Question 1

Explain why saving need not equal domestic investment in an open economy.

Accepted Answer

Because saving equals domestic

Question 2

If Argentina suffers from capital flight, Argentinean domestic investment will fall and Argentinean net exports will increase.

Accepted Answer

A) True 
 B)False

Question 3

Fill in the table below with the direction of the variables that change in response to the events in the first column.

Accepted Answer

The answer of Fill in the table below with the...

Question 4

Suppose that the government of Jordan raises its budget deficit. Which of the following best predicts the effects of this action?

Accepted Answer

A) The real exchange rate of the Jordanian dinar would depreciate, and Jordanian net exports would rise. 
B) The real exchange rate of the Jordanian dinar would depreciate, and Jordanian net exports would fall. 
C) The real exchange rate of the Jordanian dinar would appreciate, and Jordanian net exports rise. 
D) The real exchange rate of the Jordanian dinar would appreciate, and Jordanian net exports fall. 
A) The real exchange rate of the Jordanian dinar would depreciate, and Jordanian net exports would rise. 
B) The real exchange rate of the Jordanian dinar would depreciate, and Jordanian net exports would fall. 
C) The real exchange rate of the Jordanian dinar would appreciate, and Jordanian net exports rise. 
D) The real exchange rate of the Jordanian dinar would appreciate, and Jordanian net exports fall.

Question 5

What does the identity "net capital outflow = net exports" imply?

Accepted Answer

A) The supply of dollars equals the demand for dollars in the foreign-currency exchange market. 
B) National saving equals domestic investment. 
C) The volume of exports equals the volume of imports. 
D) National saving is greater than domestic investment. 
A) The supply of dollars equals the demand for dollars in the foreign-currency exchange market. 
B) National saving equals domestic investment. 
C) The volume of exports equals the volume of imports. 
D) National saving is greater than domestic investment.

Question 6

Which of the following would make the equilibrium interest rate increase and the equilibrium quantity of funds decrease?

Accepted Answer

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

Question 7

Suppose that Canada imposes restrictions on the importation of steel into the Canada. According to the open-economy macroeconomic model, which of the following would be the most likely result?

Accepted Answer

A) This policy would lower the real exchange rate and increase net exports. 
B) This policy would lower the real exchange rate and have no effect on net exports. 
C) This policy would raise the real exchange rate and decrease net exports. 
D) This policy would raise the real exchange rate and have no effect on net exports. 
A) This policy would lower the real exchange rate and increase net exports. 
B) This policy would lower the real exchange rate and have no effect on net exports. 
C) This policy would raise the real exchange rate and decrease net exports. 
D) This policy would raise the real exchange rate and have no effect on net exports.

Question 8

Which of the following is the most likely result from an increase in the government's budget surplus?

Accepted Answer

A) higher interest rates 
B) lower imports 
C) lower net capital outflows 
D) lower domestic investment 
A) higher interest rates 
B) lower imports 
C) lower net capital outflows 
D) lower domestic investment

Question 9

According to the open-economy macroeconomic model, if the Canadian government decreased the government budget deficit, both Canadian domestic investment and Canadian net capital outflow would fall.

Accepted Answer

A) True 
 B)False

Question 10

What does the value of net exports equal?

Accepted Answer

A) the value of national saving 
B) the value of public saving 
C) the value of national saving minus imports 
D) the value of national saving minus domestic investment 
A) the value of national saving 
B) the value of public saving 
C) the value of national saving minus imports 
D) the value of national saving minus domestic investment

Question 11

If Canadian citizens decide to save a smaller fraction of their incomes, which of the following best describes the effects?

Accepted Answer

A) Canadian domestic investment increases, and Canadian net capital outflow increases. 
B) Canadian domestic investment increases, and Canadian net capital outflow decreases. 
C) Canadian domestic investment decreases, and Canadian net capital outflow increases. 
D) Canadian domestic investment decreases, and Canadian net capital outflow decreases. 
A) Canadian domestic investment increases, and Canadian net capital outflow increases. 
B) Canadian domestic investment increases, and Canadian net capital outflow decreases. 
C) Canadian domestic investment decreases, and Canadian net capital outflow increases. 
D) Canadian domestic investment decreases, and Canadian net capital outflow decreases.

Question 12

Which of the following best describes the effects of an increase in the real interest rate?

Accepted Answer

A) It discourages people from saving and so increases the quantity of loanable funds demanded. 
B) It discourages people from saving and so decreases the quantity of loanable funds demanded. 
C) It encourages people to save and so increases the quantity of loanable funds supplied. 
D) It encourages people to save and so decreases the quantity of loanable funds supplied. 
A) It discourages people from saving and so increases the quantity of loanable funds demanded. 
B) It discourages people from saving and so decreases the quantity of loanable funds demanded. 
C) It encourages people to save and so increases the quantity of loanable funds supplied. 
D) It encourages people to save and so decreases the quantity of loanable funds supplied.

Question 13

Which of the following best defines capital flight?

Accepted Answer

A) the movement of workers across international borders in response to exchange rate changes 
B) the movement of funds between financial intermediaries when interest rates change 
C) the ability of investment expenditures to lift a country out of poverty 
D) a large and sudden movement of funds out of a country 
A) the movement of workers across international borders in response to exchange rate changes 
B) the movement of funds between financial intermediaries when interest rates change 
C) the ability of investment expenditures to lift a country out of poverty 
D) a large and sudden movement of funds out of a country

Question 14

If the real interest rate were above the equilibrium rate, there would be a shortage of loanable funds.

Accepted Answer

A) True 
 B)False

Question 15

When the government increases the government budget deficit, national saving decreases.

Accepted Answer

A) True 
 B)False

Question 16

Use the figure below to answer the following questions.
Figure 32-2  
-Refer to Figure 32-2. Which of the following shifts shows the effects of an import quota?

Accepted Answer

A) a shift of NCO to the right in Panel B 
B) a shift from D0 to D1 in Panel C 
C) a shift from D0 to D2 in Panel C 
D) a shift of D to the left in Panel A 
A) a shift of NCO to the right in Panel B 
B) a shift from D0 to D1 in Panel C 
C) a shift from D0 to D2 in Panel C 
D) a shift of D to the left in Panel A

Question 17

Which of the following is most likely to increase exports in the country of Turania?

Accepted Answer

A) The government of Turania introduces an investment tax credit. 
B) The government of Turania reduces the size of the budget surplus. 
C) Political instability in Turania increases modestly. 
D) The government of Turania imposes an import quota. 
A) The government of Turania introduces an investment tax credit. 
B) The government of Turania reduces the size of the budget surplus. 
C) Political instability in Turania increases modestly. 
D) The government of Turania imposes an import quota.

Question 18

How does a change in government budget affect national saving?

Accepted Answer

A) An increase in budget deficit increases national saving. 
B) An increase in budget surplus increases national saving. 
C) A decrease in budget surplus increases national saving. 
D) A decrease in budget deficit does not affect national saving. 
A) An increase in budget deficit increases national saving. 
B) An increase in budget surplus increases national saving. 
C) A decrease in budget surplus increases national saving. 
D) A decrease in budget deficit does not affect national saving.

Question 19

Which of the following is the supply and demand for loanable funds equation in an open economy?

Accepted Answer

A) S = I 
B) S = NX + NCO 
C) S = NCO 
D) S = I + NCO 
A) S = I 
B) S = NX + NCO 
C) S = NCO 
D) S = I + NCO

Question 20

In the open-economy macroeconomic model, where does the demand for loanable funds come from?

Accepted Answer

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

Explain why saving need not equal domestic investment in an open economy.

If Argentina suffers from capital flight, Argentinean domestic investment will fall and Argentinean net exports will increase.

Fill in the table below with the direction of the variables that change in response to the events in the first column.

Suppose that the government of Jordan raises its budget deficit. Which of the following best predicts the effects of this action?

What does the identity "net capital outflow = net exports" imply?

Which of the following would make the equilibrium interest rate increase and the equilibrium quantity of funds decrease?

Suppose that Canada imposes restrictions on the importation of steel into the Canada. According to the open-economy macroeconomic model, which of the following would be the most likely result?

Which of the following is the most likely result from an increase in the government's budget surplus?

According to the open-economy macroeconomic model, if the Canadian government decreased the government budget deficit, both Canadian domestic investment and Canadian net capital outflow would fall.

What does the value of net exports equal?

If Canadian citizens decide to save a smaller fraction of their incomes, which of the following best describes the effects?

Which of the following best describes the effects of an increase in the real interest rate?

Which of the following best defines capital flight?

If the real interest rate were above the equilibrium rate, there would be a shortage of loanable funds.

When the government increases the government budget deficit, national saving decreases.

Use the figure below to answer the following questions. Figure 32-2 -Refer to Figure 32-2. Which of the following shifts shows the effects of an import quota?

Which of the following is most likely to increase exports in the country of Turania?

How does a change in government budget affect national saving?

Which of the following is the supply and demand for loanable funds equation in an open economy?

In the open-economy macroeconomic model, where does the demand for loanable funds come from?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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Exam 13: A Macroeconomic Theory of the Open Economy

Explain why saving need not equal domestic investment in an open economy.

If Argentina suffers from capital flight, Argentinean domestic investment will fall and Argentinean net exports will increase.

Fill in the table below with the direction of the variables that change in response to the events in the first column.

Suppose that the government of Jordan raises its budget deficit. Which of the following best predicts the effects of this action?

What does the identity "net capital outflow = net exports" imply?

Which of the following would make the equilibrium interest rate increase and the equilibrium quantity of funds decrease?

Suppose that Canada imposes restrictions on the importation of steel into the Canada. According to the open-economy macroeconomic model, which of the following would be the most likely result?

Which of the following is the most likely result from an increase in the government's budget surplus?

According to the open-economy macroeconomic model, if the Canadian government decreased the government budget deficit, both Canadian domestic investment and Canadian net capital outflow would fall.

What does the value of net exports equal?

If Canadian citizens decide to save a smaller fraction of their incomes, which of the following best describes the effects?

Which of the following best describes the effects of an increase in the real interest rate?

Which of the following best defines capital flight?

If the real interest rate were above the equilibrium rate, there would be a shortage of loanable funds.

When the government increases the government budget deficit, national saving decreases.

Use the figure below to answer the following questions. Figure 32-2 -Refer to Figure 32-2. Which of the following shifts shows the effects of an import quota?

Which of the following is most likely to increase exports in the country of Turania?

How does a change in government budget affect national saving?

Which of the following is the supply and demand for loanable funds equation in an open economy?

In the open-economy macroeconomic model, where does the demand for loanable funds come from?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters