Question 1

An increase in real interest rates in the United States

Accepted Answer

A) discourages both U.S. and foreign residents from buying U.S. assets. 
B) encourages both U.S. and foreign residents to buy U.S. assets. 
C) encourages U.S. residents to buy U.S. assets, but discourages foreign residents from buying U.S. assets. 
D) encourages foreign residents to buy U.S. assets, but discourages U.S. residents from buying U.S. assets. 
A) discourages both U.S. and foreign residents from buying U.S. assets. 
B) encourages both U.S. and foreign residents to buy U.S. assets. 
C) encourages U.S. residents to buy U.S. assets, but discourages foreign residents from buying U.S. assets. 
D) encourages foreign residents to buy U.S. assets, but discourages U.S. residents from buying U.S. assets.

Question 2

If the U.S. government went from a budget deficit to a budget surplus then

Accepted Answer

A) the interest rate and the real exchange rate would increase. 
B) the interest rate and the real exchange rate would decrease. 
C) the interest rate would increase and the real exchange rate would decrease. 
D) the interest rate would decrease and the real exchange rate would increase. 
A) the interest rate and the real exchange rate would increase. 
B) the interest rate and the real exchange rate would decrease. 
C) the interest rate would increase and the real exchange rate would decrease. 
D) the interest rate would decrease and the real exchange rate would increase.

Question 3

During the financial crisis it was proposed that firms be provided with a tax credit for investment projects. Such a tax credit would

Accepted Answer

A) raise both the interest rate and the real exchange rate. 
B) raise the interest rate and reduce the real exchange rate. 
C) reduce the interest rate and raise the real exchange rate. 
D) reduce both the interest rate and the real exchange rate. 
A) raise both the interest rate and the real exchange rate. 
B) raise the interest rate and reduce the real exchange rate. 
C) reduce the interest rate and raise the real exchange rate. 
D) reduce both the interest rate and the real exchange rate.

Question 4

Which of the following is most likely to result if foreigners decide to withdraw the funds that they have loaned to the United States?

Accepted Answer

A) U.S. net exports will rise 
B) U.S. net capital outflow will fall. 
C) U.S. domestic investment will rise 
D) the dollar will appreciate 
A) U.S. net exports will rise 
B) U.S. net capital outflow will fall. 
C) U.S. domestic investment will rise 
D) the dollar will appreciate

Question 5

Which of the following is included in the supply of U.S. dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

Accepted Answer

A) A retail outlet in Canada wants to buy handbags from a U.S. manufacturer. 
B) A U.S. bank loans dollars to Karen, a U.S. resident, who wants to purchase a car in the U.S. 
C) A U.S. based law firm wants to build a new office in Japan. 
D) All of the above are correct. 
A) A retail outlet in Canada wants to buy handbags from a U.S. manufacturer. 
B) A U.S. bank loans dollars to Karen, a U.S. resident, who wants to purchase a car in the U.S. 
C) A U.S. based law firm wants to build a new office in Japan. 
D) All of the above are correct.

Question 6

In equilibrium which of the following happens if the U.S. imposes tariffs on leather boots?

Accepted Answer

A) U.S. production of leather boots rise 
B) U.S. net exports rise 
C) the exchange rate falls 
D) All of the above are correct. 
A) U.S. production of leather boots rise 
B) U.S. net exports rise 
C) the exchange rate falls 
D) All of the above are correct.

Question 7

Which of the following is correct concerning the open-economy macroeconomic model?

Accepted Answer

A) The net-capital-outflow curve slopes downward. 
B) The key determinant of net capital outflow is the real exchange rate. 
C) The supply of dollars in the market for foreign-currency exchange is horizontal. 
D) None of the above is correct. 
A) The net-capital-outflow curve slopes downward. 
B) The key determinant of net capital outflow is the real exchange rate. 
C) The supply of dollars in the market for foreign-currency exchange is horizontal. 
D) None of the above is correct.

Question 8

In the open-economy macroeconomic model, if the supply of loanable funds shifts left

Accepted Answer

A) the interest rate rises and the supply of dollars in the market for foreign currency exchange shifts right. 
B) the interest rate rises and the supply of dollars in the market for foreign currency exchange shifts left. 
C) the interest rate falls and the demand for dollars in the market for foreign currency exchange shifts right. 
D) the interest rate falls and the demand for dollars in the market for foreign currency exchange shifts left. 
A) the interest rate rises and the supply of dollars in the market for foreign currency exchange shifts right. 
B) the interest rate rises and the supply of dollars in the market for foreign currency exchange shifts left. 
C) the interest rate falls and the demand for dollars in the market for foreign currency exchange shifts right. 
D) the interest rate falls and the demand for dollars in the market for foreign currency exchange shifts left.

Question 9

In the open-economy macroeconomic model, net exports equal the quantity of dollars demanded in the foreign-currency exchange market.

Accepted Answer

A) True 
 B)False

Question 10

Trade policies

Accepted Answer

A) alter the trade balance because they alter imports of the country that implemented them. 
B) alter the trade balance because they alter net capital outflow of the country that implemented them. 
C) do not alter the trade balance because they cannot alter the national saving or domestic investment of the country that implements them. 
D) do not alter the trade balance because they cannot alter the real exchange rate of the currency of the country that implements them. 
A) alter the trade balance because they alter imports of the country that implemented them. 
B) alter the trade balance because they alter net capital outflow of the country that implemented them. 
C) do not alter the trade balance because they cannot alter the national saving or domestic investment of the country that implements them. 
D) do not alter the trade balance because they cannot alter the real exchange rate of the currency of the country that implements them.

Question 11

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

Accepted Answer

A) surplus. The real interest rate would rise. 
B) surplus. The real interest rate would fall. 
C) shortage. The real interest rate would rise. 
D) shortage. The interest rate would fall. 
A) surplus. The real interest rate would rise. 
B) surplus. The real interest rate would fall. 
C) shortage. The real interest rate would rise. 
D) shortage. The interest rate would fall.

Question 12

At the equilibrium real interest rate in the open-economy macroeconomic model, the amount that people want to save equals the desired quantity of

Accepted Answer

A) net capital outflow. 
B) domestic investment. 
C) net capital outflow plus domestic investment. 
D) foreign currency supplied. 
A) net capital outflow. 
B) domestic investment. 
C) net capital outflow plus domestic investment. 
D) foreign currency supplied.

Question 13

In which case(s) does(do) a country's demand for 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 14

At the equilibrium real interest rate in the open-economy macroeconomic model, the equilibrium quantity of loanable funds equals

Accepted Answer

A) net capital outflow. 
B) domestic investment. 
C) foreign currency supplied. 
D) national saving. 
A) net capital outflow. 
B) domestic investment. 
C) foreign currency supplied. 
D) national saving.

Question 15

A large and sudden movement of funds out of a country is called

Accepted Answer

A) arbitrage. 
B) capital flight. 
C) crowding out. 
D) capital mobility. 
A) arbitrage. 
B) capital flight. 
C) crowding out. 
D) capital mobility.

Question 16

According to the open-economy macroeconomic model, import quotas increase which of the following

Accepted Answer

A) net exports and net capital outflow 
B) net exports but not net capital outflow. 
C) net capital outflow but not net exports. 
D) neither net exports nor net capital outflow. 
A) net exports and net capital outflow 
B) net exports but not net capital outflow. 
C) net capital outflow but not net exports. 
D) neither net exports nor net capital outflow.

Question 17

Which of the following leads to an increase in net exports in the long run?

Accepted Answer

A) either a decrease in the budget deficit or imposing an import quota 
B) a decrease in the budget deficit but not imposing an import quota 
C) imposing an import quota but not a decrease in the budget deficit 
D) neither a decrease in the budget deficit nor imposing an import quota 
A) either a decrease in the budget deficit or imposing an import quota 
B) a decrease in the budget deficit but not imposing an import quota 
C) imposing an import quota but not a decrease in the budget deficit 
D) neither a decrease in the budget deficit nor imposing an import quota

Question 18

If the supply of loanable funds shifts right, then the equilibrium

Accepted Answer

A) levels of net capital outflow and domestic investment decrease. 
B) level of net capital outflow increases and the equilibrium level of domestic investment decreases. 
C) level of net capital outflow decreases and the equilibrium level of domestic investment increases. 
D) levels of net capital outflow and domestic investment increase. 
A) levels of net capital outflow and domestic investment decrease. 
B) level of net capital outflow increases and the equilibrium level of domestic investment decreases. 
C) level of net capital outflow decreases and the equilibrium level of domestic investment increases. 
D) levels of net capital outflow and domestic investment increase.

Question 19

When a country experiences capital flight, its net capital outflow,

Accepted Answer

A) which is part of the demand for loanable funds, increases. 
B) which is part of the supply of loanable funds, increases. 
C) which is part of the demand for loanable funds, decreases. 
D) which is part of the supply of loanable funds, decreases. 
A) which is part of the demand for loanable funds, increases. 
B) which is part of the supply of loanable funds, increases. 
C) which is part of the demand for loanable funds, decreases. 
D) which is part of the supply of loanable funds, decreases.

Question 20

In the open-economy macroeconomic model, the demand for dollars shifts right if at any given exchange rate

Accepted Answer

A) foreign residents want to buy more U.S. goods and services. 
B) U.S. residents want to buy fewer foreign goods and services. 
C) Both A and B are correct. 
D) None of the above is correct. 
A) foreign residents want to buy more U.S. goods and services. 
B) U.S. residents want to buy fewer foreign goods and services. 
C) Both A and B are correct. 
D) None of the above is correct.

Exam 19: A Macroeconomic Theory of the Open Economy

An increase in real interest rates in the United States

If the U.S. government went from a budget deficit to a budget surplus then

During the financial crisis it was proposed that firms be provided with a tax credit for investment projects. Such a tax credit would

Which of the following is most likely to result if foreigners decide to withdraw the funds that they have loaned to the United States?

Which of the following is included in the supply of U.S. dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

In equilibrium which of the following happens if the U.S. imposes tariffs on leather boots?

Which of the following is correct concerning the open-economy macroeconomic model?

In the open-economy macroeconomic model, if the supply of loanable funds shifts left

In the open-economy macroeconomic model, net exports equal the quantity of dollars demanded in the foreign-currency exchange market.

Trade policies

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

At the equilibrium real interest rate in the open-economy macroeconomic model, the amount that people want to save equals the desired quantity of

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

At the equilibrium real interest rate in the open-economy macroeconomic model, the equilibrium quantity of loanable funds equals

A large and sudden movement of funds out of a country is called

According to the open-economy macroeconomic model, import quotas increase which of the following

Which of the following leads to an increase in net exports in the long run?

If the supply of loanable funds shifts right, then the equilibrium

When a country experiences capital flight, its net capital outflow,

In the open-economy macroeconomic model, the demand for dollars shifts right if at any given exchange rate

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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