Question 1

If U.S. citizens decide to purchase more foreign assets at each interest rate, the U.S. real interest rate

Accepted Answer

A) increases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases. 
B) increases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases. 
C) decreases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow decreases. 
D) decreases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow increases. 
A) increases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases. 
B) increases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases. 
C) decreases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow decreases. 
D) decreases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow increases.

Question 2

Other things the same, an increase in the U.S. interest rate causes the quantity of loanable funds supplied to

Accepted Answer

A) rise because net capital outflow and domestic investment rise. 
B) rise because national saving rises. 
C) fall because net capital outflow and domestic investment rise. 
D) fall because national saving falls. 
A) rise because net capital outflow and domestic investment rise. 
B) rise because national saving rises. 
C) fall because net capital outflow and domestic investment rise. 
D) fall because national saving falls.

Question 3

A country has output of $900 billion, consumption of $600 billion, government expenditures of $150 billion and investment of $120 billion. What is its supply of loanable funds?

Accepted Answer

A) $30 billion 
B) $90 billion 
C) $120 billion 
D) $150 billion 
A) $30 billion 
B) $90 billion 
C) $120 billion 
D) $150 billion

Question 4

If net exports are positive, then

Accepted Answer

A) exports are greater than imports. 
B) net capital outflow is negative. 
C) Both of the above are correct. 
D) Neither of the above is correct. 
A) exports are greater than imports. 
B) net capital outflow is negative. 
C) Both of the above are correct. 
D) Neither of the above is correct.

Question 5

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 19-7  
-Refer to Figure 19-7. 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 6

Which of the following is a consistent response to an increase in the U.S. real interest rate?

Accepted Answer

A) a London bank purchases a U.S. bond instead of a Japanese bond it had considered purchasing. 
B) U.S. firms decide to buy more capital goods 
C) a U.S. citizen decides to put less money in his savings account than he had planned. 
D) All of the above are consistent. 
A) a London bank purchases a U.S. bond instead of a Japanese bond it had considered purchasing. 
B) U.S. firms decide to buy more capital goods 
C) a U.S. citizen decides to put less money in his savings account than he had planned. 
D) All of the above are consistent.

Question 7

Which of the following is correct?

Accepted Answer

A) capital flight from the United States decreases net capital outflow 
B) an increase in the government budget deficit creates no change in net capital outflow 
C) if the U.S. imposes a restriction on imports, net capital outflow increases 
D) None of the above is correct. 
A) capital flight from the United States decreases net capital outflow 
B) an increase in the government budget deficit creates no change in net capital outflow 
C) if the U.S. imposes a restriction on imports, net capital outflow increases 
D) None of the above is correct.

Question 8

In the open economy macroeconomic model, 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 9

When a government increases its budget deficit, then that country's

Accepted Answer

A) supply of loanable funds shifts right. 
B) supply of loanable funds shifts left. 
C) demand for loanable funds shifts right. 
D) demand for loanable funds shifts left. 
A) supply of loanable funds shifts right. 
B) supply of loanable funds shifts left. 
C) demand for loanable funds shifts right. 
D) demand for loanable funds shifts left.

Question 10

An import quota imposed by the U.S. would reduce U.S. imports, but have no impact on U.S. exports.

Accepted Answer

A) True 
 B)False

Question 11

Over the past two decades, the United States has persistently exported more goods and services than it has imported.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) the supply of dollars in the market for foreign-currency exchange shifts left. 
B) the supply of dollars in the market for foreign-currency exchange shifts right. 
C) the demand for dollars in the market for foreign-currency exchange shifts left. 
D) the demand for dollars in the market for foreign-currency exchange shifts right. 
A) the supply of dollars in the market for foreign-currency exchange shifts left. 
B) the supply of dollars in the market for foreign-currency exchange shifts right. 
C) the demand for dollars in the market for foreign-currency exchange shifts left. 
D) the demand for dollars in the market for foreign-currency exchange shifts right.

Question 13

In the open-economy macroeconomic model, the supply of loanable funds comes from

Accepted Answer

A) the sum of domestic investment and net capital outflow. 
B) net capital outflow alone. 
C) domestic investment alone. 
D) None of the above is correct. 
A) the sum of domestic investment and net capital outflow. 
B) net capital outflow alone. 
C) domestic investment alone. 
D) None of the above is correct.

Question 14

Fill in the table below with the direction of the variables that change in response to the events in the first column. $$\begin{array} { | l | l | l | l | l | l | } 
\hline & \begin{array} { l } 
\text { U.S. real } \
\text { interett rate }
\end{array} & \begin{array} { l } 
\text { U.S. dometic } \
\text { invertment }
\end{array} & \begin{array} { l } 
\text { U.S. net } \
\text { capital } \
\text { dutflow }
\end{array} & \begin{array} { l } 
\text { U.S. real } \
\text { exchangerate } \
\text { af domestic } \
\text { currency }
\end{array} & \begin{array} { l } 
\text { U.S. trade } \
\text { balance }
\end{array} \
\hline \begin{array} { l } 
\text { U.S. govenment } \
\text { budget deficit } \
\text { increases }
\end{array} & & & & & \
\hline \begin{array} { l } 
\text { U.S. imposes } \
\text { impart quates }
\end{array} & & & & & \
\hline \begin{array} { l } 
\text { capital fleht } \
\text { from the United } \
\text { States }
\end{array} & & & & & \
\hline
\end{array}$$

Accepted Answer

None

Question 15

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 16

Suppose the U.S. government institutes a "Buy American" campaign, in order to encourage spending on domestic goods. What effect will this have on the U.S. trade balance?

Accepted Answer

Such a campaign will increase the demand

Question 17

In the open-economy macroeconomic model, the supply of loanable funds comes from

Accepted Answer

A) the sum of domestic investment and net capital outflow. 
B) the sum of national saving and net capital outflow. 
C) national saving. 
D) net exports 
A) the sum of domestic investment and net capital outflow. 
B) the sum of national saving and net capital outflow. 
C) national saving. 
D) net exports

Question 18

A firm produces manufacturing equipment, some of which it exports. Which of the following effects of capital flight in the country it produces in would likely reduce the quantity of equipment it sells?

Accepted Answer

A) both what happens to the interest rate and what happens to the exchange rate 
B) what happens to the interest rate but not what happens to the exchange rate 
C) what happens to the exchange rate but not what happens to the interest rate 
D) neither what happens to the interest rate nor what happens to the interest rate. 
A) both what happens to the interest rate and what happens to the exchange rate 
B) what happens to the interest rate but not what happens to the exchange rate 
C) what happens to the exchange rate but not what happens to the interest rate 
D) neither what happens to the interest rate nor what happens to the interest rate.

Question 19

If net exports are positive, 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 20

In an open economy, the demand for loanable funds comes from

Accepted Answer

A) only those who want to borrow funds to buy domestic capital goods. 
B) only those who want to borrow funds to buy foreign assets. 
C) those who want to borrow funds to buy either domestic capital goods or foreign assets. 
D) neither those who want to borrow funds to buy domestic capital goods nor those who want to borrow funds to buy foreign assets. 
A) only those who want to borrow funds to buy domestic capital goods. 
B) only those who want to borrow funds to buy foreign assets. 
C) those who want to borrow funds to buy either domestic capital goods or foreign assets. 
D) neither those who want to borrow funds to buy domestic capital goods nor those who want to borrow funds to buy foreign assets.

If U.S. citizens decide to purchase more foreign assets at each interest rate, the U.S. real interest rate

Other things the same, an increase in the U.S. interest rate causes the quantity of loanable funds supplied to

A country has output of $900 billion, consumption of $600 billion, government expenditures of $150 billion and investment of $120 billion. What is its supply of loanable funds?

If net exports are positive, then

Which of the following is a consistent response to an increase in the U.S. real interest rate?

Which of the following is correct?

In the open economy macroeconomic model, the amount of dollars demanded in the market for foreign-currency exchange at a given real exchange rate increases if

When a government increases its budget deficit, then that country's

An import quota imposed by the U.S. would reduce U.S. imports, but have no impact on U.S. exports.

Over the past two decades, the United States has persistently exported more goods and services than it has imported.

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

In the open-economy macroeconomic model, the supply of loanable funds comes from

Suppose the U.S. government institutes a "Buy American" campaign, in order to encourage spending on domestic goods. What effect will this have on the U.S. trade balance?

In the open-economy macroeconomic model, the supply of loanable funds comes from

A firm produces manufacturing equipment, some of which it exports. Which of the following effects of capital flight in the country it produces in would likely reduce the quantity of equipment it sells?

If net exports are positive, then

In an open economy, the demand for loanable funds comes 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 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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Exam 19: A Macroeconomic Theory of the Open Economy

If U.S. citizens decide to purchase more foreign assets at each interest rate, the U.S. real interest rate

Other things the same, an increase in the U.S. interest rate causes the quantity of loanable funds supplied to

A country has output of $900 billion, consumption of $600 billion, government expenditures of $150 billion and investment of $120 billion. What is its supply of loanable funds?

If net exports are positive, then

Which of the following is a consistent response to an increase in the U.S. real interest rate?

Which of the following is correct?

In the open economy macroeconomic model, the amount of dollars demanded in the market for foreign-currency exchange at a given real exchange rate increases if

When a government increases its budget deficit, then that country's

An import quota imposed by the U.S. would reduce U.S. imports, but have no impact on U.S. exports.

Over the past two decades, the United States has persistently exported more goods and services than it has imported.

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

In the open-economy macroeconomic model, the supply of loanable funds comes from

Suppose the U.S. government institutes a "Buy American" campaign, in order to encourage spending on domestic goods. What effect will this have on the U.S. trade balance?

In the open-economy macroeconomic model, the supply of loanable funds comes from

A firm produces manufacturing equipment, some of which it exports. Which of the following effects of capital flight in the country it produces in would likely reduce the quantity of equipment it sells?

If net exports are positive, then

In an open economy, the demand for loanable funds comes 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 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

Filters