Question 1

When the U.S. real interest rate falls

Accepted Answer

A)  U.S. purchases of foreign assets and foreign purchases of U.S. assets rise 
B)  U.S. purchases of foreign assets rise and foreign purchases of U.S. assets fall 
C)  U.S. purchases of foreign assets fall and foreign purchases of U.S. assets rise 
D)  U.S. purchases of foreign assets and foreign purchases of U.S. assets fall 
A)  U.S. purchases of foreign assets and foreign purchases of U.S. assets rise 
B)  U.S. purchases of foreign assets rise and foreign purchases of U.S. assets fall 
C)  U.S. purchases of foreign assets fall and foreign purchases of U.S. assets rise 
D)  U.S. purchases of foreign assets and foreign purchases of U.S. assets fall

Question 2

If the demand for net exports rises, which of the following happens in the open-economy macroeconomic model?

Accepted Answer

A)  the exchange rate rises 
B)  the interest rate falls 
C)  net capital outflow rises 
D)  All of the above are correct. 
A)  the exchange rate rises 
B)  the interest rate falls 
C)  net capital outflow rises 
D)  All of the above are correct.

Question 3

In the open-economy macroeconomic model, the amount of net capital outflow represents the quantity of dollars

Accepted Answer

A)  supplied for the purpose of selling assets domestically. 
B)  supplied for the purpose of buying foreign assets. 
C)  demanded for the purpose of buying U.S. net exports of goods and services. 
D)  demanded for the purpose of importing foreign goods and services. 
A)  supplied for the purpose of selling assets domestically. 
B)  supplied for the purpose of buying foreign assets. 
C)  demanded for the purpose of buying U.S. net exports of goods and services. 
D)  demanded for the purpose of importing foreign goods and services.

Question 4

If the U.S. imposed an import quota on construction equipment, then the sales of U.S. construction equipment producers would

Accepted Answer

A)  rise and the exports of other U.S. industries would rise. 
B)  rise and the exports of other U.S. industries would fall. 
C)  fall and the exports of other U.S. industries would rise. 
D)  fall and the exports of other U.S. industries would fall. 
A)  rise and the exports of other U.S. industries would rise. 
B)  rise and the exports of other U.S. industries would fall. 
C)  fall and the exports of other U.S. industries would rise. 
D)  fall and the exports of other U.S. industries would fall.

Question 5

According to the open-economy macroeconomic model, if the U.S. government budget deficit increases, then both U.S. domestic investment and U.S. net capital outflow decrease.

Accepted Answer

A) True 
 B)False

Question 6

Other things the same, when the real exchange rate of the dollar appreciates, U.S. goods become more attractive to U.S. residents, but less attractive to foreign residents.

Accepted Answer

A) True 
 B)False

Question 7

Explain how the relation between the real exchange rate and net exports explains the downward slope of the demand for foreign-currency exchange curve.

Accepted Answer

When the U.S. real exchange rate appreci

Question 8

Other things the same, a higher real interest rate raises the quantity of

Accepted Answer

A)  domestic investment. 
B)  net capital outflow. 
C)  loanable funds demanded. 
D)  loanable funds supplied. 
A)  domestic investment. 
B)  net capital outflow. 
C)  loanable funds demanded. 
D)  loanable funds supplied.

Question 9

Figure 14-4
  
-Refer to Figure 14-4. Suppose that U.S. firms desire to purchase more capital in the U.S. The effects of this could be illustrated by

Accepted Answer

A)  shifting the demand curve in panel a to the right and the demand curve in panel c to the left. 
B)  shifting the demand curve in panel a to the right and the supply curve in panel c to the left. 
C)  shifting the supply curve in panel a to the right and the demand curve in panel c to the left. 
D)  shifting the supply curve in panel a to the right and the supply curve in panel c to the right. 
A)  shifting the demand curve in panel a to the right and the demand curve in panel c to the left. 
B)  shifting the demand curve in panel a to the right and the supply curve in panel c to the left. 
C)  shifting the supply curve in panel a to the right and the demand curve in panel c to the left. 
D)  shifting the supply curve in panel a to the right and the supply curve in panel c to the right.

Question 10

In an open economy, the supply of loanable funds comes from national saving.

Accepted Answer

A) True 
 B)False

Question 11

In 2002, the United States placed higher tariffs on imports of steel. According to the open-economy macroeconomic model this policy should have

Accepted Answer

A)  reduced imports into the United States and made U.S. net exports rise. 
B)  reduced imports into the United States and made the net supply of dollars in the foreign exchange market shift right. 
C)  reduced imports of steel into the United States, but reduced U.S. exports of other goods by an equal amount. 
D)  reduced imports of steel into the United States and increased U.S. exports of other goods by an equal amount. 
A)  reduced imports into the United States and made U.S. net exports rise. 
B)  reduced imports into the United States and made the net supply of dollars in the foreign exchange market shift right. 
C)  reduced imports of steel into the United States, but reduced U.S. exports of other goods by an equal amount. 
D)  reduced imports of steel into the United States and increased U.S. exports of other goods by an equal amount.

Question 12

During the financial crisis it was proposed that firms be provided with a tax credit for investment projects. Such a tax credit would

Accepted Answer

A)  raise both the interest rate and the real exchange rate. 
B)  raise the interest rate and reduce the real exchange rate. 
C)  reduce the interest rate and raise the real exchange rate. 
D)  reduce both the interest rate and the real exchange rate. 
A)  raise both the interest rate and the real exchange rate. 
B)  raise the interest rate and reduce the real exchange rate. 
C)  reduce the interest rate and raise the real exchange rate. 
D)  reduce both the interest rate and the real exchange rate.

Question 13

Capital flight refers to

Accepted Answer

A)  the movement of workers across international borders in response to exchange rate changes. 
B)  the movement of funds between financial intermediaries when interest rates change. 
C)  the ability of foreign direct investment to lift a country out of poverty. 
D)  a large and sudden movement of funds out of a country. 
A)  the movement of workers across international borders in response to exchange rate changes. 
B)  the movement of funds between financial intermediaries when interest rates change. 
C)  the ability of foreign direct investment to lift a country out of poverty. 
D)  a large and sudden movement of funds out of a country.

Question 14

When a country's government budget deficit increases,

Accepted Answer

A)  the real exchange rate of its currency and its net exports increase. 
B)  the real exchange rate of its currency and its net exports decrease. 
C)  the real exchange rate of its currency increases and its net exports decrease. 
D)  the real exchange rate of its currency decreases and its net exports increase. 
A)  the real exchange rate of its currency and its net exports increase. 
B)  the real exchange rate of its currency and its net exports decrease. 
C)  the real exchange rate of its currency increases and its net exports decrease. 
D)  the real exchange rate of its currency decreases and its net exports increase.

Question 15

Figure 14-2
  
-Refer to Figure 14-2. If the real exchange rate is .6, then there is a

Accepted Answer

A)  surplus of 100 so the real exchange rate will fall. 
B)  surplus of 100 so the real exchange rate will rise. 
C)  shortage of 100 so the real exchange rate will fall. 
D)  shortage of 100 so the real exchange rate will rise. 
A)  surplus of 100 so the real exchange rate will fall. 
B)  surplus of 100 so the real exchange rate will rise. 
C)  shortage of 100 so the real exchange rate will fall. 
D)  shortage of 100 so the real exchange rate will rise.

Question 16

Because depreciation of the real exchange rate of the dollar increases U.S. net exports, the demand curve for dollars in the foreign-currency exchange market is downward sloping.

Accepted Answer

A) True 
 B)False

Question 17

A limit on the quantity of a good produced abroad that can be purchased domestically is called a(n)

Accepted Answer

A)  tariff. 
B)  excise tax. 
C)  import quota. 
D)  None of the above is correct. 
A)  tariff. 
B)  excise tax. 
C)  import quota. 
D)  None of the above is correct.

Question 18

According to the open-economy macroeconomic model, if the U.S. government budget deficit decreases, then both U.S. domestic investment and net capital outflow increase.

Accepted Answer

A) True 
 B)False

Question 19

If the U.S. government imposes an import quota on French wine, U.S. net exports will

Accepted Answer

A)  increase, the real exchange rate of the dollar will appreciate, and domestic sales of U.S. wine will increase. 
B)  not change, the real exchange rate of the dollar will appreciate, and domestic sales of U.S. wine will increase. 
C)  not change, the dollar will depreciate, and domestic sales of U.S. wine will not change. 
D)  None of the above is correct. 
A)  increase, the real exchange rate of the dollar will appreciate, and domestic sales of U.S. wine will increase. 
B)  not change, the real exchange rate of the dollar will appreciate, and domestic sales of U.S. wine will increase. 
C)  not change, the dollar will depreciate, and domestic sales of U.S. wine will not change. 
D)  None of the above is correct.

Question 20

If a government of a country with a zero trade balance increases its budget deficit, then the real exchange rate

Accepted Answer

A)  appreciates and there is a trade surplus. 
B)  appreciates and there is a trade deficit. 
C)  depreciates and there is a trade surplus. 
D)  depreciates and there is a trade deficit. 
A)  appreciates and there is a trade surplus. 
B)  appreciates and there is a trade deficit. 
C)  depreciates and there is a trade surplus. 
D)  depreciates and there is a trade deficit.

When the U.S. real interest rate falls

If the demand for net exports rises, which of the following happens in the open-economy macroeconomic model?

In the open-economy macroeconomic model, the amount of net capital outflow represents the quantity of dollars

If the U.S. imposed an import quota on construction equipment, then the sales of U.S. construction equipment producers would

According to the open-economy macroeconomic model, if the U.S. government budget deficit increases, then both U.S. domestic investment and U.S. net capital outflow decrease.

Other things the same, when the real exchange rate of the dollar appreciates, U.S. goods become more attractive to U.S. residents, but less attractive to foreign residents.

Explain how the relation between the real exchange rate and net exports explains the downward slope of the demand for foreign-currency exchange curve.

Other things the same, a higher real interest rate raises the quantity of

Figure 14-4 -Refer to Figure 14-4. Suppose that U.S. firms desire to purchase more capital in the U.S. The effects of this could be illustrated by

In an open economy, the supply of loanable funds comes from national saving.

In 2002, the United States placed higher tariffs on imports of steel. According to the open-economy macroeconomic model this policy should have

During the financial crisis it was proposed that firms be provided with a tax credit for investment projects. Such a tax credit would

Capital flight refers to

When a country's government budget deficit increases,

Figure 14-2 -Refer to Figure 14-2. If the real exchange rate is .6, then there is a

Because depreciation of the real exchange rate of the dollar increases U.S. net exports, the demand curve for dollars in the foreign-currency exchange market is downward sloping.

A limit on the quantity of a good produced abroad that can be purchased domestically is called a(n)

According to the open-economy macroeconomic model, if the U.S. government budget deficit decreases, then both U.S. domestic investment and net capital outflow increase.

If the U.S. government imposes an import quota on French wine, U.S. net exports will

If a government of a country with a zero trade balance increases its budget deficit, then the real exchange rate

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

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Exam 14: A Macroeconomic Theory of the Open Economy

When the U.S. real interest rate falls

If the demand for net exports rises, which of the following happens in the open-economy macroeconomic model?

In the open-economy macroeconomic model, the amount of net capital outflow represents the quantity of dollars

If the U.S. imposed an import quota on construction equipment, then the sales of U.S. construction equipment producers would

According to the open-economy macroeconomic model, if the U.S. government budget deficit increases, then both U.S. domestic investment and U.S. net capital outflow decrease.

Other things the same, when the real exchange rate of the dollar appreciates, U.S. goods become more attractive to U.S. residents, but less attractive to foreign residents.

Explain how the relation between the real exchange rate and net exports explains the downward slope of the demand for foreign-currency exchange curve.

Other things the same, a higher real interest rate raises the quantity of

Figure 14-4 -Refer to Figure 14-4. Suppose that U.S. firms desire to purchase more capital in the U.S. The effects of this could be illustrated by

In an open economy, the supply of loanable funds comes from national saving.

In 2002, the United States placed higher tariffs on imports of steel. According to the open-economy macroeconomic model this policy should have

During the financial crisis it was proposed that firms be provided with a tax credit for investment projects. Such a tax credit would

Capital flight refers to

When a country's government budget deficit increases,

Figure 14-2 -Refer to Figure 14-2. If the real exchange rate is .6, then there is a

Because depreciation of the real exchange rate of the dollar increases U.S. net exports, the demand curve for dollars in the foreign-currency exchange market is downward sloping.

A limit on the quantity of a good produced abroad that can be purchased domestically is called a(n)

According to the open-economy macroeconomic model, if the U.S. government budget deficit decreases, then both U.S. domestic investment and net capital outflow increase.

If the U.S. government imposes an import quota on French wine, U.S. net exports will

If a government of a country with a zero trade balance increases its budget deficit, then the real exchange rate

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