Question 1

A decrease 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 2

An increase in the U.S.government budget deficit shifts the

Accepted Answer

A) demand for loanable funds right and decreases investment spending. 
B) supply of loanable funds right and increases investment spending. 
C) supply of loanable funds left and decreases investment spending. 
D) None of the above is correct. 
A) demand for loanable funds right and decreases investment spending. 
B) supply of loanable funds right and increases investment spending. 
C) supply of loanable funds left and decreases investment spending. 
D) None of the above is correct.

Question 3

If a government increases its budget deficit,then the real exchange rate

Accepted Answer

A) and domestic investment rise. 
B) and domestic investment fall. 
C) rises and domestic investment falls. 
D) falls and domestic investment rises. 
A) and domestic investment rise. 
B) and domestic investment fall. 
C) rises and domestic investment falls. 
D) falls and domestic investment rises.

Question 4

Suppose that India has a government budget surplus,and then goes into deficit.This change would

Accepted Answer

A) increase India's national saving and shift its supply of loanable funds left. 
B) increase India's national saving and shift its demand for loanable funds right. 
C) decrease India's national saving and shift its supply of loanable funds left. 
D) decrease India's national saving and shift its demand for loanable funds right. 
A) increase India's national saving and shift its supply of loanable funds left. 
B) increase India's national saving and shift its demand for loanable funds right. 
C) decrease India's national saving and shift its supply of loanable funds left. 
D) decrease India's national saving and shift its demand for loanable funds right.

Question 5

When a country experiences capital flight its currency

Accepted Answer

A) appreciates and net exports rise. 
B) appreciates and net exports fall. 
C) depreciates and net exports rise. 
D) depreciates and net exports fall. 
A) appreciates and net exports rise. 
B) appreciates and net exports fall. 
C) depreciates and net exports rise. 
D) depreciates and net exports fall.

Question 6

Which of the following would not be a consequence of an increase in the U.S.government budget deficit?

Accepted Answer

A) U.S.interest rates rise 
B) U.S.net capital outflow falls 
C) the real exchange rate of the U.S.dollar depreciates 
D) the U.S.supply of loanable funds shifts left 
A) U.S.interest rates rise 
B) U.S.net capital outflow falls 
C) the real exchange rate of the U.S.dollar depreciates 
D) the U.S.supply of loanable funds shifts left

Question 7

Which of the following would both raise the U.S.exchange rate?

Accepted Answer

A) capital flight from other countries to the U.S.occurs and the U.S.moves from budget surplus to budget deficit 
B) capital flight from other countries to the U.S.occurs and the U.S.moves from budget deficit to budget surplus 
C) capital flight from the U.S.to other countries occurs,the U.S.moves from budget surplus to budget deficit 
D) capital flight from U.S.to other countries occurs,the U.S.moves from budget deficit to budget surplus 
A) capital flight from other countries to the U.S.occurs and the U.S.moves from budget surplus to budget deficit 
B) capital flight from other countries to the U.S.occurs and the U.S.moves from budget deficit to budget surplus 
C) capital flight from the U.S.to other countries occurs,the U.S.moves from budget surplus to budget deficit 
D) capital flight from U.S.to other countries occurs,the U.S.moves from budget deficit to budget surplus

Question 8

A rise in the government budget deficit

Accepted Answer

A) increases the interest rate so in the market for foreign-currency exchange,supply shifts right. 
B) increases the interest rate so in the market for foreign-currency exchange,supply shifts left. 
C) decreases the interest rate so in the market for foreign-currency exchange,supply shifts left. 
D) decreases the interest rate so in the market for foreign-currency exchange supply shifts right. 
A) increases the interest rate so in the market for foreign-currency exchange,supply shifts right. 
B) increases the interest rate so in the market for foreign-currency exchange,supply shifts left. 
C) decreases the interest rate so in the market for foreign-currency exchange,supply shifts left. 
D) decreases the interest rate so in the market for foreign-currency exchange supply shifts right.

Question 9

If a government increases its budget deficit,then interest rates

Accepted Answer

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

Question 10

If the U.S.imposes a quota on cotton,then

Accepted Answer

A) both exports and imports of other goods will rise. 
B) exports of other goods will rise and imports of other goods will fall. 
C) exports of other goods will fall and imports of other goods will rise. 
D) both imports and exports of other goods will fall. 
A) both exports and imports of other goods will rise. 
B) exports of other goods will rise and imports of other goods will fall. 
C) exports of other goods will fall and imports of other goods will rise. 
D) both imports and exports of other goods will fall.

Question 11

Suppose a country experiences capital flight.Of the demand for loanable funds and the supply of currency in the market for foreign-currency exchange,which shifts right?

Accepted Answer

A) only the demand for loanable funds 
B) only the supply of its currency in the market for foreign-currency exchange 
C) both curves shift right 
D) neither curve shifts right 
A) only the demand for loanable funds 
B) only the supply of its currency in the market for foreign-currency exchange 
C) both curves shift right 
D) neither curve shifts right

Question 12

Imposing an import quota causes the domestic real exchange rate to

Accepted Answer

A) appreciate,which increases foreign demand for domestic goods. 
B) appreciate,which decreases foreign demand for domestic goods. 
C) depreciate,which increases foreign demand for domestic goods. 
D) depreciate,which decreases foreign demand for domestic goods. 
A) appreciate,which increases foreign demand for domestic goods. 
B) appreciate,which decreases foreign demand for domestic goods. 
C) depreciate,which increases foreign demand for domestic goods. 
D) depreciate,which decreases foreign demand for domestic goods.

Question 13

If a tariff on beef were implemented,which of the following would rise?

Accepted Answer

A) exports and net exports 
B) exports but not net exports 
C) net exports but not exports 
D) neither exports nor net exports 
A) exports and net exports 
B) exports but not net exports 
C) net exports but not exports 
D) neither exports nor net exports

Question 14

If people thought that many banks in a certain country were at or near the point of bankruptcy,then that country's interest rate

Accepted Answer

A) and net exports would rise. 
B) would rise and its net exports would fall. 
C) would fall and its net exports would rise. 
D) and its net exports would fall. 
A) and net exports would rise. 
B) would rise and its net exports would fall. 
C) would fall and its net exports would rise. 
D) and its net exports would fall.

Question 15

If a country experiences capital flight,which curves shift right?

Accepted Answer

A) the demand for loanable funds and the demand for its currency in the market for foreign-currency exchange 
B) the demand for loanable funds and the supply of its currency in the market for foreign-currency exchange 
C) the supply of loanable funds and the demand for its currency in the market for foreign-currency exchange 
D) the supply of loanable funds and the supply of its currency in the market for foreign-currency exchange 
A) the demand for loanable funds and the demand for its currency in the market for foreign-currency exchange 
B) the demand for loanable funds and the supply of its currency in the market for foreign-currency exchange 
C) the supply of loanable funds and the demand for its currency in the market for foreign-currency exchange 
D) the supply of loanable funds and the supply of its currency in the market for foreign-currency exchange

Question 16

In the open-economy macroeconomic model which of the following falls if there is an increase in the budget deficit?

Accepted Answer

A) the interest rate 
B) net exports 
C) the exchange rate 
D) All of the above are correct. 
A) the interest rate 
B) net exports 
C) the exchange rate 
D) All of the above are correct.

Question 17

The country of Solidia is politically very stable and has a long tradition of respecting property rights.If several other countries suddenly became politically unstable,we would expect Solidia's

Accepted Answer

A) real interest rate to rise. 
B) real exchange rate to rise. 
C) net exports to rise. 
D) None of the above is likely. 
A) real interest rate to rise. 
B) real exchange rate to rise. 
C) net exports to rise. 
D) None of the above is likely.

Question 18

A firm produces construction equipment,some of which it sells to domestic businesses and some of which it exports.Which of the following effects of capital flight in the country where it produces would likely increase the quantity of equipment it sells?

Accepted Answer

A) both what happens to the interest rate and what happens to the exchange rate 
B) what happens to the interest rate but not what happens to the exchange rate 
C) what happens to the exchange rate but not what happens to the interest rate 
D) neither what happens to the interest rate nor what happens to the interest rate. 
A) both what happens to the interest rate and what happens to the exchange rate 
B) what happens to the interest rate but not what happens to the exchange rate 
C) what happens to the exchange rate but not what happens to the interest rate 
D) neither what happens to the interest rate nor what happens to the interest rate.

Question 19

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 20

In 1998 the Russian government defaulted on its bonds.According to the open-economy macroeconomic model,this should have

Accepted Answer

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

Exam 19: A Macroeconomic Theory of the Open Economy: How Policies and Events Affect an Open Economy

A decrease in the budget deficit causes domestic interest rates

An increase in the U.S.government budget deficit shifts the

If a government increases its budget deficit,then the real exchange rate

Suppose that India has a government budget surplus,and then goes into deficit.This change would

When a country experiences capital flight its currency

Which of the following would not be a consequence of an increase in the U.S.government budget deficit?

Which of the following would both raise the U.S.exchange rate?

A rise in the government budget deficit

If a government increases its budget deficit,then interest rates

If the U.S.imposes a quota on cotton,then

Suppose a country experiences capital flight.Of the demand for loanable funds and the supply of currency in the market for foreign-currency exchange,which shifts right?

Imposing an import quota causes the domestic real exchange rate to

If a tariff on beef were implemented,which of the following would rise?

If people thought that many banks in a certain country were at or near the point of bankruptcy,then that country's interest rate

If a country experiences capital flight,which curves shift right?

In the open-economy macroeconomic model which of the following falls if there is an increase in the budget deficit?

The country of Solidia is politically very stable and has a long tradition of respecting property rights.If several other countries suddenly became politically unstable,we would expect Solidia's

A firm produces construction equipment,some of which it sells to domestic businesses and some of which it exports.Which of the following effects of capital flight in the country where it produces would likely increase the quantity of equipment it sells?

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

In 1998 the Russian government defaulted on its bonds.According to the open-economy macroeconomic model,this should have

Ten Principles of Economics

Ten Principles of Economics: How People Make Decisions

Ten Principles of Economics: How People Interact

Ten Principles of Economics: How the Economy As a Whole Works

Ten Principles of Economics: Part A

Ten Principles of Economics: Part B

Thinking Like an Economist

Thinking Like an Economist: The Economist As Scientist

Thinking Like an Economist: The Economist As Policy Adviser

Thinking Like an Economist: Why Economists Disagree

Thinking Like an Economist: Lets Get Going

Thinking Like an Economist: Graphing a Brief Review

Thinking Like an Economist: Part A

Thinking Like an Economist: Part B

Interdependence and the Gains From Trade

Interdependence and the Gains From Trade: A Parable for the Modern Economy

Interdependence and the Gains From Trade: Comparative Advantage the Driving Force of Specialization

Interdependence and the Gains From Trade: Applications of Comparative Advantage

Interdependence and the Gains From Trade: Conclusion

Interdependence and the Gains From Trade: Part A

Interdependence and the Gains From Trade: Part B

The Market Forces of Supply and Demand

The Market Forces of Supply and Demand:Markets and Competition

The Market Forces of Supply and Demand: Demand

The Market Forces of Supply and Demand: Supply

The Market Forces of Supply and Demand: Supply and Demand Together

The Market Forces of Supply and DemandConclusion How Prices Allocate Resources

The Market Forces of Supply and Demand: Part A

The Market Forces of Supply and Demand: Part B

Elasticity and Its Applications

Elasticity and Its Applications: The Elasticity of Demand

Elasticity and Its Applications: The Elasticity of Supply

Elasticity and Its Applications: Three Applications of Supply,demand,and Elasticity

Elasticity and Its Applications: Part A

Elasticity and Its Applications: Part B

Supply Demand and Government Policies

Supply Demand and Government Policies: Controls on Prices

Supply Demand and Government Policies: Taxes

Supply Demand and Government Policies: Part A

Supply Demand and Government Policies: Part B

Consumers Producers and the Efficiency of Markets

Consumers Producers and the Efficiency of Markets: Consumer Surplus

Consumers Producers and the Efficiency of Markets: Producer Surplus

Consumers Producers and the Efficiency of Markets: Market Efficiency

Consumers Producers and the Efficiency of Markets: Conclusion Market Efficiency and Market Failure

Consumers Producers and the Efficiency of Markets: Part A

Consumers Producers and the Efficiency of Markets: Part B

Application the Cost of Taxation

Application the Cost of Taxation: The Deadweight Loss of Taxation

Application the Cost of Taxation: The Determinants of the Deadweight Loss

Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Application the Cost of Taxation: Conclusion

Application the Cost of Taxation: Part A

Application the Cost of Taxation: Part B

Application International Trade

Application International Trade: The Determinants of Trade

Application International Trade: The Winners and Losers From Trade

Application International Trade: The Arguments for Restricting Trade

Application International Trade: Conclusion