Question 1

An increase in the budget deficit

Accepted Answer

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

Question 2

In the open-economy macroeconomic model, if there is a surplus in the market for foreign-currency exchange, which of the following will move the market to equilibrium?

Accepted Answer

A)  the real exchange rate depreciates and net exports fall. 
B)  the real exchange rate depreciates and net exports rise. 
C)  the real exchange rate appreciates and net exports fall. 
D)  the real exchange rate appreciates and net exports rise. 
A)  the real exchange rate depreciates and net exports fall. 
B)  the real exchange rate depreciates and net exports rise. 
C)  the real exchange rate appreciates and net exports fall. 
D)  the real exchange rate appreciates and net exports rise.

Question 3

Which of the following leads to an increase in net exports in the long run?

Accepted Answer

A)  either a decrease in the budget deficit or imposing an import quota 
B)  a decrease in the budget deficit but not imposing an import quota 
C)  imposing an import quota but not a decrease in the budget deficit 
D)  neither a decrease in the budget deficit nor imposing an import quota 
A)  either a decrease in the budget deficit or imposing an import quota 
B)  a decrease in the budget deficit but not imposing an import quota 
C)  imposing an import quota but not a decrease in the budget deficit 
D)  neither a decrease in the budget deficit nor imposing an import quota

Question 4

The purchase of a capital asset adds to the demand for loanable funds only if that asset is a domestic one.

Accepted Answer

A) True 
 B)False

Question 5

In the open-economy macroeconomic model, the supply of dollars in the market for foreign-currency exchange comes from

Accepted Answer

A)  net exports 
B)  net capital outflow 
C)  net exports + net capital outflow 
D)  net exports - net capital outflow 
A)  net exports 
B)  net capital outflow 
C)  net exports + net capital outflow 
D)  net exports - net capital outflow

Question 6

When a country suffers from capital flight, the exchange rate

Accepted Answer

A)  depreciates, because demand in the market for foreign-currency exchange shifts left. 
B)  depreciates, because supply in the market for foreign-currency exchange shifts right. 
C)  appreciates, because demand in the market for foreign-currency exchange shifts right. 
D)  None of the above is correct. 
A)  depreciates, because demand in the market for foreign-currency exchange shifts left. 
B)  depreciates, because supply in the market for foreign-currency exchange shifts right. 
C)  appreciates, because demand in the market for foreign-currency exchange shifts right. 
D)  None of the above is correct.

Question 7

If the supply of 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 quantity 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 quantity of loanable funds falls.

Question 8

What do trade policies do to the standard of living?

Accepted Answer

Trade policies reduce both imports and e

Question 9

U.S. net capital outflow

Accepted Answer

A)  is a source of the supply of loanable funds, and the source of the supply of dollars in the foreign exchange market. 
B)  is a source of the supply of loanable funds, and a source of the demand for dollars in the foreign exchange market. 
C)  is a part of the demand for loanable funds, and the source of the supply of dollars in the foreign exchange market. 
D)  is a part of the demand for loanable funds, and a source of the demand for dollars in the foreign exchange market. 
A)  is a source of the supply of loanable funds, and the source of the supply of dollars in the foreign exchange market. 
B)  is a source of the supply of loanable funds, and a source of the demand for dollars in the foreign exchange market. 
C)  is a part of the demand for loanable funds, and the source of the supply of dollars in the foreign exchange market. 
D)  is a part of the demand for loanable funds, and a source of the demand for dollars in the foreign exchange market.

Question 10

At a given real exchange rate, which of the following, by itself, would increase the supply of dollars in the market for foreign-currency exchange?

Accepted Answer

A)  foreign citizens want to buy more U.S. bonds 
B)  U.S. citizens want to buy more foreign bonds 
C)  foreign citizens want to buy more U.S. goods 
D)  U.S. citizens want to buy more foreign goods 
A)  foreign citizens want to buy more U.S. bonds 
B)  U.S. citizens want to buy more foreign bonds 
C)  foreign citizens want to buy more U.S. goods 
D)  U.S. citizens want to buy more foreign goods

Question 11

When a country imposes a trade restriction, the real exchange rate of that country's currency appreciates.

Accepted Answer

A) True 
 B)False

Question 12

If a government started with a budget deficit and moved to a surplus, domestic investment

Accepted Answer

A)  and the real exchange rate would rise. 
B)  and the real exchange rate would fall. 
C)  would rise and the real exchange rate would fall. 
D)  would fall and the real exchange rate would rise. 
A)  and the real exchange rate would rise. 
B)  and the real exchange rate would fall. 
C)  would rise and the real exchange rate would fall. 
D)  would fall and the real exchange rate would rise.

Question 13

If a country raises its budget deficit, the net capital outflow

Accepted Answer

A)  rises, so the supply of its currency shifts right in the market for foreign currency exchange. 
B)  rises, so the demand for its currency shifts right in the market for foreign currency exchange. 
C)  falls, so the supply of its currency shifts left in the market for foreign currency exchange. 
D)  falls, so the demand for its currency shifts right in the market for foreign currency exchange. 
A)  rises, so the supply of its currency shifts right in the market for foreign currency exchange. 
B)  rises, so the demand for its currency shifts right in the market for foreign currency exchange. 
C)  falls, so the supply of its currency shifts left in the market for foreign currency exchange. 
D)  falls, so the demand for its currency shifts right in the market for foreign currency exchange.

Question 14

Other things the same, an increase in the U.S. interest rate causes the quantity of loanable funds supplied to

Accepted Answer

A)  rise because net capital outflow and domestic investment rise. 
B)  rise because national saving rises. 
C)  fall because net capital outflow and domestic investment rise. 
D)  fall because national saving falls. 
A)  rise because net capital outflow and domestic investment rise. 
B)  rise because national saving rises. 
C)  fall because net capital outflow and domestic investment rise. 
D)  fall because national saving falls.

Question 15

A country has national saving of $80 billion, government expenditures of $40 billion, domestic investment of $60 billion, and net capital outflow of $20 billion. What is its demand for loanable funds?

Accepted Answer

A)  $40 billion 
B)  $60 billion 
C)  $80 billion 
D)  $120 billion 
A)  $40 billion 
B)  $60 billion 
C)  $80 billion 
D)  $120 billion

Question 16

When a country experiences capital flight, its net capital outflow,

Accepted Answer

A)  which is part of the demand for loanable funds, increases. 
B)  which is part of the supply of loanable funds, increases. 
C)  which is part of the demand for loanable funds, decreases. 
D)  which is part of the supply of loanable funds, decreases. 
A)  which is part of the demand for loanable funds, increases. 
B)  which is part of the supply of loanable funds, increases. 
C)  which is part of the demand for loanable funds, decreases. 
D)  which is part of the supply of loanable funds, decreases.

Question 17

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

Accepted Answer

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

Question 18

Which of the following is the correct way to show the effects of a newly imposed import quota?

Accepted Answer

A)  Shift the demand for loanable funds right, the supply of dollars in the market for foreign-currency exchange right, and the demand for dollars left. 
B)  Shift the demand for loanable funds right, and the supply of dollars in the market for foreign-currency exchange left. 
C)  Shift the demand for dollars in the market for foreign-currency exchange left. 
D)  None of the above is correct. 
A)  Shift the demand for loanable funds right, the supply of dollars in the market for foreign-currency exchange right, and the demand for dollars left. 
B)  Shift the demand for loanable funds right, and the supply of dollars in the market for foreign-currency exchange left. 
C)  Shift the demand for dollars in the market for foreign-currency exchange left. 
D)  None of the above is correct.

Question 19

If the United States imposes an import quota on clothing, then U.S. exports

Accepted Answer

A)  increase, U.S. imports increase, and U.S. net exports will not change. 
B)  increase, U.S. imports decrease, and U.S. net exports increase. 
C)  decrease, U.S. imports increase, and U.S. net exports decrease. 
D)  decrease, U.S. imports decrease, and U.S. net exports will not change. 
A)  increase, U.S. imports increase, and U.S. net exports will not change. 
B)  increase, U.S. imports decrease, and U.S. net exports increase. 
C)  decrease, U.S. imports increase, and U.S. net exports decrease. 
D)  decrease, U.S. imports decrease, and U.S. net exports will not change.

Question 20

Which of the following would both raise the U.S. exchange rate?

Accepted Answer

A)  capital flight from other countries to the U.S. occurs and the U.S. moves from budget surplus to budget deficit 
B)  capital flight from other countries to the U.S. occurs and the U.S. moves from budget deficit to budget surplus 
C)  capital flight from the U.S. to other countries occurs, the U.S. moves from budget surplus to budget deficit 
D)  capital flight from U.S. to other countries occurs, the U.S. moves from budget deficit to budget surplus 
A)  capital flight from other countries to the U.S. occurs and the U.S. moves from budget surplus to budget deficit 
B)  capital flight from other countries to the U.S. occurs and the U.S. moves from budget deficit to budget surplus 
C)  capital flight from the U.S. to other countries occurs, the U.S. moves from budget surplus to budget deficit 
D)  capital flight from U.S. to other countries occurs, the U.S. moves from budget deficit to budget surplus

An increase in the budget deficit

In the open-economy macroeconomic model, if there is a surplus in the market for foreign-currency exchange, which of the following will move the market to equilibrium?

Which of the following leads to an increase in net exports in the long run?

The purchase of a capital asset adds to the demand for loanable funds only if that asset is a domestic one.

In the open-economy macroeconomic model, the supply of dollars in the market for foreign-currency exchange comes from

When a country suffers from capital flight, the exchange rate

If the supply of loanable funds shifts right, then

What do trade policies do to the standard of living?

U.S. net capital outflow

At a given real exchange rate, which of the following, by itself, would increase the supply of dollars in the market for foreign-currency exchange?

When a country imposes a trade restriction, the real exchange rate of that country's currency appreciates.

If a government started with a budget deficit and moved to a surplus, domestic investment

If a country raises its budget deficit, the net capital outflow

Other things the same, an increase in the U.S. interest rate causes the quantity of loanable funds supplied to

A country has national saving of $80 billion, government expenditures of $40 billion, domestic investment of $60 billion, and net capital outflow of $20 billion. What is its demand for loanable funds?

When a country experiences capital flight, its net capital outflow,

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

Which of the following is the correct way to show the effects of a newly imposed import quota?

If the United States imposes an import quota on clothing, then U.S. exports

Which of the following would both raise the U.S. 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

Exam 14: A Macroeconomic Theory of the Open Economy

An increase in the budget deficit

In the open-economy macroeconomic model, if there is a surplus in the market for foreign-currency exchange, which of the following will move the market to equilibrium?

Which of the following leads to an increase in net exports in the long run?

The purchase of a capital asset adds to the demand for loanable funds only if that asset is a domestic one.

In the open-economy macroeconomic model, the supply of dollars in the market for foreign-currency exchange comes from

When a country suffers from capital flight, the exchange rate

If the supply of loanable funds shifts right, then

What do trade policies do to the standard of living?

U.S. net capital outflow

At a given real exchange rate, which of the following, by itself, would increase the supply of dollars in the market for foreign-currency exchange?

When a country imposes a trade restriction, the real exchange rate of that country's currency appreciates.

If a government started with a budget deficit and moved to a surplus, domestic investment

If a country raises its budget deficit, the net capital outflow

Other things the same, an increase in the U.S. interest rate causes the quantity of loanable funds supplied to

A country has national saving of $80 billion, government expenditures of $40 billion, domestic investment of $60 billion, and net capital outflow of $20 billion. What is its demand for loanable funds?

When a country experiences capital flight, its net capital outflow,

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

Which of the following is the correct way to show the effects of a newly imposed import quota?

If the United States imposes an import quota on clothing, then U.S. exports

Which of the following would both raise the U.S. 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

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