Question 1

If there is a surplus in the U.S. loanable funds market, then

Accepted Answer

A) NCO > I. B) NCO S. D) NCO + I < S. A) NCO > I. B) NCO S. D) NCO + I < S.

Question 2

In the open-economy macroeconomic model, a decrease in the domestic interest rate shifts

Accepted Answer

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

Question 3

If a county becomes more likely to default on its bonds, what happens to that country's interest rate and exchange rate? Explain.

Accepted Answer

A higher probability of default leads to

Question 4

If there is a surplus in the market for loanable funds, the resulting change in the real interest rate

Accepted Answer

A) reduces both the quantity of loanable funds supplied and the quantity of loanable funds demanded. 
B) reduces the quantity of loanable funds supplied and raises the quantity of loanable funds demanded 
C) raises both the quantity of loanable funds supplied and the quantity of loanable funds demanded. 
D) raises the quantity of loanable funds supplied and reduces the quantity of loanable funds demanded. 
A) reduces both the quantity of loanable funds supplied and the quantity of loanable funds demanded. 
B) reduces the quantity of loanable funds supplied and raises the quantity of loanable funds demanded 
C) raises both the quantity of loanable funds supplied and the quantity of loanable funds demanded. 
D) raises the quantity of loanable funds supplied and reduces the quantity of loanable funds demanded.

Question 5

Other things the same, if the interest rate falls, then

Accepted Answer

A) firms will want to borrow more, which increases the quantity of loanable funds demanded. 
B) firms will want to borrow less, which decreases the quantity of loanable funds demanded. 
C) firms will want to borrow more, which increase the quantity of loanable funds supplied. 
D) firms will want to borrow less, which decreases the quantity of loanable funds supplied. 
A) firms will want to borrow more, which increases the quantity of loanable funds demanded. 
B) firms will want to borrow less, which decreases the quantity of loanable funds demanded. 
C) firms will want to borrow more, which increase the quantity of loanable funds supplied. 
D) firms will want to borrow less, which decreases the quantity of loanable funds supplied.

Question 6

If C+I+G>Y, then net exports and net capital outflow are both less than zero.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is most likely to increase U.S. exports?

Accepted Answer

A) The government gives subsidies to U.S. firms that export goods or services. 
B) The government reduces the size of the budget surplus. 
C) The United States unilaterally reduces its restrictions on foreign imports. 
D) Taxes on domestic saving rise. 
A) The government gives subsidies to U.S. firms that export goods or services. 
B) The government reduces the size of the budget surplus. 
C) The United States unilaterally reduces its restrictions on foreign imports. 
D) Taxes on domestic saving rise.

Question 8

The imposition of an import quota shifts

Accepted Answer

A) the supply of currency right, so the exchange rate falls. 
B) the supply of currency left, so the exchange rate rises. 
C) the demand for currency right, so the exchange rate rises. 
D) the demand for currency left, so the exchange rate falls. 
A) the supply of currency right, so the exchange rate falls. 
B) the supply of currency left, so the exchange rate rises. 
C) the demand for currency right, so the exchange rate rises. 
D) the demand for currency left, so the exchange rate falls.

Question 9

In 1995 House Speaker Newt Gingrich threatened to send the United States into default on its debt. During the day of this announcement, U.S. interest rates rose and the real exchange rate of the U.S. dollar depreciated. Which of these changes is consistent with the results of the open-economy macroeconomic model?

Accepted Answer

A) the increase in U.S. interest rates 
B) the depreciation of the real exchange rate of the U.S. dollar 
C) Both a and b are consistent. 
D) Neither a nor b are consistent. 
A) the increase in U.S. interest rates 
B) the depreciation of the real exchange rate of the U.S. dollar 
C) Both a and b are consistent. 
D) Neither a nor b are consistent.

Question 10

When a country experiences capital flight, which of the following rise?

Accepted Answer

A) its real interest rate and its real exchange rate 
B) its real interest rate but not its real exchange rate 
C) its real exchange rate but not its real interest rate 
D) neither its real interest rate nor its foreign exchange rate 
A) its real interest rate and its real exchange rate 
B) its real interest rate but not its real exchange rate 
C) its real exchange rate but not its real interest rate 
D) neither its real interest rate nor its foreign exchange rate

Question 11

In the open economy model, the supply of loanable funds comes from national saving and net capital outflow.

Accepted Answer

A) True 
 B)False

Question 12

Suppose that the United States imposes an import quota on televisions. In the open-economy macroeconomic model this quota shifts the

Accepted Answer

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

Question 13

If a government started with a budget deficit and moved to a surplus, domestic investment

Accepted Answer

A) and the real exchange rate would rise. 
B) and the real exchange rate would fall. 
C) would rise and the real exchange rate would fall. 
D) would fall and the real exchange rate would rise. 
A) and the real exchange rate would rise. 
B) and the real exchange rate would fall. 
C) would rise and the real exchange rate would fall. 
D) would fall and the real exchange rate would rise.

Question 14

Figure 19-1  
-Refer to Figure 19-1. In the Figure shown, if the real interest rate is 2 percent, there will be a

Accepted Answer

A) surplus of $20 billion. 
B) surplus of $40 billion. 
C) shortage of $20 billion. 
D) shortage of $40 billion. 
A) surplus of $20 billion. 
B) surplus of $40 billion. 
C) shortage of $20 billion. 
D) shortage of $40 billion.

Question 15

If interest rates rise in the U.S., then other things the same

Accepted Answer

A) foreigners would buy more U.S. bonds which increases the quantity of loanable funds demanded in the U.S. 
B) foreigners would buy more U.S. bonds which reduces the quantity of loanable funds demanded in the U.S. 
C) foreigners would buy fewer U.S. bonds which increases the quantity of loanable funds demanded in the U.S. 
D) foreigners would buy fewer U.S. bonds which reduces the quantity of loanable funds demanded in the U.S. 
A) foreigners would buy more U.S. bonds which increases the quantity of loanable funds demanded in the U.S. 
B) foreigners would buy more U.S. bonds which reduces the quantity of loanable funds demanded in the U.S. 
C) foreigners would buy fewer U.S. bonds which increases the quantity of loanable funds demanded in the U.S. 
D) foreigners would buy fewer U.S. bonds which reduces the quantity of loanable funds demanded in the U.S.

Question 16

If the U.S. imposed an import quota on construction equipment, then the sales of U.S. construction equipment producers would

Accepted Answer

A) rise and the exports of other U.S. industries would rise. 
B) rise and the exports of other U.S. industries would fall. 
C) fall and the exports of other U.S. industries would rise. 
D) fall and the exports of other U.S. industries would fall. 
A) rise and the exports of other U.S. industries would rise. 
B) rise and the exports of other U.S. industries would fall. 
C) fall and the exports of other U.S. industries would rise. 
D) fall and the exports of other U.S. industries would fall.

Question 17

When Mexico suffered from capital flight in 1994, Mexico's net capital outflow

Accepted Answer

A) and net exports decreased. 
B) and net exports increased. 
C) increased while net exports decreased. 
D) decreased while net exports increased. 
A) and net exports decreased. 
B) and net exports increased. 
C) increased while net exports decreased. 
D) decreased while net exports increased.

Question 18

Figure 19-4  
-Refer to Figure 19-4. Suppose that 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 19

In which case(s) does(do) a country's demand for loanable funds shift left?

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 20

Suppose the U.S. imposes an import quota on steel. U.S. exports

Accepted Answer

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

Exam 19: A Macroeconomic Theory of the Open Economy

If there is a surplus in the U.S. loanable funds market, then

In the open-economy macroeconomic model, a decrease in the domestic interest rate shifts

If a county becomes more likely to default on its bonds, what happens to that country's interest rate and exchange rate? Explain.

If there is a surplus in the market for loanable funds, the resulting change in the real interest rate

Other things the same, if the interest rate falls, then

If C+I+G>Y, then net exports and net capital outflow are both less than zero.

Which of the following is most likely to increase U.S. exports?

The imposition of an import quota shifts

When a country experiences capital flight, which of the following rise?

In the open economy model, the supply of loanable funds comes from national saving and net capital outflow.

Suppose that the United States imposes an import quota on televisions. In the open-economy macroeconomic model this quota shifts the

If a government started with a budget deficit and moved to a surplus, domestic investment

Figure 19-1 -Refer to Figure 19-1. In the Figure shown, if the real interest rate is 2 percent, there will be a

If interest rates rise in the U.S., then other things the same

If the U.S. imposed an import quota on construction equipment, then the sales of U.S. construction equipment producers would

When Mexico suffered from capital flight in 1994, Mexico's net capital outflow

Figure 19-4 -Refer to Figure 19-4. Suppose that U.S. firms desire to purchase more capital in the U.S. The effects of this could be illustrated by

In which case(s) does(do) a country's demand for loanable funds shift left?

Suppose the U.S. imposes an import quota on steel. U.S. exports

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