Exam 19: A Macroeconomic Theory of the Open Economy

The country of Frequencia is politically very stable and has a long tradition of respecting property rights. If several other countries suddenly became politically unstable, we would expect Frequencia's

Suppose that the U.S. imposed an import quota on beef. Sales of U.S. beef producers would

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

In the open-economy macroeconomic model, other things the same, an increase in the exchange rate raises the quantity of dollars supplied in the market for foreign-currency exchange.

In the open-economy macroeconomic model, if there is a surplus in the market for foreign-currency exchange, which of the following will move the market to equilibrium?

If a country raises its budget deficit, then in the market for foreign-currency exchange

A government budget deficit

If at a given real interest rate desired national saving were $50 billion, domestic investment were $40 billion, and net capital outflow were $20 billion, then at that real interest rate in the loanable funds market there would be a

A decrease in the budget deficit causes domestic interest rates

The variable that links the market for loanable funds and the market for foreign-currency exchange is

Recently the Greek government had large deficits and people became worried about Greece's ability to continue to make payments on its debt. Which of the these events raise a country's interest rates?

From 1980 to 1987, U.S. net capital outflows decreased. According to the open-economy macroeconomic model, which of the following could have caused this?

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

If the demand for loanable funds shifts left, then

Suppose a country experiences capital flight. Of the demand for loanable funds and the supply of currency in the market for foreign-currency exchange, which shifts right?

Other things the same, a higher real interest rate raises the quantity of

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

In the open-economy macroeconomic model, the supply curve of currency is vertical because the quantity of currency supplied does not depend on the real exchange rate.

A country has national saving of $60 billion, government expenditures of $30 billion, domestic investment of $40 billion, and net capital outflow of $20 billion. What is its supply of loanable funds?

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