive relative to foreign goods, which makes exports fall and imports rise. 
C) more expensive relative to foreign goods, which makes exports rise and imports fall. 
D) more expensive relative to foreign goods, which makes exports fall and imports rise. 
A) less expensive relative to foreign goods, which makes exports rise and imports fall. 
B) less expensive relative to foreign goods, which makes exports fall and imports rise. 
C) more expensive relative to foreign goods, which makes exports rise and imports fall. 
D) more expensive relative to foreign goods, which makes exports fall and imports rise.

Question 7

If the government of Colombia made policy changes that increased national saving,the real exchange rate of the peso would

Accepted Answer

A) depreciate and Colombian net exports would rise. 
B) depreciate and Colombian net exports would fall. 
C) appreciate and Colombian net exports would rise. 
D) appreciate and Colombian net exports would fall. 
A) depreciate and Colombian net exports would rise. 
B) depreciate and Colombian net exports would fall. 
C) appreciate and Colombian net exports would rise. 
D) appreciate and Colombian net exports would fall.

Question 8

Over the past two decades,the United States has

Accepted Answer

A) generally had, or been very near to a trade balance. 
B) had trade deficits in about as many years as it has trade surpluses. 
C) persistently had a trade deficit. 
D) persistently had a trade surplus. 
A) generally had, or been very near to a trade balance. 
B) had trade deficits in about as many years as it has trade surpluses. 
C) persistently had a trade deficit. 
D) persistently had a trade surplus.

Question 9

If the government of a country with a zero trade balance started with a budget deficit and moved to a surplus,domestic investment would

Accepted Answer

A) rise and there would be a trade surplus. 
B) rise and there would be a trade deficit. 
C) fall and there would be a trade surplus. 
D) fall and there would be a trade deficit. 
A) rise and there would be a trade surplus. 
B) rise and there would be a trade deficit. 
C) fall and there would be a trade surplus. 
D) fall and there would be a trade deficit.

Question 10

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.Suppose the Mexican economy starts at r₀ and E₁.Which of the following new equilibrium is consistent with capital flight?

Accepted Answer

A) rₒ and E₀ 
B) r₁ and E₀ 
C) r₁ and E₁ 
D) None of the above is correct. 
A) rₒ and E₀ 
B) r₁ and E₀ 
C) r₁ and E₁ 
D) None of the above is correct.

Question 11

Which of the following is the most accurate statement?

Accepted Answer

A) Trade policy has neither microeconomic nor macroeconomic effects. 
B) Trade policy has similar microeconomic and macroeconomic effects. 
C) The effects of trade policy are more macroeconomic than microeconomic. 
D) The effects of trade policy are more microeconomic than macroeconomic. 
A) Trade policy has neither microeconomic nor macroeconomic effects. 
B) Trade policy has similar microeconomic and macroeconomic effects. 
C) The effects of trade policy are more macroeconomic than microeconomic. 
D) The effects of trade policy are more microeconomic than macroeconomic.

Question 12

Which of the following contains a list only of things that increase when the budget deficit of the U.S.increases?

Accepted Answer

A) U.S.supply of loanable funds, U.S.interest rates, U.S.domestic investment 
B) U.S.imports, U.S.interest rates, the real exchange rate of the dollar 
C) U.S.interest rates, the real exchange rate of the dollar, U.S.domestic investment 
D) the real exchange rate of the dollar, U.S.net capital outflow, U.S.net exports 
A) U.S.supply of loanable funds, U.S.interest rates, U.S.domestic investment 
B) U.S.imports, U.S.interest rates, the real exchange rate of the dollar 
C) U.S.interest rates, the real exchange rate of the dollar, U.S.domestic investment 
D) the real exchange rate of the dollar, U.S.net capital outflow, U.S.net exports

Question 13

In the 1980s,the U.S.government budget deficit rose.At the same time the U.S.trade deficit grew larger,the real exchange rate of the dollar appreciated,and U.S.net capital outflow decreased.Which of these events is contrary to what the open-economy macroeconomic model predicts concerning the effects of an increase in the budget deficit?

Accepted Answer

A) The U.S.trade deficit grew. 
B) The real exchange rate of the dollar appreciated. 
C) U.S.net capital outflow fell. 
D) None of the above is contrary to the predictions of the model. 
A) The U.S.trade deficit grew. 
B) The real exchange rate of the dollar appreciated. 
C) U.S.net capital outflow fell. 
D) None of the above is contrary to the predictions of the model.

Question 14

Which of the following is the correct way to show the effects of a newly imposed import quota?

Accepted Answer

A) Shift the demand for loanable funds right, the supply of dollars in the market for foreign-currency exchange right, and the demand for dollars left. 
B) Shift the demand for loanable funds right, and the supply of dollars in the market for foreign-currency exchange left. 
C) Shift the demand for dollars in the market for foreign-currency exchange left. 
D) None of the above is correct. 
A) Shift the demand for loanable funds right, the supply of dollars in the market for foreign-currency exchange right, and the demand for dollars left. 
B) Shift the demand for loanable funds right, and the supply of dollars in the market for foreign-currency exchange left. 
C) Shift the demand for dollars in the market for foreign-currency exchange left. 
D) None of the above is correct.

Question 15

In an open economy,the market for loanable funds equates national saving with

Accepted Answer

A) domestic investment. 
B) net capital outflow. 
C) national consumption minus domestic investment. 
D) None of the above is correct. 
A) domestic investment. 
B) net capital outflow. 
C) national consumption minus domestic investment. 
D) None of the above is correct.

Question 16

Explain why saving need not equal domestic investment in an open economy.

Accepted Answer

Because saving equals domestic

Question 17

Which of the following is included in the supply of dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

Accepted Answer

A) A retail outlet in Russia wants to buy semi-conductors from a U.S.manufacturer. 
B) A U.S.bank loans dollars to Blair, a U.S.resident, who wants to purchase a new house in the United States. 
C) A U.S.based mutual fund wants to purchase bonds issued by an Italian corporation. 
D) All of the above are correct. 
A) A retail outlet in Russia wants to buy semi-conductors from a U.S.manufacturer. 
B) A U.S.bank loans dollars to Blair, a U.S.resident, who wants to purchase a new house in the United States. 
C) A U.S.based mutual fund wants to purchase bonds issued by an Italian corporation. 
D) All of the above are correct.

Question 18

In the open-economy macroeconomic model,the quantity of dollars demanded in the market for foreign-currency exchange

Accepted Answer

A) depends on the real exchange rate.The quantity of dollars supplied in the foreign-exchange market depends on the real interest rate. 
B) depends on the real interest rate.The quantity of dollars supplied in the foreign-exchange market depends on the real exchange rate. 
C) and the quantity of dollars supplied in the market for foreign-currency exchange depend on the real exchange rate. 
D) and the quantity of dollars supplied in the market for foreign-currency exchange depend on the real interest rate. 
A) depends on the real exchange rate.The quantity of dollars supplied in the foreign-exchange market depends on the real interest rate. 
B) depends on the real interest rate.The quantity of dollars supplied in the foreign-exchange market depends on the real exchange rate. 
C) and the quantity of dollars supplied in the market for foreign-currency exchange depend on the real exchange rate. 
D) and the quantity of dollars supplied in the market for foreign-currency exchange depend on the real interest rate.

Question 19

According to the open-economy macroeconomic model,if the United States moved from a government budget deficit to a government budget surplus,U.S.real interest rates would increase and the real exchange rate of the U.S.dollar would appreciate.

Accepted Answer

A) True 
 B)False

Question 20

When a country experiences capital flight its currency

Accepted Answer

A) appreciates and net exports rise. 
B) appreciates and net exports fall. 
C) depreciates and net exports rise. 
D) depreciates and net exports fall. 
A) appreciates and net exports rise. 
B) appreciates and net exports fall. 
C) depreciates and net exports rise. 
D) depreciates and net exports fall.

Exam 32: A Macroeconomic Theory of the Open Economy

In an open economy,

Suppose a presidential candidate promises to increase the government budget surplus and claims that doing so will stop U.S.citizens from investing in foreign companies and increase the value of the dollar.Evaluate this promise.

Which of the following would tend to shift the supply of dollars in the market for foreign-currency exchange of the open-economy macroeconomic model to the left?

If the United States imposes an import quota on clothing,U.S.exports

If the U.S.imposed an import quota on beef,then in the U.S.

When the real exchange rate for the dollar appreciates,U.S.goods become

If the government of Colombia made policy changes that increased national saving,the real exchange rate of the peso would

Over the past two decades,the United States has

If the government of a country with a zero trade balance started with a budget deficit and moved to a surplus,domestic investment would

Which of the following is the most accurate statement?

Which of the following contains a list only of things that increase when the budget deficit of the U.S.increases?

Which of the following is the correct way to show the effects of a newly imposed import quota?

In an open economy,the market for loanable funds equates national saving with

Explain why saving need not equal domestic investment in an open economy.

Which of the following is included in the supply of dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

In the open-economy macroeconomic model,the quantity of dollars demanded in the market for foreign-currency exchange

According to the open-economy macroeconomic model,if the United States moved from a government budget deficit to a government budget surplus,U.S.real interest rates would increase and the real exchange rate of the U.S.dollar would appreciate.

When a country experiences capital flight its currency

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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