Exam 14: A Macroeconomic Theory of the Open Economy

In the open-economy macroeconomic model, if there is currently a surplus in the foreign exchange market, the quantity of desired net exports will increase as the market moves to equilibrium.

Which of the following contains a list only of things that increase when the budget deficit of the U.S. increases?

Capital flight raises a country's interest rate.

U.S. corporation Titan Bikes borrows funds to build a factory in the U.S. and a factory in Denmark. Borrowing for factories in which location(s) is included in the U.S. demand for loanable funds?

In the open-economy macroeconomic model, the supply of loanable funds equals

In the open-economy macroeconomic model, the demand for dollars shifts right if at any given exchange rate

In the open-economy macroeconomic model, the market for loanable funds equates national saving with

A government budget deficit

In the long run, import quotas increase net exports.

If a country's budget deficit increases, then in the foreign exchange market,

If the budget deficit increases, then

The open-economy macroeconomic model takes

Other things the same, if the expected return on U.S. assets increased, the

Other things the same, if foreigners desire to purchase more U.S. bonds then the demand for loanable funds shifts left.

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

Imposing an import quota causes the domestic real exchange rate to

If the demand for loanable funds shifts left, then

If the government of a country with a zero trade balance started with a budget deficit and moved to a budget surplus, domestic investment would

In the open-economy macroeconomic model, if investment demand increases, then

In the open-economy macroeconomic model, other things the same, an increase in the exchange rate raises the quantity of dollars supplied in the market for foreign-currency exchange.