Exam 14: A Macroeconomic Theory of the Open Economy

In 1995 House Speaker Newt Gingrich threatened to send the United States into default on its debt. During the day of this announcement, U.S. interest rates rose and the real exchange rate of the U.S. dollar depreciated. Which of these changes is consistent with the results of the open-economy macroeconomic model?

Figure 14-2 -Refer to Figure 14-2. At what real exchange rate is the quantity of dollars demanded equal to 100?

The quantity of U.S. bonds foreigners want to buy is taken into account

In the open-economy macroeconomic model, at the equilibrium real interest rate, the amount that people (including government) want to save equals desired quantities of domestic investment and net capital outflow.

Which of the following contains a list only of things that decrease when the budget deficit of the U.S. increases?

Which of the following is most likely to result if foreigners decide to withdraw the funds that they have loaned to the United States?

If interest rates rose more in the U.S. than in Canada, then other things the same

The slope of the supply of loanable funds is based on an increase in

A trade policy is a government policy

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

Other things the same, a lower real interest rate decreases the quantity of

If at a given real interest rate desired national saving were $140 billion, domestic investment were $90 billion, and net capital outflow were $40 billion, then at that real interest rate in the loanable funds market there would be a

If U.S. citizens decide to purchase more foreign assets at each interest rate, the U.S. real interest rate

Suppose the U.S. imposes an import quota on steel. U.S. exports

In the open-economy macroeconomic model, if a country's interest rate falls, then its

When a country experiences capital flight, which of the following rise?

When the real exchange rate for the dollar depreciates, U.S. goods become

If C+I+G>Y, then net exports and net capital outflow are both less than zero.

If a country raises its budget deficit, then its

In 2002 it looked like the Argentinean government might default on its debt (which eventually it did). The open-economy macroeconomic model predicts that this should have