Question 1

If the real exchange rate of the U.S.dollar were above its equilibrium level,the real exchange rate of the U.S.dollar would appreciate.

Accepted Answer

A) True 
 B)False

Question 2

From 2001 to 2004 the U.S.budget went from surplus to deficit.According to the open economy macroeconomic model,this change should have

Accepted Answer

A)  increased U.S.interest rates and increased the real exchange rate of the dollar. 
B)  increased U.S.interest rates and decreased the real exchange rate of the dollar. 
C)  decreased U.S.interest rates and increased the real exchange rate of the dollar. 
D)  decreased U.S.interest rates and decreased the real exchange rate of the dollar. 
A)  increased U.S.interest rates and increased the real exchange rate of the dollar. 
B)  increased U.S.interest rates and decreased the real exchange rate of the dollar. 
C)  decreased U.S.interest rates and increased the real exchange rate of the dollar. 
D)  decreased U.S.interest rates and decreased the real exchange rate of the dollar.

Question 3

When the U.S.real interest rate falls,owning U.S.assets becomes

Accepted Answer

A)  less attractive and so U.S.net capital outflow rises. 
B)  less attractive and so U.S.net capital outflow falls. 
C)  more attractive and so U.S.net capital outflow rises. 
D)  more attractive and so U.S.net capital outflow falls. 
A)  less attractive and so U.S.net capital outflow rises. 
B)  less attractive and so U.S.net capital outflow falls. 
C)  more attractive and so U.S.net capital outflow rises. 
D)  more attractive and so U.S.net capital outflow falls.

Question 4

If the government of Colombia made policy changes that increased national saving,the real exchange rate of the peso would

Accepted Answer

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

Question 5

Figure 32-1  
-Refer to Figure 32-1.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 6

If U.S.citizens decide to save a larger fraction of their incomes,the real interest rate

Accepted Answer

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

Question 7

If there is capital flight from the United States,then the demand for loanable funds

Accepted Answer

A)  and the supply of dollars in the foreign-exchange market shift right. 
B)  and the supply of dollars in the foreign-exchange market shift left. 
C)  shifts left while the supply of dollars in the foreign-exchange market shifts right. 
D)  shifts right while the supply of dollars in the foreign-exchange market shifts left. 
A)  and the supply of dollars in the foreign-exchange market shift right. 
B)  and the supply of dollars in the foreign-exchange market shift left. 
C)  shifts left while the supply of dollars in the foreign-exchange market shifts right. 
D)  shifts right while the supply of dollars in the foreign-exchange market shifts left.

Question 8

In the long run,import quotas increase net exports.

Accepted Answer

A) True 
 B)False

Question 9

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 10

Capital flight reduces a country's real exchange rate.

Accepted Answer

A) True 
 B)False

Question 11

If a government increases its budget deficit,then domestic interest rates

Accepted Answer

A)  and net exports rise. 
B)  rise and net exports fall. 
C)  fall and net exports rise. 
D)  and net exports fall. 
A)  and net exports rise. 
B)  rise and net exports fall. 
C)  fall and net exports rise. 
D)  and net exports 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 2002,the United States placed higher tariffs on imports of steel.According to the open-economy macroeconomic model this policy should have

Accepted Answer

A)  reduced imports into the United States and made U.S.net exports rise. 
B)  reduced imports into the United States and made the net supply of dollars in the foreign exchange market shift right. 
C)  reduced imports of steel into the United States,but reduced U.S.exports of other goods by an equal amount. 
D)  reduced imports of steel into the United States and increased U.S.exports of other goods by an equal amount. 
A)  reduced imports into the United States and made U.S.net exports rise. 
B)  reduced imports into the United States and made the net supply of dollars in the foreign exchange market shift right. 
C)  reduced imports of steel into the United States,but reduced U.S.exports of other goods by an equal amount. 
D)  reduced imports of steel into the United States and increased U.S.exports of other goods by an equal amount.

Question 14

In the open-economy macroeconomic model,at the equilibrium real interest rate,the amount that people (including government)want to save exactly balances desired domestic investment.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following would do the most to reduce a trade deficit?

Accepted Answer

A)  increase domestic saving 
B)  increase domestic political stability and respect of property rights 
C)  other countries reduce their trade restrictions 
D)  raise tariffs 
A)  increase domestic saving 
B)  increase domestic political stability and respect of property rights 
C)  other countries reduce their trade restrictions 
D)  raise tariffs

Question 16

If a country institutes policies that lead domestic firms to desire more capital stock

Accepted Answer

A)  net capital outflows rise and the real exchange rate rises. 
B)  net capital outflows rise and the real exchange rate falls. 
C)  net capital outflows fall and the real exchange rate rises. 
D)  net capital outflows and the real exchange rate falls. 
A)  net capital outflows rise and the real exchange rate rises. 
B)  net capital outflows rise and the real exchange rate falls. 
C)  net capital outflows fall and the real exchange rate rises. 
D)  net capital outflows and the real exchange rate falls.

Question 17

Suppose a presidential candidate promises to increase the government budget surplus and claims that doing so will stop U.S.citizens from investing in foreign companies and increase the value of the dollar.Evaluate this promise.

Accepted Answer

An increase in the government budget sur

Question 18

If U.S.residents want to buy more foreign bonds,then in the market for foreign-currency exchange the exchange rate

Accepted Answer

A)  and the quantity of dollars traded rises. 
B)  rises and the quantity of dollars traded falls. 
C)  falls and the quantity of dollars traded rises. 
D)  and the quantity of dollars traded falls. 
A)  and the quantity of dollars traded rises. 
B)  rises and the quantity of dollars traded falls. 
C)  falls and the quantity of dollars traded rises. 
D)  and the quantity of dollars traded falls.

Question 19

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 20

When Mexico suffered from capital flight in 1994,U.S.demand for loanable funds

Accepted Answer

A)  and U.S.net capital outflow rose. 
B)  and U.S.net capital outflow fell. 
C)  fell and U.S.net capital outflow rose. 
D)  rose and U.S.net capital outflow fell. 
A)  and U.S.net capital outflow rose. 
B)  and U.S.net capital outflow fell. 
C)  fell and U.S.net capital outflow rose. 
D)  rose and U.S.net capital outflow fell.

Exam 32: A Macroeconomic Theory of the Open Economy

If the real exchange rate of the U.S.dollar were above its equilibrium level,the real exchange rate of the U.S.dollar would appreciate.

From 2001 to 2004 the U.S.budget went from surplus to deficit.According to the open economy macroeconomic model,this change should have

When the U.S.real interest rate falls,owning U.S.assets becomes

If the government of Colombia made policy changes that increased national saving,the real exchange rate of the peso would

Figure 32-1 -Refer to Figure 32-1.In the Figure shown,if the real interest rate is 2 percent,there will be a

If U.S.citizens decide to save a larger fraction of their incomes,the real interest rate

If there is capital flight from the United States,then the demand for loanable funds

In the long run,import quotas increase net exports.

In an open economy,

Capital flight reduces a country's real exchange rate.

If a government increases its budget deficit,then domestic interest rates

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 2002,the United States placed higher tariffs on imports of steel.According to the open-economy macroeconomic model this policy should have

In the open-economy macroeconomic model,at the equilibrium real interest rate,the amount that people (including government)want to save exactly balances desired domestic investment.

Which of the following would do the most to reduce a trade deficit?

If a country institutes policies that lead domestic firms to desire more capital stock

Suppose a presidential candidate promises to increase the government budget surplus and claims that doing so will stop U.S.citizens from investing in foreign companies and increase the value of the dollar.Evaluate this promise.

If U.S.residents want to buy more foreign bonds,then in the market for foreign-currency exchange the exchange rate

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

When Mexico suffered from capital flight in 1994,U.S.demand for loanable funds

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

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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 Macroeconomics: Basic Concepts

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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