Exam 14: A Macroeconomic Theory of the Open Economy

Shoe Quota Concerns raised about the declining U.S. shoe industry and unfair labor practices in foreign shoe factories lead the Congress and President to impose a quota on shoe imports. -Refer to Shoe Quota. What is a quota? What is a tariff?

When a country suffers from capital flight, the exchange rate

If the U.S. imposes a quota on cotton, then

Which of the following is included in the supply of U.S. dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

At the original exchange rate an import quota

When fear of default on bonds issued by U.S. corporations decline, then

Which of the following would cause the real exchange rate of the U.S. dollar to depreciate?

A country has private saving of $100 billion, public saving of -$30 billion, domestic investment of $50 billion, and net capital outflow of $20 billion. What is its supply of loanable funds?

In the open-economy macroeconomic model, if the supply of loanable funds increases, then the interest rate

Budget Reform Due to concerns about a rising level of debt relative to GDP, Congress and the President cut expenditures and raise taxes. -Refer to Budget Reform. In the market for loanable funds which curves does this policy change shift? Which direction does it shift?

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.

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

Depositors Move Funds out of Greek Banks. In 2011 Greek citizens were concerned about the size of government debt. Fearful that the government might be unable to fulfill its promise to insure depositors in Greek banks against losses created by bank failures, depositors moved funds out of Greek banks. -Refer to Depositors Move Funds Out of Greek Banks. Which curve in the domestic loanable funds market shifted and which direction did it shift?

If net exports are positive, then

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

Other things the same, a decrease in the interest rate

Suppose that the U.S. imposes an import quota on lumber. The quota makes the real exchange rate of the U.S. dollar

Imposing an import quota causes the domestic real exchange rate to

Other things the same, which of the following would a rise in the real interest rate raise: desired investment spending, desired national saving, desired net capital outflow?

If policymakers impose import restrictions on clothing, the U.S. trade deficit will shrink.