Question 1

If the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied

Accepted Answer

A) there is a surplus and the interest rate will rise. 
B) there is a surplus and the interest rate will fall. 
C) there is a shortage and the interest rate will rise. 
D) there is a shortage and the interest rate will fall. 
A) there is a surplus and the interest rate will rise. 
B) there is a surplus and the interest rate will fall. 
C) there is a shortage and the interest rate will rise. 
D) there is a shortage and the interest rate will fall.

Question 2

The amount of dollars demanded in the market for foreign-currency exchange at a given real exchange rate increases if

Accepted Answer

A) either U.S.imports or exports increase. 
B) either U.S.imports or exports decrease. 
C) either U.S.imports increase or U.S.exports decrease. 
D) either U.S.imports decrease or U.S.exports increase. 
A) either U.S.imports or exports increase. 
B) either U.S.imports or exports decrease. 
C) either U.S.imports increase or U.S.exports decrease. 
D) either U.S.imports decrease or U.S.exports increase.

Question 3

Which of the following would be consistent with an increase in the U.S.real interest rate?

Accepted Answer

A) a Swiss bank purchases a U.S.bond instead of the German bond it had considered purchasing. 
B) firms decide to do more investment spending. 
C) a U.S.citizen decides to put less money in his savings account than he had planned to. 
D) All of the above are consistent. 
A) a Swiss bank purchases a U.S.bond instead of the German bond it had considered purchasing. 
B) firms decide to do more investment spending. 
C) a U.S.citizen decides to put less money in his savings account than he had planned to. 
D) All of the above are consistent.

Question 4

Figure 32-3
  
-Refer to Figure 32-3.Starting from r₂ and E₃,an increase in the budget surplus can be illustrated as a move to

Accepted Answer

A) r₃ and E₄. 
B) r₃ and E₂. 
C) r₁ and E₄. 
D) r₁ and E₂. 
A) r₃ and E₄. 
B) r₃ and E₂. 
C) r₁ and E₄. 
D) r₁ and E₂.

Question 5

In an open economy the supply of loanable funds comes from

Accepted Answer

A) national saving.Demand comes from only domestic investment. 
B) national saving.Demand comes from domestic investment and net capital outflow. 
C) Only net capital outflow.Demand for loanable funds comes from national saving. 
D) domestic investment and net capital outflow.Demand for loanable funds comes from national saving. 
A) national saving.Demand comes from only domestic investment. 
B) national saving.Demand comes from domestic investment and net capital outflow. 
C) Only net capital outflow.Demand for loanable funds comes from national saving. 
D) domestic investment and net capital outflow.Demand for loanable funds comes from national saving.

Question 6

The 1998 default by the Russian government had results that were predictable using the textbook model.The default

Accepted Answer

A) increased Russian interest rates and net exports. 
B) reduced Russian interest rates and net exports. 
C) increased Russian interest rates and reduced Russian net exports. 
D) reduced Russian interest rates and increased Russian net exports. 
A) increased Russian interest rates and net exports. 
B) reduced Russian interest rates and net exports. 
C) increased Russian interest rates and reduced Russian net exports. 
D) reduced Russian interest rates and increased Russian net exports.

Question 7

-Refer to Figure 32-5.Which of the following shifts show the effects of an import quota?

Accepted Answer

A) shifting the middle supply curve in panel c to the one to its left. 
B) shifting the demand curve from the right to the left in panel c. 
C) shifting the demand curve from the left to the right in panel c. 
D) None of the above is correct. 
A) shifting the middle supply curve in panel c to the one to its left. 
B) shifting the demand curve from the right to the left in panel c. 
C) shifting the demand curve from the left to the right in panel c. 
D) None of the above is correct.

Question 8

An increase in real interest rates in the United States

Accepted Answer

A) discourages both U.S.and foreign residents from buying U.S.assets. 
B) encourages both U.S.and foreign residents to buy U.S.assets. 
C) encourages U.S.residents to buy U.S.assets, but discourages foreign residents from buying U.S.assets. 
D) encourages foreign residents to buy U.S.assets, but discourages U.S.residents from buying U.S.assets. 
A) discourages both U.S.and foreign residents from buying U.S.assets. 
B) encourages both U.S.and foreign residents to buy U.S.assets. 
C) encourages U.S.residents to buy U.S.assets, but discourages foreign residents from buying U.S.assets. 
D) encourages foreign residents to buy U.S.assets, but discourages U.S.residents from buying U.S.assets.

Question 9

Other things the same,a lower real interest rate decreases the quantity of

Accepted Answer

A) loanable funds demanded. 
B) loanable funds supplied. 
C) domestic investment. 
D) net capital outflow. 
A) loanable funds demanded. 
B) loanable funds supplied. 
C) domestic investment. 
D) net capital outflow.

Question 10

Figure 32-3
  
-Refer to Figure 32-3.Suppose the U.S.firms desire to purchase more capital in the U.S.The effects of this could be illustrated by

Accepted Answer

A) shifting the demand curve in panel a to the right and the demand curve in panel c to the left. 
B) shifting the demand curve in panel a to the right and the supply curve in panel c to the left. 
C) shifting the supply curve in panel a to the right and the demand curve in panel c to the left. 
D) shifting the supply curve in panel a to the right and the supply curve in panel c to the right. 
A) shifting the demand curve in panel a to the right and the demand curve in panel c to the left. 
B) shifting the demand curve in panel a to the right and the supply curve in panel c to the left. 
C) shifting the supply curve in panel a to the right and the demand curve in panel c to the left. 
D) shifting the supply curve in panel a to the right and the supply curve in panel c to the right.

Question 11

If the real exchange rate of the U.S.dollar were above its equilibrium level,the real exchange rate of the U.S.dollar would appreciate.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

Higher U.S.interest rates make U.S.asset

Question 13

Net capital outflow

Accepted Answer

A) is a source of the supply of loanable funds, and the source of the supply of dollars in the foreign exchange market. 
B) is a source of the supply of loanable funds, and a source of the demand for dollars in the foreign exchange market. 
C) is a part of the demand for loanable funds, and the source of the supply of dollars in the foreign exchange market. 
D) is a part of the demand for loanable funds, and a source of the demand for dollars in the foreign exchange market. 
A) is a source of the supply of loanable funds, and the source of the supply of dollars in the foreign exchange market. 
B) is a source of the supply of loanable funds, and a source of the demand for dollars in the foreign exchange market. 
C) is a part of the demand for loanable funds, and the source of the supply of dollars in the foreign exchange market. 
D) is a part of the demand for loanable funds, and a source of the demand for dollars in the foreign exchange market.

Question 14

The key determinant of net capital outflow is the real exchange rate.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following would both raise the U.S.exchange rate?

Accepted Answer

A) capital flight from other countries to the U.S.occurs and the U.S.moves from budget surplus to budget deficit 
B) capital flight from other countries to the U.S.occurs and the U.S.moves from budget deficit to budget surplus 
C) capital flight from the U.S.to other countries occurs, the U.S.moves from budget surplus to budget deficit 
D) capital flight from U.S.to other countries occurs, the U.S.moves from budget deficit to budget surplus 
A) capital flight from other countries to the U.S.occurs and the U.S.moves from budget surplus to budget deficit 
B) capital flight from other countries to the U.S.occurs and the U.S.moves from budget deficit to budget surplus 
C) capital flight from the U.S.to other countries occurs, the U.S.moves from budget surplus to budget deficit 
D) capital flight from U.S.to other countries occurs, the U.S.moves from budget deficit to budget surplus

Question 16

Figure 32-2
 
-Refer to Figure 32-2.At an interest rate of 3 percent,the diagram indicates that

Accepted Answer

A) there is a surplus in the market for foreign-currency exchange. 
B) national saving equals domestic investment. 
C) net capital outflow + domestic investment = national saving. 
D) the market for foreign-currency exchange the quantity of dollars supplied equals the quantity of dollars demanded. 
A) there is a surplus in the market for foreign-currency exchange. 
B) national saving equals domestic investment. 
C) net capital outflow + domestic investment = national saving. 
D) the market for foreign-currency exchange the quantity of dollars supplied equals the quantity of dollars demanded.

Question 17

If there is a shortage of loanable funds,

Accepted Answer

A) the demand for loanable funds will shift right so the interest rate rises. 
B) the supply of loanable funds will shift left so the interest rate falls. 
C) there will be no shifts of the curves, but the interest rate rises. 
D) there will be no shifts of the curves, but the interest rate falls. 
A) the demand for loanable funds will shift right so the interest rate rises. 
B) the supply of loanable funds will shift left so the interest rate falls. 
C) there will be no shifts of the curves, but the interest rate rises. 
D) there will be no shifts of the curves, but the interest rate falls.

Question 18

If net exports are negative,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 19

Figure 32-2
 
-Refer to Figure 32-2.Which curve is determined by net capital outflow only?

Accepted Answer

A) the demand curve in panela 
B) the demand curve in panelc 
C) the supply curve in panel a. 
D) the supply curve in panel c. 
A) the demand curve in panela 
B) the demand curve in panelc 
C) the supply curve in panel a. 
D) the supply curve in panel c.

Question 20

Figure 32-3
  
-Refer to Figure 32-4.The initial effect of an increase in the budget deficit in the loanable funds market is illustrated as a move from

Accepted Answer

A) a to b. 
B) a to c. 
C) c to b. 
D) c to d.o 
A) a to b. 
B) a to c. 
C) c to b. 
D) c to d.o

Exam 32: A Macroeconomic Theory of the Open Economy

If the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied

The amount of dollars demanded in the market for foreign-currency exchange at a given real exchange rate increases if

Which of the following would be consistent with an increase in the U.S.real interest rate?

Figure 32-3 -Refer to Figure 32-3.Starting from r₂ and E₃,an increase in the budget surplus can be illustrated as a move to

In an open economy the supply of loanable funds comes from

The 1998 default by the Russian government had results that were predictable using the textbook model.The default

-Refer to Figure 32-5.Which of the following shifts show the effects of an import quota?

An increase in real interest rates in the United States

Other things the same,a lower real interest rate decreases the quantity of

Figure 32-3 -Refer to Figure 32-3.Suppose the U.S.firms desire to purchase more capital in the U.S.The effects of this could be illustrated by

If the real exchange rate of the U.S.dollar were above its equilibrium level,the real exchange rate of the U.S.dollar would appreciate.

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

Net capital outflow

The key determinant of net capital outflow is the real exchange rate.

Which of the following would both raise the U.S.exchange rate?

Figure 32-2 -Refer to Figure 32-2.At an interest rate of 3 percent,the diagram indicates that

If there is a shortage of loanable funds,

If net exports are negative,then

Figure 32-2 -Refer to Figure 32-2.Which curve is determined by net capital outflow only?

Figure 32-3 -Refer to Figure 32-4.The initial effect of an increase in the budget deficit in the loanable funds market is illustrated as a move from

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

Filters