Question 1

If Canadian citizens decide to purchase more foreign assets at each interest rate, which of the following best describes the effects?

Accepted Answer

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

Question 2

Which of the following increases if the Canadian government imposes an import quota on computer components?

Accepted Answer

A) Canadian exports 
B) Canadian imports 
C) Canadian net exports 
D) the real exchange rate of the dollar 
A) Canadian exports 
B) Canadian imports 
C) Canadian net exports 
D) the real exchange rate of the dollar

Question 3

When does the purchase of a capital asset add to the demand for loanable funds?

Accepted Answer

A) only if the asset is located at home 
B) only if the asset is located abroad 
C) whether the asset is located at home or abroad 
D) never 
A) only if the asset is located at home 
B) only if the asset is located abroad 
C) whether the asset is located at home or abroad 
D) never

Question 4

Suppose that the Turkish government budget deficit increases. What curves in the open-economy macroeconomic model shift? Explain why each curve shifts the direction it does.

Accepted Answer

The supply of Turkish loanable funds cur

Question 5

The 1998 default by the Russian government had results that were predictable using the textbook model. Which of the following best describes what happened?

Accepted Answer

A) The event increased Russian interest rates and net exports. 
B) The event reduced Russian interest rates and net exports. 
C) The event increased Russian interest rates and reduced Russian net exports. 
D) The event reduced Russian interest rates and increased Russian net exports. 
A) The event increased Russian interest rates and net exports. 
B) The event reduced Russian interest rates and net exports. 
C) The event increased Russian interest rates and reduced Russian net exports. 
D) The event reduced Russian interest rates and increased Russian net exports.

Question 6

Figure 32-1  
-Refer to Figure 32-1. If the world interest rate equals 4 percent, what is the net capital outflow?

Accepted Answer

A) $4000 
B) $2000 
C) -$2000 
D) -$4000 
A) $4000 
B) $2000 
C) -$2000 
D) -$4000

Question 7

How does an increase in the Canadian government budget deficit shift the supply of Canadian loanable funds?

Accepted Answer

A) The supply of loanable funds curve shifts to the right. 
B) The supply of loanable funds curve shifts to the left. 
C) The supply of loanable funds does not change. 
D) The change in the supply of loanable funds is ambiguous. 
A) The supply of loanable funds curve shifts to the right. 
B) The supply of loanable funds curve shifts to the left. 
C) The supply of loanable funds does not change. 
D) The change in the supply of loanable funds is ambiguous.

Question 8

If a government increases its budget deficit, which of the following best predicts the effects?

Accepted Answer

A) Interest rates rise and the trade balance moves toward surplus. 
B) Interest rates rise and the trade balance moves toward deficit. 
C) Interest rates fall and the trade balance moves toward surplus. 
D) Interest rates fall and the trade balance moves toward deficit. 
A) Interest rates rise and the trade balance moves toward surplus. 
B) Interest rates rise and the trade balance moves toward deficit. 
C) Interest rates fall and the trade balance moves toward surplus. 
D) Interest rates fall and the trade balance moves toward deficit.

Question 9

Suppose that the Canadian budget deficit rises. At the same time the Canadian trade deficit grows larger, the real exchange rate of the dollar appreciates, and Canadian net capital outflow decreases. 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 Canadian trade deficit grew. 
B) The real exchange rate of the dollar appreciated. 
C) Canadian net capital outflow fell. 
D) The supply of dollars in the foreign exchange market increased. 
A) The Canadian trade deficit grew. 
B) The real exchange rate of the dollar appreciated. 
C) Canadian net capital outflow fell. 
D) The supply of dollars in the foreign exchange market increased.

Question 10

Which of the following best defines a trade policy?

Accepted Answer

A) It is a government policy directed toward the goal of improving the tradeoff between equity and efficiency. 
B) It is a government policy that directly influences the quantity of goods and services that a country imports or exports. 
C) It is a government policy directed toward the goal of increasing domestic trade. 
D) It is a government policy toward trade unions. 
A) It is a government policy directed toward the goal of improving the tradeoff between equity and efficiency. 
B) It is a government policy that directly influences the quantity of goods and services that a country imports or exports. 
C) It is a government policy directed toward the goal of increasing domestic trade. 
D) It is a government policy toward trade unions.

Question 11

When a country experiences capital flight, which of the following best explains the effects?

Accepted Answer

A) The interest rate falls because the demand for loanable funds shifts left. 
B) The interest rate falls because the supply for loanable funds shifts right. 
C) The interest rate rises because the demand for loanable funds shifts right. 
D) The interest rate rises because the supply for loanable funds shifts left. 
A) The interest rate falls because the demand for loanable funds shifts left. 
B) The interest rate falls because the supply for loanable funds shifts right. 
C) The interest rate rises because the demand for loanable funds shifts right. 
D) The interest rate rises because the supply for loanable funds shifts left.

Question 12

Figure 32-3  
-Refer to Figure 32-3. Suppose the Mexican economy starts at r0 and E0. Which of the following new equilibriums is consistent with capital flight?

Accepted Answer

A) r0 and E0 
B) r1 and E0 
C) r1 and E1 
D) r0 and E1 
A) r0 and E0 
B) r1 and E0 
C) r1 and E1 
D) r0 and E1

Question 13

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

Accepted Answer

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

Question 14

Which of the following terms refers to a large and sudden movement of funds out of a country?

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 15

If a government increases its budget deficit, which of the following best predicts the effects?

Accepted Answer

A) The real exchange rate and domestic investment rise. 
B) The real exchange rate and domestic investment fall. 
C) The real exchange rate rises and domestic investment falls. 
D) The real exchange rate falls and domestic investment rises. 
A) The real exchange rate and domestic investment rise. 
B) The real exchange rate and domestic investment fall. 
C) The real exchange rate rises and domestic investment falls. 
D) The real exchange rate falls and domestic investment rises.

Question 16

Which of the following is most likely to increase Canadian exports?

Accepted Answer

A) The government increases its spending. 
B) The government reduces the size of the budget surplus. 
C) Canada reduces its restrictions on foreign imports. 
D) Taxes on domestic saving rise. 
A) The government increases its spending. 
B) The government reduces the size of the budget surplus. 
C) Canada reduces its restrictions on foreign imports. 
D) Taxes on domestic saving rise.

Question 17

What is net capital outflow equal to?

Accepted Answer

A) national saving minus the trade balance 
B) domestic investment plus national saving 
C) national saving minus domestic investment 
D) domestic investment minus national saving 
A) national saving minus the trade balance 
B) domestic investment plus national saving 
C) national saving minus domestic investment 
D) domestic investment minus national saving

Question 18

When Mexico suffered from capital flight in 1994, what happened to Mexico's net exports?

Accepted Answer

A) They decreased. 
B) They did not change. 
C) They increased. 
D) They decreased until the peso appreciated; then they increased. 
A) They decreased. 
B) They did not change. 
C) They increased. 
D) They decreased until the peso appreciated; then they increased.

Question 19

If a country went from a government budget deficit to a surplus, which of the following best predicts the consequences?

Accepted Answer

A) National savings would increase, shifting the supply of loanable funds right. 
B) National savings would increase, shifting the supply of loanable funds left. 
C) National savings would decrease, shifting the demand for loanable funds right. 
D) National savings would decrease, shifting the demand for loanable funds left. 
A) National savings would increase, shifting the supply of loanable funds right. 
B) National savings would increase, shifting the supply of loanable funds left. 
C) National savings would decrease, shifting the demand for loanable funds right. 
D) National savings would decrease, shifting the demand for loanable funds left.

Question 20

If the quantity of loanable funds supplied is greater than the quantity demanded, which of the following best describes the consequences?

Accepted Answer

A) There is a shortage of loanable funds, and the interest rate will fall. 
B) There is a shortage of loanable funds, and the interest rate will rise. 
C) There is a surplus of loanable funds, and the interest rate will fall. 
D) There is a surplus of loanable funds, and the interest rate will rise. 
A) There is a shortage of loanable funds, and the interest rate will fall. 
B) There is a shortage of loanable funds, and the interest rate will rise. 
C) There is a surplus of loanable funds, and the interest rate will fall. 
D) There is a surplus of loanable funds, and the interest rate will rise.

If Canadian citizens decide to purchase more foreign assets at each interest rate, which of the following best describes the effects?

Which of the following increases if the Canadian government imposes an import quota on computer components?

When does the purchase of a capital asset add to the demand for loanable funds?

Suppose that the Turkish government budget deficit increases. What curves in the open-economy macroeconomic model shift? Explain why each curve shifts the direction it does.

The 1998 default by the Russian government had results that were predictable using the textbook model. Which of the following best describes what happened?

Figure 32-1 -Refer to Figure 32-1. If the world interest rate equals 4 percent, what is the net capital outflow?

How does an increase in the Canadian government budget deficit shift the supply of Canadian loanable funds?

If a government increases its budget deficit, which of the following best predicts the effects?

Which of the following best defines a trade policy?

When a country experiences capital flight, which of the following best explains the effects?

Figure 32-3 -Refer to Figure 32-3. Suppose the Mexican economy starts at r₀ and E₀. Which of the following new equilibriums is consistent with capital flight?

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

Which of the following terms refers to a large and sudden movement of funds out of a country?

If a government increases its budget deficit, which of the following best predicts the effects?

Which of the following is most likely to increase Canadian exports?

What is net capital outflow equal to?

When Mexico suffered from capital flight in 1994, what happened to Mexico's net exports?

If a country went from a government budget deficit to a surplus, which of the following best predicts the consequences?

If the quantity of loanable funds supplied is greater than the quantity demanded, which of the following best describes the consequences?

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

Exam 13: A Macroeconomic Theory of the Open Economy

If Canadian citizens decide to purchase more foreign assets at each interest rate, which of the following best describes the effects?

Which of the following increases if the Canadian government imposes an import quota on computer components?

When does the purchase of a capital asset add to the demand for loanable funds?

Suppose that the Turkish government budget deficit increases. What curves in the open-economy macroeconomic model shift? Explain why each curve shifts the direction it does.

The 1998 default by the Russian government had results that were predictable using the textbook model. Which of the following best describes what happened?

Figure 32-1 -Refer to Figure 32-1. If the world interest rate equals 4 percent, what is the net capital outflow?

How does an increase in the Canadian government budget deficit shift the supply of Canadian loanable funds?

If a government increases its budget deficit, which of the following best predicts the effects?

Which of the following best defines a trade policy?

When a country experiences capital flight, which of the following best explains the effects?

Figure 32-3 -Refer to Figure 32-3. Suppose the Mexican economy starts at r0 and E0. Which of the following new equilibriums is consistent with capital flight?

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

Which of the following terms refers to a large and sudden movement of funds out of a country?

If a government increases its budget deficit, which of the following best predicts the effects?

Which of the following is most likely to increase Canadian exports?

What is net capital outflow equal to?

When Mexico suffered from capital flight in 1994, what happened to Mexico's net exports?

If a country went from a government budget deficit to a surplus, which of the following best predicts the consequences?

If the quantity of loanable funds supplied is greater than the quantity demanded, which of the following best describes the consequences?

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

Figure 32-3 -Refer to Figure 32-3. Suppose the Mexican economy starts at r₀ and E₀. Which of the following new equilibriums is consistent with capital flight?