Question 1

In the open-economy macroeconomic model, if net capital outflow increases then

Accepted Answer

A)  the demand for dollars in the market for foreign-currency exchange shifts right. 
B)  the demand for dollars in the market for foreign-currency exchange shifts left. 
C)  the supply of dollars in the market for foreign-currency exchange shifts right. 
D)  the supply of dollars in the market for foreign-currency exchange shifts left. 
A)  the demand for dollars in the market for foreign-currency exchange shifts right. 
B)  the demand for dollars in the market for foreign-currency exchange shifts left. 
C)  the supply of dollars in the market for foreign-currency exchange shifts right. 
D)  the supply of dollars in the market for foreign-currency exchange shifts left.

Question 2

Figure 14-7
  
-Refer to Figure 14-7. Suppose the Mexican economy starts at r0 and E1. Which of the following new equilibrium is consistent with capital flight?

Accepted Answer

A)  ro and E0 
B)  r1 and E0 
C)  r1 and E1 
D)  None of the above is correct. 
A)  ro and E0 
B)  r1 and E0 
C)  r1 and E1 
D)  None of the above is correct.

Question 3

Trade policies

Accepted Answer

A)  affect a country's overall trade balance, but affect all firms and industries the same. 
B)  affect a country's overall trade balance, but affect some firms or industries differently than others. 
C)  do not affect a country's overall trade balance, but affect some firms or industries differently than others. 
D)  do not affect either a country's overall trade balance or specific firms or industries. 
A)  affect a country's overall trade balance, but affect all firms and industries the same. 
B)  affect a country's overall trade balance, but affect some firms or industries differently than others. 
C)  do not affect a country's overall trade balance, but affect some firms or industries differently than others. 
D)  do not affect either a country's overall trade balance or specific firms or industries.

Question 4

The key determinant of net capital outflow is the real interest rate.

Accepted Answer

A) True 
 B)False

Question 5

If the budget deficit increases, then

Accepted Answer

A)  an increase in the interest rate increases net capital outflow. 
B)  an increase in the interest rate decreases net capital outflow. 
C)  a decrease in the interest rate increases net capital outflow. 
D)  a decrease in the interest rate decreases net capital outflow. 
A)  an increase in the interest rate increases net capital outflow. 
B)  an increase in the interest rate decreases net capital outflow. 
C)  a decrease in the interest rate increases net capital outflow. 
D)  a decrease in the interest rate decreases net capital outflow.

Question 6

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.

Question 7

If the demand for loanable funds shifts right, then

Accepted Answer

A)  the real interest rate and the equilibrium quantity of loanable funds both fall. 
B)  the real interest rate falls and the equilibrium quantity of loanable funds rises. 
C)  the real interest rate and the equilibrium quantity of loanable funds both rise. 
D)  the real interest rate rises and the equilibrium quantify of loanable funds falls. 
A)  the real interest rate and the equilibrium quantity of loanable funds both fall. 
B)  the real interest rate falls and the equilibrium quantity of loanable funds rises. 
C)  the real interest rate and the equilibrium quantity of loanable funds both rise. 
D)  the real interest rate rises and the equilibrium quantify of loanable funds falls.

Question 8

When Mexico suffered from capital flight in 1994, Mexico's net exports

Accepted Answer

A)  decreased. 
B)  did not change. 
C)  increased. 
D)  decreased until the peso appreciated, then increased. 
A)  decreased. 
B)  did not change. 
C)  increased. 
D)  decreased until the peso appreciated, then increased.

Question 9

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

Accepted Answer

A)  rises and the quantity of dollars exchanged falls. 
B)  rises and the quantity of dollars exchanged does not change. 
C)  rises and the quantity of dollars exchanged rises. 
D)  falls and the quantity of dollars exchanged does not change. 
A)  rises and the quantity of dollars exchanged falls. 
B)  rises and the quantity of dollars exchanged does not change. 
C)  rises and the quantity of dollars exchanged rises. 
D)  falls and the quantity of dollars exchanged does not change.

Question 10

When a country imposes an import quota, its

Accepted Answer

A)  imports fall and its net exports rise. 
B)  imports fall and its net exports are unchanged. 
C)  imports rise and its net exports are unchanged. 
D)  imports and exports are unchanged. 
A)  imports fall and its net exports rise. 
B)  imports fall and its net exports are unchanged. 
C)  imports rise and its net exports are unchanged. 
D)  imports and exports are unchanged.

Question 11

An increase in the budget surplus

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 12

Which of the following is most likely to increase exports?

Accepted Answer

A)  a reduction in domestic political instability 
B)  ending investment tax credits 
C)  a reduction in the size of the government's budget surplus 
D)  None of the above will increase exports. 
A)  a reduction in domestic political instability 
B)  ending investment tax credits 
C)  a reduction in the size of the government's budget surplus 
D)  None of the above will increase exports.

Question 13

Figure 14-1
  
-Refer to Figure 14-1. In the Figure shown, if the real interest rate is 6 percent, the quantity of loanable funds demanded is

Accepted Answer

A)  $20 billion, and the quantity supplied is $40 billion. 
B)  $20 billion, and the quantity supplied is $60 billion. 
C)  $60 billion, and the quantity supplied is $20 billion. 
D)  $60 billion, and the quantity supplied is $40 billion. 
A)  $20 billion, and the quantity supplied is $40 billion. 
B)  $20 billion, and the quantity supplied is $60 billion. 
C)  $60 billion, and the quantity supplied is $20 billion. 
D)  $60 billion, and the quantity supplied is $40 billion.

Question 14

In the open-economy macroeconomic model, the supply curve of currency is vertical because the quantity of currency supplied does not depend on the real exchange rate.

Accepted Answer

A) True 
 B)False

Question 15

If net exports are positive, then

Accepted Answer

A)  exports are greater than imports. 
B)  net capital outflow is negative. 
C)  Both of the above are correct. 
D)  Neither of the above is correct. 
A)  exports are greater than imports. 
B)  net capital outflow is negative. 
C)  Both of the above are correct. 
D)  Neither of the above is correct.

Question 16

If the government of Kenya implemented a policy that decreased national saving, its real exchange rate would

Accepted Answer

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

Question 17

Figure 14-1
  
-Refer to Figure 14-1. In the Figure shown, if the real interest rate is 2 percent, there will be a

Accepted Answer

A)  surplus of $20 billion. 
B)  surplus of $40 billion. 
C)  shortage of $20 billion. 
D)  shortage of $40 billion. 
A)  surplus of $20 billion. 
B)  surplus of $40 billion. 
C)  shortage of $20 billion. 
D)  shortage of $40 billion.

Question 18

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

Accepted Answer

A) NCO > I. B) NCO S. D) NCO + I < S. A) NCO > I. B) NCO S. D) NCO + I < S.

Question 19

Figure 14-4
  
-Refer to Figure 14-5. Starting from r2 and E3, an increase in the budget surplus can be illustrated as a move to

Accepted Answer

A)  r3 and E4. 
B)  r3 and E2. 
C)  r1 and E4. 
D)  r1 and E2. 
A)  r3 and E4. 
B)  r3 and E2. 
C)  r1 and E4. 
D)  r1 and E2.

Question 20

Which of the following is correct concerning the open-economy macroeconomic model?

Accepted Answer

A)  The net-capital-outflow curve slopes downward. 
B)  The key determinant of net capital outflow is the real exchange rate. 
C)  The supply of dollars in the market for foreign-currency exchange is horizontal. 
D)  None of the above is correct. 
A)  The net-capital-outflow curve slopes downward. 
B)  The key determinant of net capital outflow is the real exchange rate. 
C)  The supply of dollars in the market for foreign-currency exchange is horizontal. 
D)  None of the above is correct.

In the open-economy macroeconomic model, if net capital outflow increases then

Figure 14-7 -Refer to Figure 14-7. Suppose the Mexican economy starts at r₀ and E₁. Which of the following new equilibrium is consistent with capital flight?

Trade policies

The key determinant of net capital outflow is the real interest rate.

If the budget deficit increases, then

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

If the demand for loanable funds shifts right, then

When Mexico suffered from capital flight in 1994, Mexico's net exports

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

When a country imposes an import quota, its

An increase in the budget surplus

Which of the following is most likely to increase exports?

Figure 14-1 -Refer to Figure 14-1. In the Figure shown, if the real interest rate is 6 percent, the quantity of loanable funds demanded is

In the open-economy macroeconomic model, the supply curve of currency is vertical because the quantity of currency supplied does not depend on the real exchange rate.

If net exports are positive, then

If the government of Kenya implemented a policy that decreased national saving, its real exchange rate would

Figure 14-1 -Refer to Figure 14-1. In the Figure shown, if the real interest rate is 2 percent, there will be a

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

Figure 14-4 -Refer to Figure 14-5. Starting from r₂ and E₃, an increase in the budget surplus can be illustrated as a move to

Which of the following is correct concerning the open-economy macroeconomic model?

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

In the open-economy macroeconomic model, if net capital outflow increases then

Figure 14-7 -Refer to Figure 14-7. Suppose the Mexican economy starts at r0 and E1. Which of the following new equilibrium is consistent with capital flight?

Trade policies

The key determinant of net capital outflow is the real interest rate.

If the budget deficit increases, then

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

If the demand for loanable funds shifts right, then

When Mexico suffered from capital flight in 1994, Mexico's net exports

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

When a country imposes an import quota, its

An increase in the budget surplus

Which of the following is most likely to increase exports?

Figure 14-1 -Refer to Figure 14-1. In the Figure shown, if the real interest rate is 6 percent, the quantity of loanable funds demanded is

In the open-economy macroeconomic model, the supply curve of currency is vertical because the quantity of currency supplied does not depend on the real exchange rate.

If net exports are positive, then

If the government of Kenya implemented a policy that decreased national saving, its real exchange rate would

Figure 14-1 -Refer to Figure 14-1. In the Figure shown, if the real interest rate is 2 percent, there will be a

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

Figure 14-4 -Refer to Figure 14-5. Starting from r2 and E3, an increase in the budget surplus can be illustrated as a move to

Which of the following is correct concerning the open-economy macroeconomic model?

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

Figure 14-7 -Refer to Figure 14-7. Suppose the Mexican economy starts at r₀ and E₁. Which of the following new equilibrium is consistent with capital flight?

Figure 14-4 -Refer to Figure 14-5. Starting from r₂ and E₃, an increase in the budget surplus can be illustrated as a move to