Question 1

An increase in the budget deficit

Accepted Answer

A)  reduces investment because the interest rate rises. 
B)  reduces investment because the interest rate falls. 
C)  raises investment because the interest rate rises. 
D)  raises investment because the interest rate falls. 
A)  reduces investment because the interest rate rises. 
B)  reduces investment because the interest rate falls. 
C)  raises investment because the interest rate rises. 
D)  raises investment because the interest rate falls.

Question 2

In the open-economy macroeconomic model, a higher domestic interest rate reduces the quantity of loanable funds demanded

Accepted Answer

A) True 
 B)False

Question 3

If a government has a budget surplus, then public saving

Accepted Answer

A)  is positive and increases national saving. 
B)  is positive but decreases national saving. 
C)  is negative and decreases national saving. 
D)  is negative but increases national saving. 
A)  is positive and increases national saving. 
B)  is positive but decreases national saving. 
C)  is negative and decreases national saving. 
D)  is negative but increases national saving.

Question 4

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

Accepted Answer

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

Question 5

In the open-economy macroeconomic model, if the supply of loanable funds increases, then the interest rate

Accepted Answer

A)  and the real exchange rate increase. 
B)  and the real exchange rate decrease. 
C)  increases and the real exchange rate decreases. 
D)  decreases and the real exchange rate increases. 
A)  and the real exchange rate increase. 
B)  and the real exchange rate decrease. 
C)  increases and the real exchange rate decreases. 
D)  decreases and the real exchange rate increases.

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

A country has output of $900 billion, consumption of $600 billion, government expenditures of $150 billion and investment of $120 billion. What is its supply of loanable funds?

Accepted Answer

A)  $30 billion 
B)  $90 billion 
C)  $120 billion 
D)  $150 billion 
A)  $30 billion 
B)  $90 billion 
C)  $120 billion 
D)  $150 billion

Question 8

In an open economy, the demand for loanable funds comes from both domestic investment and net capital outflow.

Accepted Answer

A) True 
 B)False

Question 9

If net exports are positive, then

Accepted Answer

A)  net capital outflow is positive, so foreign assets bought by Americans are greater than American assets bought by foreigners. 
B)  net capital outflow is positive, so American assets bought by foreigners are greater than foreign assets bought by Americans. 
C)  net capital outflow is negative, so foreign assets bought by Americans are greater than American assets bought by foreigners. 
D)  net capital outflow is negative, so American assets bought by foreigners are greater than foreign assets bought by Americans. 
A)  net capital outflow is positive, so foreign assets bought by Americans are greater than American assets bought by foreigners. 
B)  net capital outflow is positive, so American assets bought by foreigners are greater than foreign assets bought by Americans. 
C)  net capital outflow is negative, so foreign assets bought by Americans are greater than American assets bought by foreigners. 
D)  net capital outflow is negative, so American assets bought by foreigners are greater than foreign assets bought by Americans.

Question 10

Suppose that the Turkish 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 Turkish loanable funds cur

Question 11

A tax credit for purchases of capital goods causes the interest rate to increase and the exchange rate to appreciate.

Accepted Answer

A) True 
 B)False

Question 12

If net exports are negative, then

Accepted Answer

A)  net capital outflow is positive, so foreign assets bought by Americans are greater than American assets bought by foreigners. 
B)  net capital outflow is positive, so American assets bought by foreigners are greater than foreign assets bought by Americans. 
C)  net capital outflow is negative, so foreign assets bought by Americans are greater than American assets bought by foreigners. 
D)  net capital outflow is negative, so American assets bought by foreigners are greater than foreign assets bought by Americans. 
A)  net capital outflow is positive, so foreign assets bought by Americans are greater than American assets bought by foreigners. 
B)  net capital outflow is positive, so American assets bought by foreigners are greater than foreign assets bought by Americans. 
C)  net capital outflow is negative, so foreign assets bought by Americans are greater than American assets bought by foreigners. 
D)  net capital outflow is negative, so American assets bought by foreigners are greater than foreign assets bought by Americans.

Question 13

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 14

In the open-economy macroeconomic model, as the exchange rate rises,

Accepted Answer

A)  desired net exports fall, so the quantity of dollars supplied rise. 
B)  desired net exports fall, so the quantity of dollars demanded falls. 
C)  desired net exports rise ,so the quantity of dollars supplied falls. 
D)  desired net exports rise, so the quantity of dollars demanded rises. 
A)  desired net exports fall, so the quantity of dollars supplied rise. 
B)  desired net exports fall, so the quantity of dollars demanded falls. 
C)  desired net exports rise ,so the quantity of dollars supplied falls. 
D)  desired net exports rise, so the quantity of dollars demanded rises.

Question 15

An increase in the budget deficit

Accepted Answer

A)  raises net exports and domestic investment. 
B)  raises net exports and reduces domestic investment. 
C)  reduces net exports and raises domestic investment. 
D)  reduces net exports and domestic investment. 
A)  raises net exports and domestic investment. 
B)  raises net exports and reduces domestic investment. 
C)  reduces net exports and raises domestic investment. 
D)  reduces net exports and domestic investment.

Question 16

A higher U.S. interest rate discourages Americans from buying foreign assets and encourages foreigners to buy U.S. assets.

Accepted Answer

A) True 
 B)False

Question 17

If interest rates rose more in Germany than in the U.S., then other things the same

Accepted Answer

A)  U.S. citizens would buy more German bonds and German citizens would buy more U.S. bonds. 
B)  U.S. citizens would buy more German bonds and German citizens would buy fewer U.S. bonds. 
C)  U.S. citizens would buy fewer German bonds and German citizens would buy more U.S. bonds. 
D)  U.S. citizens would buy fewer German bonds and German citizens would buy fewer U.S. bonds. 
A)  U.S. citizens would buy more German bonds and German citizens would buy more U.S. bonds. 
B)  U.S. citizens would buy more German bonds and German citizens would buy fewer U.S. bonds. 
C)  U.S. citizens would buy fewer German bonds and German citizens would buy more U.S. bonds. 
D)  U.S. citizens would buy fewer German bonds and German citizens would buy fewer U.S. bonds.

Question 18

In the open-economy macroeconomic model, the key determinant of net capital outflow is

Accepted Answer

A)  the real exchange rate. When the real exchange rate rises, net capital outflow rises. 
B)  the real exchange rate. When the real exchange rate rises, net capital outflow falls. 
C)  the real interest rate. When the real interest rate rises, net capital outflow rises. 
D)  the real interest rate. When the real interest rate rises, net capital outflow falls. 
A)  the real exchange rate. When the real exchange rate rises, net capital outflow rises. 
B)  the real exchange rate. When the real exchange rate rises, net capital outflow falls. 
C)  the real interest rate. When the real interest rate rises, net capital outflow rises. 
D)  the real interest rate. When the real interest rate rises, net capital outflow falls.

Question 19

An increase in the government budget deficit shifts the demand for loanable funds to the right.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following increases if the U.S. imposes an import quota on computer components?

Accepted Answer

A)  U.S. exports 
B)  U.S. imports 
C)  U.S. net exports 
D)  None of the above increases. 
A)  U.S. exports 
B)  U.S. imports 
C)  U.S. net exports 
D)  None of the above increases.

An increase in the budget deficit

In the open-economy macroeconomic model, a higher domestic interest rate reduces the quantity of loanable funds demanded

If a government has a budget surplus, then public saving

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

In the open-economy macroeconomic model, if the supply of loanable funds increases, then the interest rate

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

A country has output of $900 billion, consumption of $600 billion, government expenditures of $150 billion and investment of $120 billion. What is its supply of loanable funds?

In an open economy, the demand for loanable funds comes from both domestic investment and net capital outflow.

If net exports are positive, then

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

A tax credit for purchases of capital goods causes the interest rate to increase and the exchange rate to appreciate.

If net exports are negative, then

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

In the open-economy macroeconomic model, as the exchange rate rises,

An increase in the budget deficit

A higher U.S. interest rate discourages Americans from buying foreign assets and encourages foreigners to buy U.S. assets.

If interest rates rose more in Germany than in the U.S., then other things the same

In the open-economy macroeconomic model, the key determinant of net capital outflow is

An increase in the government budget deficit shifts the demand for loanable funds to the right.

Which of the following increases if the U.S. imposes an import quota on computer components?

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

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

Exam 14: A Macroeconomic Theory of the Open Economy

An increase in the budget deficit

In the open-economy macroeconomic model, a higher domestic interest rate reduces the quantity of loanable funds demanded

If a government has a budget surplus, then public saving

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

In the open-economy macroeconomic model, if the supply of loanable funds increases, then the interest rate

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

A country has output of $900 billion, consumption of $600 billion, government expenditures of $150 billion and investment of $120 billion. What is its supply of loanable funds?

In an open economy, the demand for loanable funds comes from both domestic investment and net capital outflow.

If net exports are positive, then

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

A tax credit for purchases of capital goods causes the interest rate to increase and the exchange rate to appreciate.

If net exports are negative, then

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

In the open-economy macroeconomic model, as the exchange rate rises,

An increase in the budget deficit

A higher U.S. interest rate discourages Americans from buying foreign assets and encourages foreigners to buy U.S. assets.

If interest rates rose more in Germany than in the U.S., then other things the same

In the open-economy macroeconomic model, the key determinant of net capital outflow is

An increase in the government budget deficit shifts the demand for loanable funds to the right.

Which of the following increases if the U.S. imposes an import quota on computer components?

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

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters