Question 1

In the United States in the early 1980s, there was a government budget

Accepted Answer

A) surplus and a trade surplus. 
B) deficit and a trade deficit. 
C) surplus and a trade deficit. 
D) deficit and a trade surplus. 
A) surplus and a trade surplus. 
B) deficit and a trade deficit. 
C) surplus and a trade deficit. 
D) deficit and a trade surplus.

Question 2

If the supply of loanable funds shifts left, then

Accepted Answer

A) the real interest rate and the equilibrium quantity of loanable funds both fall. 
B) the real interest rate falls and the equilibrium quantity of loanable funds rises. 
C) the real interest rate and the equilibrium quantity of loanable funds both rise. 
D) the real interest rate rises and the equilibrium quantity of loanable funds falls. 
A) the real interest rate and the equilibrium quantity of loanable funds both fall. 
B) the real interest rate falls and the equilibrium quantity of loanable funds rises. 
C) the real interest rate and the equilibrium quantity of loanable funds both rise. 
D) the real interest rate rises and the equilibrium quantity of loanable funds falls.

Question 3

If the British government raised its budget deficit, then the pound (Britain's currency) would

Accepted Answer

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

Question 4

According to the open-economy macroeconomic model, if the United States moved from a government budget deficit to a government budget surplus, U.S. real interest rates would increase and the real exchange rate of the U.S. dollar would appreciate.

Accepted Answer

A) True 
 B)False

Question 5

If a country raises its budget deficit then

Accepted Answer

A) both its supply of and demand for loanable funds shift. 
B) its supply of but not its demand for loanable funds shifts. 
C) its demand for but not its supply of loanable funds shifts. 
D) neither its supply nor its demand for loanable funds shift. 
A) both its supply of and demand for loanable funds shift. 
B) its supply of but not its demand for loanable funds shifts. 
C) its demand for but not its supply of loanable funds shifts. 
D) neither its supply nor its demand for loanable funds shift.

Question 6

In an open economy,

Accepted Answer

A) net capital outflow = imports. 
B) net capital outflow = net exports. 
C) net capital outflow = exports. 
D) None of the above is correct. 
A) net capital outflow = imports. 
B) net capital outflow = net exports. 
C) net capital outflow = exports. 
D) None of the above is correct.

Question 7

If government policy encouraged households to save more at each interest rate, then

Accepted Answer

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

Question 8

When Mexico suffered from capital flight in 1994, Mexico's real interest rate

Accepted Answer

A) fell and the peso appreciated. 
B) fell and the peso depreciated. 
C) rose and the peso appreciated. 
D) rose and the peso depreciated. 
A) fell and the peso appreciated. 
B) fell and the peso depreciated. 
C) rose and the peso appreciated. 
D) rose and the peso depreciated.

Question 9

If the U.S. government increased its deficit, then

Accepted Answer

A) U.S. bonds would pay higher interest but a dollar would purchase fewer foreign goods. 
B) U.S. bonds would pay higher interest and a dollar would purchase more foreign goods. 
C) U.S. bonds would pay lower interest and a dollar would purchase fewer foreign goods. 
D) U.S. bonds would pay lower interest but a dollar would purchase more foreign goods. 
A) U.S. bonds would pay higher interest but a dollar would purchase fewer foreign goods. 
B) U.S. bonds would pay higher interest and a dollar would purchase more foreign goods. 
C) U.S. bonds would pay lower interest and a dollar would purchase fewer foreign goods. 
D) U.S. bonds would pay lower interest but a dollar would purchase more foreign goods.

Question 10

If policymakers impose import restrictions on clothing, the U.S. trade deficit will shrink.

Accepted Answer

A) True 
 B)False

Question 11

A rise in the budget deficit

Accepted Answer

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

Question 12

In which case(s) does(do) a country's supply of 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 13

If Argentina suffers from capital flight, Argentinean domestic investment and Argentinean net exports will both decline.

Accepted Answer

A) True 
 B)False

Question 14

In the open-economy macroeconomic model, if a country's interest rate rises, its net capital outflow

Accepted Answer

A) rises and the real exchange rate rises. 
B) falls and the real exchange rate falls. 
C) rises and the real exchange rate falls. 
D) falls and the real exchange rate rises. 
A) rises and the real exchange rate rises. 
B) falls and the real exchange rate falls. 
C) rises and the real exchange rate falls. 
D) falls and the real exchange rate rises.

Question 15

The purchase of a capital asset adds to the demand for loanable funds only if that asset is a domestic one.

Accepted Answer

A) True 
 B)False

Question 16

If the U.S. put an import quota on clothing, it would

Accepted Answer

A) raise U.S. net exports of clothing and raise net exports of other U.S. goods. 
B) raise U.S. net exports of clothing and lower net exports of other U.S. goods. 
C) lower U.S. net exports of clothing and raise net exports of other U.S. goods. 
D) lower U.S. net exports of clothing and lower net exports of other U.S. goods. 
A) raise U.S. net exports of clothing and raise net exports of other U.S. goods. 
B) raise U.S. net exports of clothing and lower net exports of other U.S. goods. 
C) lower U.S. net exports of clothing and raise net exports of other U.S. goods. 
D) lower U.S. net exports of clothing and lower net exports of other U.S. goods.

Question 17

In the open-economy macroeconomic model which of the following falls if there is an increase in the budget deficit?

Accepted Answer

A) the interest rate 
B) net exports 
C) the exchange rate 
D) All of the above are correct. 
A) the interest rate 
B) net exports 
C) the exchange rate 
D) All of the above are correct.

Question 18

An increase in the government budget deficit shifts the demand for loanable funds to the right.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following would both raise the U.S. exchange rate?

Accepted Answer

A) capital flight from other countries to the U.S. occurs and the U.S. moves from budget surplus to budget deficit 
B) capital flight from other countries to the U.S. occurs and the U.S. moves from budget deficit to budget surplus 
C) capital flight from the U.S. to other countries occurs, the U.S. moves from budget surplus to budget deficit 
D) capital flight from U.S. to other countries occurs, the U.S. moves from budget deficit to budget surplus 
A) capital flight from other countries to the U.S. occurs and the U.S. moves from budget surplus to budget deficit 
B) capital flight from other countries to the U.S. occurs and the U.S. moves from budget deficit to budget surplus 
C) capital flight from the U.S. to other countries occurs, the U.S. moves from budget surplus to budget deficit 
D) capital flight from U.S. to other countries occurs, the U.S. moves from budget deficit to budget surplus

Question 20

Figure 19-2  
-Refer to Figure 19-2. If the real exchange rate is .6, then there is a

Accepted Answer

A) surplus of 100 so the real exchange rate will fall. 
B) surplus of 100 so the real exchange rate will rise. 
C) shortage of 100 so the real exchange rate will fall. 
D) shortage of 100 so the real exchange rate will rise. 
A) surplus of 100 so the real exchange rate will fall. 
B) surplus of 100 so the real exchange rate will rise. 
C) shortage of 100 so the real exchange rate will fall. 
D) shortage of 100 so the real exchange rate will rise.

Exam 19: A Macroeconomic Theory of the Open Economy

In the United States in the early 1980s, there was a government budget

If the supply of loanable funds shifts left, then

If the British government raised its budget deficit, then the pound (Britain's currency) would

According to the open-economy macroeconomic model, if the United States moved from a government budget deficit to a government budget surplus, U.S. real interest rates would increase and the real exchange rate of the U.S. dollar would appreciate.

If a country raises its budget deficit then

In an open economy,

If government policy encouraged households to save more at each interest rate, then

When Mexico suffered from capital flight in 1994, Mexico's real interest rate

If the U.S. government increased its deficit, then

If policymakers impose import restrictions on clothing, the U.S. trade deficit will shrink.

A rise in the budget deficit

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

If Argentina suffers from capital flight, Argentinean domestic investment and Argentinean net exports will both decline.

In the open-economy macroeconomic model, if a country's interest rate rises, its net capital outflow

The purchase of a capital asset adds to the demand for loanable funds only if that asset is a domestic one.

If the U.S. put an import quota on clothing, it would

In the open-economy macroeconomic model which of the following falls if there is an increase in the budget deficit?

An increase in the government budget deficit shifts the demand for loanable funds to the right.

Which of the following would both raise the U.S. exchange rate?

Figure 19-2 -Refer to Figure 19-2. If the real exchange rate is .6, then there is a

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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