Question 1

What changes will a shortage of loanable funds induce in a savings-investment diagram in a closed economy?

Accepted Answer

A)  The demand for loanable funds curve will shift right,so the interest rate will rise. 
B)  The supply of loanable funds curve will shift left,so the interest rate will fall. 
C)  There will be no shifts of the curves,but the interest rate will rise. 
D)  There will be no shifts of the curves,but the interest rate will fall. 
A)  The demand for loanable funds curve will shift right,so the interest rate will rise. 
B)  The supply of loanable funds curve will shift left,so the interest rate will fall. 
C)  There will be no shifts of the curves,but the interest rate will rise. 
D)  There will be no shifts of the curves,but the interest rate will fall.

Question 2

If a government increases its budget deficit,which statement would best predict the effects?

Accepted Answer

A)  Interest rates rise,and the real exchange rate appreciates. 
B)  Interest rates fall,and the real exchange rate depreciates. 
C)  Interest rates rise,and the real exchange rate depreciates. 
D)  Interest rates fall,and the real exchange rate appreciates. 
A)  Interest rates rise,and the real exchange rate appreciates. 
B)  Interest rates fall,and the real exchange rate depreciates. 
C)  Interest rates rise,and the real exchange rate depreciates. 
D)  Interest rates fall,and the real exchange rate appreciates.

Question 3

Which statement is consistent with positive net exports?

Accepted Answer

A)  Exports are greater than imports. 
B)  Net capital outflow is negative. 
C)  Exports are less than imports. 
D)  Net capital outflow is zero. 
A)  Exports are greater than imports. 
B)  Net capital outflow is negative. 
C)  Exports are less than imports. 
D)  Net capital outflow is zero.

Question 4

Other things the same,when the real exchange rate of the dollar appreciates,Canadian goods become more attractive to Canadian residents,but less attractive to foreign residents.

Accepted Answer

A) True 
 B)False

Question 5

Suppose that the Albanian 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 Albanian loanable funds cu

Question 6

How are the identities S = NCO + I and NCO = NX related to the foreign-currency exchange market and the loanable funds market?

Accepted Answer

S is national saving,which is the source

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Which list contains only things that decrease when the budget deficit of the Canadian government increases?

Accepted Answer

A)  Canadian net exports,national saving,and net capital outflow 
B)  Canadian supply of loanable funds,the real exchange rate of the dollar,and domestic investment 
C)  Canadian imports,interest rates,and the real exchange rate of the dollar 
D)  interest rate,net exports,and the quantity demanded for loanable funds for domestic investment 
A)  Canadian net exports,national saving,and net capital outflow 
B)  Canadian supply of loanable funds,the real exchange rate of the dollar,and domestic investment 
C)  Canadian imports,interest rates,and the real exchange rate of the dollar 
D)  interest rate,net exports,and the quantity demanded for loanable funds for domestic investment

Question 9

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 10

Figure 13-2  
-Refer to the Figure13-2.If the economy were initially in equilibrium at r0 and E0 and the government removed import quotas,what would happen to the exchange rate?

Accepted Answer

A)  It would appreciate to E1. 
B)  It would appreciate to E2. 
C)  It would depreciate to E1. 
D)  It would depreciate to E2. 
A)  It would appreciate to E1. 
B)  It would appreciate to E2. 
C)  It would depreciate to E1. 
D)  It would depreciate to E2.

Question 11

If Canadian citizens decide to save a larger fraction of their incomes,which statement would best identify the effects?

Accepted Answer

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

Question 12

Suppose that the world consists of only two countries,A and B,of relatively equal sizes.The world interest rate in such a model is some average of the autarkic (no trade)interest rates in each of the two countries.
a.Draw "parallel" loanable funds markets for the two countries and show the position of the world interest rate.(Hint: What relationship must exist between the NCOs of the two countries?)
b.Suppose country A enacts laws that induce people to save more.Show the effects of such laws on each country's domestic amounts saved and invested.
c.In the currency-exchange diagrams for both countries,show the effect of country A's savings policies on both countries' exchange rates and net exports.

Accepted Answer

a.A country's NCO must be equal to the n

Question 13

What does the open-economy macroeconomic model take as given?

Accepted Answer

A)  GDP,but not the price level 
B)  the price level,but not GDP 
C)  both the price level and GDP 
D)  the exchange rate 
A)  GDP,but not the price level 
B)  the price level,but not GDP 
C)  both the price level and GDP 
D)  the exchange rate

Question 14

Suppose the market for loanable funds is described by the equations I = 180 - 16r and S = 8 + 24r.Suppose also that the world interest rate is 8 percent.
a)Calculate domestic investment,domestic saving,and net capital outflow.
b)If the net exports curve is given by NX = 142 - 2X,where X is the real exchange rate,calculate the equilibrium real exchange rate and net exports.
c)How does the real exchange rate change when the world interest rate decreases to 7 percent?
d)Discuss your results.

Accepted Answer

a)Domestic saving at the world interest

Question 15

Suppose that Canada imposes an import quota on live turkeys.In the open-economy macroeconomic model,which curve would this quota shift?

Accepted Answer

A)  supply of loanable funds left 
B)  demand for loanable funds left 
C)  demand for Canadian dollars right 
D)  supply of Canadian dollars left 
A)  supply of loanable funds left 
B)  demand for loanable funds left 
C)  demand for Canadian dollars right 
D)  supply of Canadian dollars left

Question 16

What 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)  The government of Turania reduces the size of the budget deficit. 
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)  The government of Turania reduces the size of the budget deficit. 
D)  The government of Turania imposes an import quota.

Question 17

If Canadian citizens decide to purchase more foreign assets at each interest rate,which statement would best describe 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 18

Which of the following is an effect of capital flight in a small economy such as Panama?

Accepted Answer

A)  a shift of the supply of loanable funds to the left 
B)  a decrease of the Panamanian interest rate 
C)  a shift of the net capital outflow to the right 
D)  an appreciation of the Panamanian real exchange rate 
A)  a shift of the supply of loanable funds to the left 
B)  a decrease of the Panamanian interest rate 
C)  a shift of the net capital outflow to the right 
D)  an appreciation of the Panamanian real exchange rate

Question 19

If a government increases its budget deficit,which statement would best predict 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 20

Which statement is consistent with an above-the-equilibrium exchange rate of the dollar?

Accepted Answer

A)  The quantity of dollars supplied is greater than the quantity demanded,and the dollar will appreciate. 
B)  The quantity of dollars supplied is greater than the quantity demanded,and the dollar will depreciate. 
C)  The quantity of dollars supplied is less than the quantity demanded,and the dollar will appreciate. 
D)  The quantity of dollars supplied is less than the quantity demanded,and the dollar will depreciate. 
A)  The quantity of dollars supplied is greater than the quantity demanded,and the dollar will appreciate. 
B)  The quantity of dollars supplied is greater than the quantity demanded,and the dollar will depreciate. 
C)  The quantity of dollars supplied is less than the quantity demanded,and the dollar will appreciate. 
D)  The quantity of dollars supplied is less than the quantity demanded,and the dollar will depreciate.

What changes will a shortage of loanable funds induce in a savings-investment diagram in a closed economy?

If a government increases its budget deficit,which statement would best predict the effects?

Which statement is consistent with positive net exports?

Other things the same,when the real exchange rate of the dollar appreciates,Canadian goods become more attractive to Canadian residents,but less attractive to foreign residents.

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

How are the identities S = NCO + I and NCO = NX related to the foreign-currency exchange market and the loanable funds market?

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

Which list contains only things that decrease when the budget deficit of the Canadian government increases?

Mexico suffered from capital flight in 1994.What happened to Mexico's net exports?

Figure 13-2 -Refer to the Figure13-2.If the economy were initially in equilibrium at r0 and E0 and the government removed import quotas,what would happen to the exchange rate?

If Canadian citizens decide to save a larger fraction of their incomes,which statement would best identify the effects?

What does the open-economy macroeconomic model take as given?

Suppose that Canada imposes an import quota on live turkeys.In the open-economy macroeconomic model,which curve would this quota shift?

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

If Canadian citizens decide to purchase more foreign assets at each interest rate,which statement would best describe the effects?

Which of the following is an effect of capital flight in a small economy such as Panama?

If a government increases its budget deficit,which statement would best predict the effects?

Which statement is consistent with an above-the-equilibrium exchange rate of the dollar?

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 Small Open Economy

What changes will a shortage of loanable funds induce in a savings-investment diagram in a closed economy?

If a government increases its budget deficit,which statement would best predict the effects?

Which statement is consistent with positive net exports?

Other things the same,when the real exchange rate of the dollar appreciates,Canadian goods become more attractive to Canadian residents,but less attractive to foreign residents.

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

How are the identities S = NCO + I and NCO = NX related to the foreign-currency exchange market and the loanable funds market?

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

Which list contains only things that decrease when the budget deficit of the Canadian government increases?

Mexico suffered from capital flight in 1994.What happened to Mexico's net exports?

Figure 13-2 -Refer to the Figure13-2.If the economy were initially in equilibrium at r0 and E0 and the government removed import quotas,what would happen to the exchange rate?

If Canadian citizens decide to save a larger fraction of their incomes,which statement would best identify the effects?

What does the open-economy macroeconomic model take as given?

Suppose that Canada imposes an import quota on live turkeys.In the open-economy macroeconomic model,which curve would this quota shift?

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

If Canadian citizens decide to purchase more foreign assets at each interest rate,which statement would best describe the effects?

Which of the following is an effect of capital flight in a small economy such as Panama?

If a government increases its budget deficit,which statement would best predict the effects?

Which statement is consistent with an above-the-equilibrium exchange rate of the dollar?

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