Exam 14: A Macroeconomic Theory of the Open Economy

In the open economy macroeconomic model, the price that balances supply and demand in the market for foreign-currency exchange model is the

When a country imposes an import quota, its exchange rate

In the 1980s, both the U.S. government budget and U.S. trade deficits increased.

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

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 government increases its budget deficit, then that country's

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

According to the open-economy macroeconomic model, a decrease in the U.S. government budget deficit increases U.S. net capital outflow, causes the real exchange rate of the dollar to depreciate, and increases U.S. net exports.

Which of the following would make the equilibrium real interest rate increase and the equilibrium quantity of funds decrease?

Explain how an increase in the demand for capital goods in the U.S. can lead to a change in the U.S. exchange rate.

From 1980 to 1987, U.S. net capital outflows decreased. According to the open-economy macroeconomic model, which of the following could have caused this?

Which of the following is consistent with moving from a surplus to equilibrium in the market for foreign currency exchange?

If a country's budget deficit rises, then its exchange rate

If the real interest rate were above the equilibrium rate, there would be a shortage of loanable funds.

In equilibrium a country has a net capital outflow of $200 billion and domestic investment of $150 billion. What is the quantity of loanable funds demanded?

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

Suppose the U.S. government institutes a "Buy American" campaign, in order to encourage spending on domestic goods. What effect will this have on the U.S. trade balance?

When Mexico suffered from capital flight in 1994, U.S. demand for loanable funds

If there is a surplus in the U.S. loanable funds market, then the interest rate

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