Question 1

If a tariff on lumber were implemented, for the country as a whole which of the following would rise?

Accepted Answer

A) exports and net exports 
B) exports but not net exports 
C) net exports but not exports 
D) neither exports nor net exports 
A) exports and net exports 
B) exports but not net exports 
C) net exports but not exports 
D) neither exports nor net exports

Question 2

If a government has a budget surplus, then public saving

Accepted Answer

A) is positive and increases national saving. 
B) is positive but decreases national saving. 
C) is negative and decreases national saving. 
D) is negative but increases national saving. 
A) is positive and increases national saving. 
B) is positive but decreases national saving. 
C) is negative and decreases national saving. 
D) is negative but increases national saving.

Question 3

What effect do protectionist policies have on the trade deficit?

Accepted Answer

Protectionist policies increase the dema

Question 4

If a government increases its budget deficit, then domestic interest rates

Accepted Answer

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

Question 5

If at a given real interest rate desired national saving were $140 billion, domestic investment were $90 billion, and net capital outflow were $40 billion, then at that real interest rate in the loanable funds market there would be a

Accepted Answer

A) surplus; the real interest rate would rise. 
B) surplus; the real interest rate would fall. 
C) shortage; the real interest rate would rise. 
D) shortage; the real interest rate would fall. 
A) surplus; the real interest rate would rise. 
B) surplus; the real interest rate would fall. 
C) shortage; the real interest rate would rise. 
D) shortage; the real interest rate would fall.

Question 6

If the government of a country with a zero trade balance started with a budget deficit and moved to a budget 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 7

When the U.S. real interest rate falls

Accepted Answer

A) U.S. purchases of foreign assets and foreign purchases of U.S. assets rise 
B) U.S. purchases of foreign assets rise and foreign purchases of U.S. assets fall 
C) U.S. purchases of foreign assets fall and foreign purchases of U.S. assets rise 
D) U.S. purchases of foreign assets and foreign purchases of U.S. assets fall 
A) U.S. purchases of foreign assets and foreign purchases of U.S. assets rise 
B) U.S. purchases of foreign assets rise and foreign purchases of U.S. assets fall 
C) U.S. purchases of foreign assets fall and foreign purchases of U.S. assets rise 
D) U.S. purchases of foreign assets and foreign purchases of U.S. assets fall

Question 8

In the open-economy macroeconomic model, 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 9

If the U.S. imposed an import quota on corn, 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 10

When the U.S. real interest rate falls, owning U.S. assets becomes

Accepted Answer

A) less attractive and so U.S. net capital outflow rises. 
B) less attractive and so U.S. net capital outflow falls. 
C) more attractive and so U.S. net capital outflow rises. 
D) more attractive and so U.S. net capital outflow falls. 
A) less attractive and so U.S. net capital outflow rises. 
B) less attractive and so U.S. net capital outflow falls. 
C) more attractive and so U.S. net capital outflow rises. 
D) more attractive and so U.S. net capital outflow falls.

Question 11

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

Accepted Answer

A) increase, U.S. imports increase, and U.S. net exports will not change. 
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 will not change. 
A) increase, U.S. imports increase, and U.S. net exports will not change. 
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 will not change.

Question 12

A tax on imported goods is called a(n)

Accepted Answer

A) excise tax. 
B) tariff. 
C) import quota. 
D) None of the above is correct. 
A) excise tax. 
B) tariff. 
C) import quota. 
D) None of the above is correct.

Question 13

In 2002, the United States imposed restrictions on the importation of steel into the United States. The open-economy macroeconomic model shows that such a policy would

Accepted Answer

A) lower the real exchange rate and increase net exports. 
B) lower the real exchange rate and have no effect on net exports. 
C) raise the real exchange rate and decrease net exports. 
D) raise the real exchange rate and have no effect on net exports. 
A) lower the real exchange rate and increase net exports. 
B) lower the real exchange rate and have no effect on net exports. 
C) raise the real exchange rate and decrease net exports. 
D) raise the real exchange rate and have no effect on net exports.

Question 14

If a country had capital flight, then the real exchange rate would

Accepted Answer

A) fall. To offset this fall the government could increase the budget deficit. 
B) fall. To offset this fall the government could decrease the budget deficit. 
C) rise. To offset this rise the government could increase the budget deficit. 
D) rise. To offset this rise the government could decrease the budget deficit. 
A) fall. To offset this fall the government could increase the budget deficit. 
B) fall. To offset this fall the government could decrease the budget deficit. 
C) rise. To offset this rise the government could increase the budget deficit. 
D) rise. To offset this rise the government could decrease the budget deficit.

Question 15

Suppose that the Turkish government budget deficit increases. What curves in the open-economy macroeconomic model shift? Explain why each curve shifts the direction it does.

Accepted Answer

The supply of Turkish loanable funds cur

Question 16

If for some reason Americans desired to increase their purchases of foreign assets, then other things the same

Accepted Answer

A) both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency exchange would fall. 
B) both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency would rise. 
C) the real exchange rate would rise and the quantity of dollars exchanged in the market for foreign-currency would fall. 
D) the real exchange rate would fall and the quantity of dollars exchanged in the market for foreign-currency would rise. 
A) both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency exchange would fall. 
B) both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency would rise. 
C) the real exchange rate would rise and the quantity of dollars exchanged in the market for foreign-currency would fall. 
D) the real exchange rate would fall and the quantity of dollars exchanged in the market for foreign-currency would rise.

Question 17

An increase in the budget deficit

Accepted Answer

A) raises net exports and domestic investment. 
B) raises net exports and reduces domestic investment. 
C) reduces net exports and raises domestic investment. 
D) reduces net exports and domestic investment. 
A) raises net exports and domestic investment. 
B) raises net exports and reduces domestic investment. 
C) reduces net exports and raises domestic investment. 
D) reduces net exports and domestic investment.

Question 18

In the open-economy macroeconomic model, if the supply of loanable funds increases, then the interest rate

Accepted Answer

A) and the real exchange rate increase. 
B) and the real exchange rate decrease. 
C) increases and the real exchange rate decreases. 
D) decreases and the real exchange rate increases. 
A) and the real exchange rate increase. 
B) and the real exchange rate decrease. 
C) increases and the real exchange rate decreases. 
D) decreases and the real exchange rate increases.

Question 19

Which of the following increases if the U.S. imposes an import quota on computer components?

Accepted Answer

A) U.S. exports 
B) U.S. imports 
C) U.S. net exports 
D) None of the above increases. 
A) U.S. exports 
B) U.S. imports 
C) U.S. net exports 
D) None of the above increases.

Question 20

A firm produces manufacturing equipment, some of which it exports. Which of the following effects of a budget deficit would likely reduce the quantity of equipment it sells?

Accepted Answer

A) the change in the interest rate and the change in the exchange rate 
B) the change in the interest rate but not the change in the exchange rate 
C) the change in the exchange rate but not the change in the interest rate 
D) neither the change in the interest rate nor the change in the exchange rate 
A) the change in the interest rate and the change in the exchange rate 
B) the change in the interest rate but not the change in the exchange rate 
C) the change in the exchange rate but not the change in the interest rate 
D) neither the change in the interest rate nor the change in the exchange rate

Exam 19: A Macroeconomic Theory of the Open Economy

If a tariff on lumber were implemented, for the country as a whole which of the following would rise?

If a government has a budget surplus, then public saving

What effect do protectionist policies have on the trade deficit?

If a government increases its budget deficit, then domestic interest rates

If at a given real interest rate desired national saving were $140 billion, domestic investment were $90 billion, and net capital outflow were $40 billion, then at that real interest rate in the loanable funds market there would be a

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

When the U.S. real interest rate falls

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

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

When the U.S. real interest rate falls, owning U.S. assets becomes

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

A tax on imported goods is called a(n)

In 2002, the United States imposed restrictions on the importation of steel into the United States. The open-economy macroeconomic model shows that such a policy would

If a country had capital flight, then the real exchange rate would

Suppose that the Turkish government budget deficit increases. What curves in the open-economy macroeconomic model shift? Explain why each curve shifts the direction it does.

If for some reason Americans desired to increase their purchases of foreign assets, then other things the same

An increase in the budget deficit

In the open-economy macroeconomic model, if the supply of loanable funds increases, then the interest rate

Which of the following increases if the U.S. imposes an import quota on computer components?

A firm produces manufacturing equipment, some of which it exports. Which of the following effects of a budget deficit would likely reduce the quantity of equipment it sells?

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

Application: The Costs of Taxation

Application: International Trade

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 Macroeconomic Models

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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