Exam 14: A Macroeconomic Theory of the Open Economy

Which of the following would do the most to reduce a trade deficit?

Which of the following make(s) demand for U.S. dollars in the market for foreign-currency exchange higher than otherwise?

Fill in the table below with the direction of the variables that change in response to the events in the first column.

In the open-economy macroeconomic model, the real exchange rate does not affect net capital outflow.

If a country's budget deficit decreases, then the exchange rate

If for some reason Americans desired to increase their purchases of foreign assets, then other things the same

The imposition of an import quota shifts

Other things the same, an increase in the U.S. real interest rate induces

A firm produces manufacturing equipment, some of which it exports. Which of the following effects of capital flight in the country it produces in would likely reduce the quantity of equipment it sells?

Other things the same, an increase in the U.S. interest rate

A decrease in the budget deficit causes domestic interest rates

In an open economy, the demand for loanable funds comes from

In which case(s) does(do) a country's supply of loanable funds shift right?

In the 1980s, the U.S. government budget deficit rose. At the same time the U.S. trade deficit grew larger, the real exchange rate of the dollar appreciated, and U.S. net capital outflow decreased. Which of these events is contrary to what the open-economy macroeconomic model predicts concerning the effects of an increase in the budget deficit?

In the open-economy macroeconomic model, other things the same, when a U.S. resident imports a foreign good, the demand for dollars in the foreign-currency exchange market decreases.

Which of the following is included in the demand for dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

In the open-economy macroeconomic model, other things the same, which of the following both make the exchange rate fall?

From 2001 to 2004 the U.S. budget went from surplus to deficit. According to the open economy macroeconomic model, this change should have

Many U.S. business leaders argue that the current state of U.S. net exports is the result of

Recently the Greek government had large deficits and people became worried about Greece's ability to continue to make payments on its debt. Which of the these events raise a country's interest rates?