Question 1

If the government of Peru increased its budget deficit, then domestic investment

Accepted Answer

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

Question 2

In which case(s) does(do) a country's supply of loanable funds shift right?

Accepted Answer

A) both an increase in the budget deficit and capital flight 
B) an increase in the budget deficit, but not capital flight 
C) capital flight, but not an increase in the budget deficit 
D) neither an increase in the budget deficit nor capital flight 
A) both an increase in the budget deficit and capital flight 
B) an increase in the budget deficit, but not capital flight 
C) capital flight, but not an increase in the budget deficit 
D) neither an increase in the budget deficit nor capital flight

Question 3

A country has domestic investment of $100 billion. Its citizens purchase $500 of foreign assets and foreign citizens purchase $300 of its assets. What is national saving?

Accepted Answer

A) -$100 billion 
B) $100 billion 
C) $300 billion 
D) $600 billion 
A) -$100 billion 
B) $100 billion 
C) $300 billion 
D) $600 billion

Question 4

If a quota on lumber were implemented, then at the original exchange rate there would be a

Accepted Answer

A) surplus in the market for foreign-currency exchange, so the real exchange rate appreciates. 
B) surplus in the market for foreign-currency exchange, so the real exchange rate depreciates. 
C) shortage in the market for foreign-currency exchange, so the real exchange rate appreciates. 
D) shortage in the market for foreign-currency exchange, so the real exchange rate depreciates. 
A) surplus in the market for foreign-currency exchange, so the real exchange rate appreciates. 
B) surplus in the market for foreign-currency exchange, so the real exchange rate depreciates. 
C) shortage in the market for foreign-currency exchange, so the real exchange rate appreciates. 
D) shortage in the market for foreign-currency exchange, so the real exchange rate depreciates.

Question 5

If a government increases its budget deficit, then the real exchange rate

Accepted Answer

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

Question 6

If foreigners want to buy more U.S. bonds, then in the market for foreign-currency exchange the exchange rate

Accepted Answer

A) and the quantity of dollars traded rises. 
B) rises and the quantity of dollars traded falls. 
C) falls and the quantity of dollars traded rises. 
D) and the quantity of dollars traded falls. 
A) and the quantity of dollars traded rises. 
B) rises and the quantity of dollars traded falls. 
C) falls and the quantity of dollars traded rises. 
D) and the quantity of dollars traded falls.

Question 7

In the open-economy macroeconomic model, if investment demand increases, then

Accepted Answer

A) net exports and the real exchange rate rise. 
B) net exports rise and the real exchange rate falls. 
C) net exports fall and the real exchange rate rises. 
D) net exports and the real exchange rate fall. 
A) net exports and the real exchange rate rise. 
B) net exports rise and the real exchange rate falls. 
C) net exports fall and the real exchange rate rises. 
D) net exports and the real exchange rate fall.

Question 8

Suppose the U.S. supply of loanable funds shifts left. This will

Accepted Answer

A) increase U.S. net capital outflow and increase the quantity of loanable funds demanded. 
B) increase U.S. net capital outflow and decrease the quantity of loanable funds demanded. 
C) decrease U.S. net capital outflow and increase the quantity of loanable funds demanded. 
D) decrease U.S. net capital outflow and decrease the quantity of loanable funds demanded. 
A) increase U.S. net capital outflow and increase the quantity of loanable funds demanded. 
B) increase U.S. net capital outflow and decrease the quantity of loanable funds demanded. 
C) decrease U.S. net capital outflow and increase the quantity of loanable funds demanded. 
D) decrease U.S. net capital outflow and decrease the quantity of loanable funds demanded.

Question 9

Figure 19-4  
-Refer to Figure 19-4. Suppose that the government goes from a budget surplus to a budget deficit. The effects of the change 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 left 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 right. 
D) shifting the supply curve in panel a to the left and the supply curve in panel c to the left. 
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 left 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 right. 
D) shifting the supply curve in panel a to the left and the supply curve in panel c to the left.

Question 10

Other things the same, an increase in the U.S. interest rate

Accepted Answer

A) raises net capital outflow which decreases the quantity of loanable funds demanded. 
B) raises net capital outflow which increases the quantity of loanable funds demanded. 
C) lowers net capital outflow which decreases the quantity of loanable funds demanded. 
D) lowers net capital outflow which increases the quantity of loanable funds demanded. 
A) raises net capital outflow which decreases the quantity of loanable funds demanded. 
B) raises net capital outflow which increases the quantity of loanable funds demanded. 
C) lowers net capital outflow which decreases the quantity of loanable funds demanded. 
D) lowers net capital outflow which increases the quantity of loanable funds demanded.

Question 11

An increase in the budget deficit causes domestic interest rates

Accepted Answer

A) and net capital outflow to rise. 
B) to rise and net capital outflow to fall. 
C) to fall and net capital outflow to rise. 
D) and net capital outflow to fall. 
A) and net capital outflow to rise. 
B) to rise and net capital outflow to fall. 
C) to fall and net capital outflow to rise. 
D) and net capital outflow to fall.

Question 12

If a country institutes policies that lead domestic firms to desire more capital stock

Accepted Answer

A) net capital outflows rise and the real exchange rate rises. 
B) net capital outflows rise and the real exchange rate falls. 
C) net capital outflows fall and the real exchange rate rises. 
D) net capital outflows and the real exchange rate falls. 
A) net capital outflows rise and the real exchange rate rises. 
B) net capital outflows rise and the real exchange rate falls. 
C) net capital outflows fall and the real exchange rate rises. 
D) net capital outflows and the real exchange rate falls.

Question 13

Capital flight refers to

Accepted Answer

A) the movement of workers across international borders in response to exchange rate changes. 
B) the movement of funds between financial intermediaries when interest rates change. 
C) the ability of foreign direct investment to lift a country out of poverty. 
D) a large and sudden movement of funds out of a country. 
A) the movement of workers across international borders in response to exchange rate changes. 
B) the movement of funds between financial intermediaries when interest rates change. 
C) the ability of foreign direct investment to lift a country out of poverty. 
D) a large and sudden movement of funds out of a country.

Question 14

If a country removed an import quota on cotton, then overall that country's

Accepted Answer

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

Question 15

The primary focus of the open-economy macroeconomic model is the determination of GDP and the price level.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Other things the same, if the U.S. interest rate falls, then U.S. residents will want to purchase

Accepted Answer

A) more foreign assets, which increases the quantity of loanable funds demanded. 
B) fewer foreign assets, which decreases the quantity of loanable funds demanded. 
C) more foreign assets, which increase the quantity of loanable funds supplied. 
D) fewer foreign assets, which decreases the quantity of loanable funds supplied. 
A) more foreign assets, which increases the quantity of loanable funds demanded. 
B) fewer foreign assets, which decreases the quantity of loanable funds demanded. 
C) more foreign assets, which increase the quantity of loanable funds supplied. 
D) fewer foreign assets, which decreases the quantity of loanable funds supplied.

Question 18

State what, if anything, each of the following does to the supply or demand of loanable funds.
a.net capital outflow increases at each interest rate
b.domestic investment increases at each interest rate
c.the government deficit increases
d.private saving increases

Accepted Answer

a.the demand for loanable fund

Question 19

If the U.S. government imposed a quota on toy imports, then

Accepted Answer

A) imports and exports would both fall. 
B) imports would fall and exports would rise. 
C) imports would rise and exports would fall. 
D) None of the above is correct. 
A) imports and exports would both fall. 
B) imports would fall and exports would rise. 
C) imports would rise and exports would fall. 
D) None of the above is correct.

Question 20

When a country's government budget deficit increases,

Accepted Answer

A) the real exchange rate of its currency and its net exports increase. 
B) the real exchange rate of its currency and its net exports decrease. 
C) the real exchange rate of its currency increases and its net exports decrease. 
D) the real exchange rate of its currency decreases and its net exports increase. 
A) the real exchange rate of its currency and its net exports increase. 
B) the real exchange rate of its currency and its net exports decrease. 
C) the real exchange rate of its currency increases and its net exports decrease. 
D) the real exchange rate of its currency decreases and its net exports increase.

Exam 19: A Macroeconomic Theory of the Open Economy

If the government of Peru increased its budget deficit, then domestic investment

In which case(s) does(do) a country's supply of loanable funds shift right?

A country has domestic investment of $100 billion. Its citizens purchase $500 of foreign assets and foreign citizens purchase $300 of its assets. What is national saving?

If a quota on lumber were implemented, then at the original exchange rate there would be a

If a government increases its budget deficit, then the real exchange rate

If foreigners want to buy more U.S. bonds, then in the market for foreign-currency exchange the exchange rate

In the open-economy macroeconomic model, if investment demand increases, then

Suppose the U.S. supply of loanable funds shifts left. This will

Figure 19-4 -Refer to Figure 19-4. Suppose that the government goes from a budget surplus to a budget deficit. The effects of the change could be illustrated by

Other things the same, an increase in the U.S. interest rate

An increase in the budget deficit causes domestic interest rates

If a country institutes policies that lead domestic firms to desire more capital stock

Capital flight refers to

If a country removed an import quota on cotton, then overall that country's

The primary focus of the open-economy macroeconomic model is the determination of GDP and the price level.

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

Other things the same, if the U.S. interest rate falls, then U.S. residents will want to purchase

State what, if anything, each of the following does to the supply or demand of loanable funds. a.net capital outflow increases at each interest rate b.domestic investment increases at each interest rate c.the government deficit increases d.private saving increases

If the U.S. government imposed a quota on toy imports, then

When a country's government budget deficit increases,

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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