Question 1

When a country suffers from capital flight,the demand for loanable funds in that country shifts

Accepted Answer

A)  right,which increases interest rates in that country. 
B)  right,which decreases interest rates in that country. 
C)  left,which increases interest rates in that country. 
D)  left,which decreases interest rates in that country. 
A)  right,which increases interest rates in that country. 
B)  right,which decreases interest rates in that country. 
C)  left,which increases interest rates in that country. 
D)  left,which decreases interest rates in that country.

Question 2

An increase in the budget deficit causes domestic interest rates

Accepted Answer

A)  and investment to rise. 
B)  to rise and investment to fall. 
C)  to fall and investment to rise. 
D)  and investment to fall. 
A)  and investment to rise. 
B)  to rise and investment to fall. 
C)  to fall and investment to rise. 
D)  and investment to fall.

Question 3

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

Accepted Answer

A)  both the supply of loanable funds and the supply of dollars in the market for foreign-currency exchange. 
B)  neither the supply of loanable funds nor the supply of dollars in the market for foreign-currency exchange. 
C)  the supply of loanable funds but not the supply of dollars in the market for foreign-currency exchange. 
D)  the supply of dollars in the market for foreign-currency exchange,but not the supply of loanable funds. 
A)  both the supply of loanable funds and the supply of dollars in the market for foreign-currency exchange. 
B)  neither the supply of loanable funds nor the supply of dollars in the market for foreign-currency exchange. 
C)  the supply of loanable funds but not the supply of dollars in the market for foreign-currency exchange. 
D)  the supply of dollars in the market for foreign-currency exchange,but not the supply of loanable funds.

Question 4

When a country experiences capital flight its

Accepted Answer

A)  net capital outflow increases and its real exchange rate rises. 
B)  net capital outflow increases and its real exchange rate falls. 
C)  net capital outflow decreases and its real exchange rate rises. 
D)  net capital outflow decreases and its real exchange rate falls. 
A)  net capital outflow increases and its real exchange rate rises. 
B)  net capital outflow increases and its real exchange rate falls. 
C)  net capital outflow decreases and its real exchange rate rises. 
D)  net capital outflow decreases and its real exchange rate falls.

Question 5

Over the past two decades,the United States has persistently exported more goods and services than it has imported.

Accepted Answer

A) True 
 B)False

Question 6

In the open-economy macroeconomic model,the supply curve of currency is vertical because the quantity of currency supplied does not depend on the real exchange rate.

Accepted Answer

A) True 
 B)False

Question 7

If there is a surplus in the market for loanable funds,the resulting change in the real interest rate

Accepted Answer

A)  reduces both the quantity of loanable funds supplied and the quantity of loanable funds demanded. 
B)  reduces the quantity of loanable funds supplied and raises the quantity of loanable funds demanded 
C)  raises both the quantity of loanable funds supplied and the quantity of loanable funds demanded. 
D)  raises the quantity of loanable funds supplied and reduces the quantity of loanable funds demanded. 
A)  reduces both the quantity of loanable funds supplied and the quantity of loanable funds demanded. 
B)  reduces the quantity of loanable funds supplied and raises the quantity of loanable funds demanded 
C)  raises both the quantity of loanable funds supplied and the quantity of loanable funds demanded. 
D)  raises the quantity of loanable funds supplied and reduces the quantity of loanable funds demanded.

Question 8

If U.S.citizens decide to save a smaller fraction of their incomes,U.S.domestic investment

Accepted Answer

A)  increases,and U.S.net capital outflow increases. 
B)  increases,and U.S.net capital outflow decreases. 
C)  decreases,and U.S.net capital outflow increases. 
D)  decreases,and U.S.net capital outflow decreases. 
A)  increases,and U.S.net capital outflow increases. 
B)  increases,and U.S.net capital outflow decreases. 
C)  decreases,and U.S.net capital outflow increases. 
D)  decreases,and U.S.net capital outflow decreases.

Question 9

When Mexico suffered from capital flight in 1994,Mexico's net exports

Accepted Answer

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

Question 10

If the supply of dollars in the market for foreign-currency exchange shifts left,then the exchange rate

Accepted Answer

A)  rises and the quantity of dollars exchanged falls. 
B)  rises and the quantity of dollars exchanged does not change. 
C)  rises and the quantity of dollars exchanged rises. 
D)  falls and the quantity of dollars exchanged does not change. 
A)  rises and the quantity of dollars exchanged falls. 
B)  rises and the quantity of dollars exchanged does not change. 
C)  rises and the quantity of dollars exchanged rises. 
D)  falls and the quantity of dollars exchanged does not change.

Question 11

U.S.corporation Well's Petroleum borrows money to build an oil well in Texas and to build another in Venezuela.Borrowing for which well is included in the demand for loanable funds in the U.S.?

Accepted Answer

A)  The U.S.and Venezuela. 
B)  The U.S.only. 
C)  Venezuela only. 
D)  Neither the U.S.or Venezuela. 
A)  The U.S.and Venezuela. 
B)  The U.S.only. 
C)  Venezuela only. 
D)  Neither the U.S.or Venezuela.

Question 12

If the demand for loanable funds shifts right,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 quantify 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 quantify of loanable funds falls.

Question 13

Figure 32-7  
-Refer to Figure 32-7.Supposing that the Mexican economy starts at r0 and E1.Which of the following is consistent with the effects of capital flight?

Accepted Answer

A)  the shift from D0 to D1 in Panel A 
B)  the shift from NCO0 to NCO1 in Panel B 
C)  the shift from S0 to S1 in Panel C 
D)  All of the above shifts are consistent with the effects of capital flight. 
A)  the shift from D0 to D1 in Panel A 
B)  the shift from NCO0 to NCO1 in Panel B 
C)  the shift from S0 to S1 in Panel C 
D)  All of the above shifts are consistent with the effects of capital flight.

Question 14

If the quantity of loanable funds supplied is less than the quantity demanded,then

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.

Question 15

Figure 32-4  
-Refer to Figure 32-5.Starting from r2 and E3,an increase in the budget surplus can be illustrated as a move to

Accepted Answer

A)  r3 and E4. 
B)  r3 and E2. 
C)  r1 and E4. 
D)  r1 and E2. 
A)  r3 and E4. 
B)  r3 and E2. 
C)  r1 and E4. 
D)  r1 and E2.

Question 16

If the government of a country with a zero trade balances increases its budget deficit,then interest rates

Accepted Answer

A)  rise and the trade balance moves to a surplus. 
B)  rise and the trade balance moves to a deficit. 
C)  fall and the trade balance moves to a surplus. 
D)  fall and the trade balance moves to a deficit. 
A)  rise and the trade balance moves to a surplus. 
B)  rise and the trade balance moves to a deficit. 
C)  fall and the trade balance moves to a surplus. 
D)  fall and the trade balance moves to a deficit.

Question 17

If foreigners want to buy more U.S.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 18

When a country experiences capital flight,which of the following rise?

Accepted Answer

A)  its real interest rate and its real exchange rate 
B)  its real interest rate but not its real exchange rate 
C)  its real exchange rate but not its real interest rate 
D)  neither its real interest rate nor its foreign exchange rate 
A)  its real interest rate and its real exchange rate 
B)  its real interest rate but not its real exchange rate 
C)  its real exchange rate but not its real interest rate 
D)  neither its real interest rate nor its foreign exchange rate

Question 19

At a given real exchange rate,which of the following,by itself,would increase the supply of dollars in the market for foreign-currency exchange?

Accepted Answer

A)  foreign citizens want to buy more U.S.bonds 
B)  U.S.citizens want to buy more foreign bonds 
C)  foreign citizens want to buy more U.S.goods 
D)  U.S.citizens want to buy more foreign goods 
A)  foreign citizens want to buy more U.S.bonds 
B)  U.S.citizens want to buy more foreign bonds 
C)  foreign citizens want to buy more U.S.goods 
D)  U.S.citizens want to buy more foreign goods

Question 20

In the 1980s,the U.S.government budget deficit rose.At the same time the U.S.trade deficit grew larger,the real exchange rate of the dollar appreciated,and U.S.net capital outflow decreased.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 U.S.trade deficit grew. 
B)  The real exchange rate of the dollar appreciated. 
C)  U.S.net capital outflow fell. 
D)  None of the above is contrary to the predictions of the model. 
A)  The U.S.trade deficit grew. 
B)  The real exchange rate of the dollar appreciated. 
C)  U.S.net capital outflow fell. 
D)  None of the above is contrary to the predictions of the model.

Exam 32: A Macroeconomic Theory of the Open Economy

When a country suffers from capital flight,the demand for loanable funds in that country shifts

An increase in the budget deficit causes domestic interest rates

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

When a country experiences capital flight its

Over the past two decades,the United States has persistently exported more goods and services than it has imported.

In the open-economy macroeconomic model,the supply curve of currency is vertical because the quantity of currency supplied does not depend on the real exchange rate.

If there is a surplus in the market for loanable funds,the resulting change in the real interest rate

If U.S.citizens decide to save a smaller fraction of their incomes,U.S.domestic investment

When Mexico suffered from capital flight in 1994,Mexico's net exports

If the supply of dollars in the market for foreign-currency exchange shifts left,then the exchange rate

U.S.corporation Well's Petroleum borrows money to build an oil well in Texas and to build another in Venezuela.Borrowing for which well is included in the demand for loanable funds in the U.S.?

If the demand for loanable funds shifts right,then

Figure 32-7 -Refer to Figure 32-7.Supposing that the Mexican economy starts at r0 and E1.Which of the following is consistent with the effects of capital flight?

If the quantity of loanable funds supplied is less than the quantity demanded,then

Figure 32-4 -Refer to Figure 32-5.Starting from r2 and E3,an increase in the budget surplus can be illustrated as a move to

If the government of a country with a zero trade balances increases its budget deficit,then interest rates

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

When a country experiences capital flight,which of the following rise?

At a given real exchange rate,which of the following,by itself,would increase the supply of dollars in the market for foreign-currency exchange?

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

Filters

Figure 32-7 -Refer to Figure 32-7.Supposing that the Mexican economy starts at r₀ and E₁.Which of the following is consistent with the effects of capital flight?

Figure 32-4 -Refer to Figure 32-5.Starting from r₂ and E₃,an increase in the budget surplus can be illustrated as a move to