Question 1

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

Accepted Answer

A)  national saving 
B)  domestic investment 
C)  net exports 
D)  net capital outflow 
A)  national saving 
B)  domestic investment 
C)  net exports 
D)  net capital outflow

Question 2

When a country suffers from capital flight, the demand for loanable funds in that country shifts

Accepted Answer

A)  right, which increases interest rates in that country. 
B)  right, which decreases interest rates in that country. 
C)  left, which increases interest rates in that country. 
D)  left, which decreases interest rates in that country. 
A)  right, which increases interest rates in that country. 
B)  right, which decreases interest rates in that country. 
C)  left, which increases interest rates in that country. 
D)  left, which decreases interest rates in that country.

Question 3

What do trade policies do to the standard of living?

Accepted Answer

Trade policies reduce both imports and e

Question 4

In 2009 Greece's budget deficit rose and people became worried about the ability of the Greek government to make payments on its debt. Which of the these events reduces a country's real exchange rate?

Accepted Answer

A)  an increase in the budget deficit, and increased concerns about the ability of the government to pay back its debt 
B)  an increase in the budget deficit, but not increased concerns about the ability of the government to pay back its debt 
C)  increased concerns about the ability of the government to pay back its debt, but not an increase in the budget deficit 
D)  neither an increase in the budget deficit, nor increased concerns about the ability of the government to pay back its debt 
A)  an increase in the budget deficit, and increased concerns about the ability of the government to pay back its debt 
B)  an increase in the budget deficit, but not increased concerns about the ability of the government to pay back its debt 
C)  increased concerns about the ability of the government to pay back its debt, but not an increase in the budget deficit 
D)  neither an increase in the budget deficit, nor increased concerns about the ability of the government to pay back its debt

Question 5

Figure 32-5
Refer to this diagram of the open-economy macroeconomic model to answer the questions below.  
-Refer to Figure 32-5. In the market for foreign-currency exchange, the effects of an increase in the budget surplus can be illustrated as a move from j to

Accepted Answer

A)  g. 
B)  h. 
C)  i. 
D)  k. 
A)  g. 
B)  h. 
C)  i. 
D)  k.

Question 6

Budget in Recession
During a recession government revenues from the income tax fall and government transfers rise as the reduction in income and the rise in unemployment raise the number of people who qualify for benefits.
-Refer to Budget in Recession. What does this change in the budget deficit do to the equilibrium values of the interest rate and the quantity of loanable funds?

Accepted Answer

Since the supply of loanable f

Question 7

Political events convince people that the assets of country x are now riskier. As a result of this change which curves in the open-economy macroeconomic model shift and which direction do they shift for country x?

Accepted Answer

The demand curve for loanable

Question 8

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 domestic real exchange rate app

Question 9

In an open economy, the source of the demand for loanable funds is

Accepted Answer

A)  national saving 
B)  national saving + net capital outflow 
C)  investment + the government budget deficit 
D)  investment + net capital outflow 
A)  national saving 
B)  national saving + net capital outflow 
C)  investment + the government budget deficit 
D)  investment + net capital outflow

Question 10

What happens to net capital outflow as the real interest rate falls? Explain your answer.

Accepted Answer

As the real interest rate falls, domesti

Question 11

If the supply of loanable funds shifts left, 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 12

If the risk of buying U.S. assets rises because it is discovered that lending institutions had not carefully evaluated borrowers prior to lending them funds, then

Accepted Answer

A)  net capital outflow and the real exchange rate will rise. 
B)  net capital outflow will rise and the real exchange rate will fall. 
C)  net capital outflow will fall and the real exchange rate will rise. 
D)  net capital outflow and the exchange rate will fall. 
A)  net capital outflow and the real exchange rate will rise. 
B)  net capital outflow will rise and the real exchange rate will fall. 
C)  net capital outflow will fall and the real exchange rate will rise. 
D)  net capital outflow and the exchange rate will fall.

Question 13

If a country makes political reforms so that people now believe this country's assets are less risky, what happens to its interest rate, its exchange rate, and its net exports?

Accepted Answer

Its interest rate fa

Question 14

The variable that links the market for loanable funds and the market for foreign-currency exchange is

Accepted Answer

A)  net capital outflow. 
B)  national saving. 
C)  exports. 
D)  domestic investment. 
A)  net capital outflow. 
B)  national saving. 
C)  exports. 
D)  domestic investment.

Question 15

If a government has a budget surplus, then public saving

Accepted Answer

A)  is positive and increases national saving. 
B)  is positive but decreases national saving. 
C)  is negative and decreases national saving. 
D)  is negative but increases national saving. 
A)  is positive and increases national saving. 
B)  is positive but decreases national saving. 
C)  is negative and decreases national saving. 
D)  is negative but increases national saving.

Question 16

Other things the same, if the U.S. interest rate rises, what happens to the net capital outflow of other countries?

Accepted Answer

As the U.S. real interest rate rises, U.

Question 17

A country has output of $900 billion, consumption of $600 billion, government expenditures of $150 billion and investment of $120 billion. What is its supply of loanable funds?

Accepted Answer

A)  $30 billion 
B)  $90 billion 
C)  $120 billion 
D)  $150 billion 
A)  $30 billion 
B)  $90 billion 
C)  $120 billion 
D)  $150 billion

Question 18

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 19

If the demand for dollars in the market for foreign-currency exchange shifts left, then the exchange rate

Accepted Answer

A)  rises and the quantity of dollars exchanged rises. 
B)  rises and the quantity of dollars exchanged does not change. 
C)  falls and the quantity of dollars exchanged falls. 
D)  falls and the quantity of dollars exchanged does not change. 
A)  rises and the quantity of dollars exchanged rises. 
B)  rises and the quantity of dollars exchanged does not change. 
C)  falls and the quantity of dollars exchanged falls. 
D)  falls and the quantity of dollars exchanged does not change.

Question 20

Other things the same, if foreigners desire to purchase more U.S. bonds, then the demand for loanable funds shifts left.

Accepted Answer

A) True 
 B)False

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 demand for loanable funds in that country shifts

What do trade policies do to the standard of living?

In 2009 Greece's budget deficit rose and people became worried about the ability of the Greek government to make payments on its debt. Which of the these events reduces a country's real exchange rate?

Figure 32-5 Refer to this diagram of the open-economy macroeconomic model to answer the questions below. -Refer to Figure 32-5. In the market for foreign-currency exchange, the effects of an increase in the budget surplus can be illustrated as a move from j to

Political events convince people that the assets of country x are now riskier. As a result of this change which curves in the open-economy macroeconomic model shift and which direction do they shift for country x?

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

In an open economy, the source of the demand for loanable funds is

What happens to net capital outflow as the real interest rate falls? Explain your answer.

If the supply of loanable funds shifts left, then

If the risk of buying U.S. assets rises because it is discovered that lending institutions had not carefully evaluated borrowers prior to lending them funds, then

If a country makes political reforms so that people now believe this country's assets are less risky, what happens to its interest rate, its exchange rate, and its net exports?

The variable that links the market for loanable funds and the market for foreign-currency exchange is

If a government has a budget surplus, then public saving

Other things the same, if the U.S. interest rate rises, what happens to the net capital outflow of other countries?

A country has output of $900 billion, consumption of $600 billion, government expenditures of $150 billion and investment of $120 billion. What is its supply of loanable funds?

When the U.S. real interest rate falls

If the demand for dollars in the market for foreign-currency exchange shifts left, then the exchange rate

Other things the same, if foreigners desire to purchase more U.S. bonds, then the demand for loanable funds shifts left.

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 and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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Exam 14: A Macroeconomic Theory of the Open Economy

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 demand for loanable funds in that country shifts

What do trade policies do to the standard of living?

In 2009 Greece's budget deficit rose and people became worried about the ability of the Greek government to make payments on its debt. Which of the these events reduces a country's real exchange rate?

Figure 32-5 Refer to this diagram of the open-economy macroeconomic model to answer the questions below. -Refer to Figure 32-5. In the market for foreign-currency exchange, the effects of an increase in the budget surplus can be illustrated as a move from j to

Political events convince people that the assets of country x are now riskier. As a result of this change which curves in the open-economy macroeconomic model shift and which direction do they shift for country x?

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

In an open economy, the source of the demand for loanable funds is

What happens to net capital outflow as the real interest rate falls? Explain your answer.

If the supply of loanable funds shifts left, then

If the risk of buying U.S. assets rises because it is discovered that lending institutions had not carefully evaluated borrowers prior to lending them funds, then

If a country makes political reforms so that people now believe this country's assets are less risky, what happens to its interest rate, its exchange rate, and its net exports?

The variable that links the market for loanable funds and the market for foreign-currency exchange is

If a government has a budget surplus, then public saving

Other things the same, if the U.S. interest rate rises, what happens to the net capital outflow of other countries?

A country has output of $900 billion, consumption of $600 billion, government expenditures of $150 billion and investment of $120 billion. What is its supply of loanable funds?

When the U.S. real interest rate falls

If the demand for dollars in the market for foreign-currency exchange shifts left, then the exchange rate

Other things the same, if foreigners desire to purchase more U.S. bonds, then the demand for loanable funds shifts left.

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 and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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