Question 1

What happens to each of the following if the supply of loanable funds shifts left?
a. the interest rate
b. net capital outflow
c. the exchange rate

Accepted Answer

The interest rate ri

Question 2

An increase in the budget deficit causes net capital outflow to

Accepted Answer

A)  rise, because the supply of loanable funds shifts right. 
B)  rise, because the demand for loanable funds shifts right. 
C)  fall, because the supply of loanable funds shifts left. 
D)  fall, because the demand for loanable funds shifts right. 
A)  rise, because the supply of loanable funds shifts right. 
B)  rise, because the demand for loanable funds shifts right. 
C)  fall, because the supply of loanable funds shifts left. 
D)  fall, because the demand for loanable funds shifts right.

Question 3

In the open-economy macroeconomic model, if there is currently a surplus in the foreign exchange market, the quantity of desired net exports will increase as the market moves to equilibrium.

Accepted Answer

A) True 
 B)False

Question 4

Figure 32-2  
-Refer to Figure 32-2. What are the equilibrium values of the real exchange rate and net exports?

Accepted Answer

A)  1, 300 
B)  .8, 400 
C)  .6, 500 
D)  None of the above are correct. 
A)  1, 300 
B)  .8, 400 
C)  .6, 500 
D)  None of the above are correct.

Question 5

If the demand for dollars in the market for foreign-currency exchange shifts right, 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 6

Which of the following will not change the U.S. real interest rate?

Accepted Answer

A)  capital flight from the United States 
B)  the government budget deficit increases 
C)  the U.S. imposes import quotas 
D)  None of the above is correct. 
A)  capital flight from the United States 
B)  the government budget deficit increases 
C)  the U.S. imposes import quotas 
D)  None of the above is correct.

Question 7

Which of the following is the most likely response to a decrease in the U.S. real interest rate?

Accepted Answer

A)  a U.S. company decides to expand its factory 
B)  a U.S. citizen decides to purchase fewer foreign bonds 
C)  a German mutual fund decides to increase its deposits at a U.S. bank 
D)  All of the above are consistent. 
A)  a U.S. company decides to expand its factory 
B)  a U.S. citizen decides to purchase fewer foreign bonds 
C)  a German mutual fund decides to increase its deposits at a U.S. bank 
D)  All of the above are consistent.

Question 8

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 9

Which of the following would shift the demand for dollars in the market for foreign currency exchange to the right?

Accepted Answer

A)  foreign citizens want to buy more U.S. goods and services at a given exchange rate 
B)  foreign citizens want to buy fewer U.S. goods and services at a given exchange rate 
C)  foreign citizens want to buy more U.S. bonds 
D)  foreign citizens want to by fewer U.S. bonds 
A)  foreign citizens want to buy more U.S. goods and services at a given exchange rate 
B)  foreign citizens want to buy fewer U.S. goods and services at a given exchange rate 
C)  foreign citizens want to buy more U.S. bonds 
D)  foreign citizens want to by fewer U.S. bonds

Question 10

Which of the following would not be a consequence of an increase in the U.S. government budget deficit?

Accepted Answer

A)  the U.S. trade balance rises 
B)  the U.S. interest rate rises 
C)  domestic investment in the U.S. falls 
D)  the real exchange rate of the U.S. dollar appreciates 
A)  the U.S. trade balance rises 
B)  the U.S. interest rate rises 
C)  domestic investment in the U.S. falls 
D)  the real exchange rate of the U.S. dollar appreciates

Question 11

If there is a surplus of loanable funds, the quantity demanded is

Accepted Answer

A)  greater than the quantity supplied and the interest rate will rise. 
B)  greater than the quantity supplied and the interest rate will fall. 
C)  less than the quantity supplied and the interest rate will rise. 
D)  less than the quantity supplied and the interest rate will fall. 
A)  greater than the quantity supplied and the interest rate will rise. 
B)  greater than the quantity supplied and the interest rate will fall. 
C)  less than the quantity supplied and the interest rate will rise. 
D)  less than the quantity supplied and the interest rate will fall.

Question 12

An increase in the budget deficit

Accepted Answer

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

Question 13

Which of the following will decrease U.S. net capital outflow?

Accepted Answer

A)  capital flight from the United States 
B)  the government budget deficit increases 
C)  the U.S. imposes import quotas 
D)  None of the above is correct. 
A)  capital flight from the United States 
B)  the government budget deficit increases 
C)  the U.S. imposes import quotas 
D)  None of the above is correct.

Question 14

A country has national saving of $80 billion, government expenditures of $40 billion, domestic investment of $50 billion, and net capital outflow of $30 billion. What is its supply of loanable funds?

Accepted Answer

A)  $30 billion 
B)  $40 billion 
C)  $50 billion 
D)  $80 billion 
A)  $30 billion 
B)  $40 billion 
C)  $50 billion 
D)  $80 billion

Question 15

When Mexico suffered from capital flight in 1994, Mexico's net exports

Accepted Answer

A)  decreased. 
B)  did not change. 
C)  increased. 
D)  decreased until the peso appreciated, then increased. 
A)  decreased. 
B)  did not change. 
C)  increased. 
D)  decreased until the peso appreciated, then increased.

Question 16

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

Accepted Answer

A)  less expensive relative to foreign goods, which makes exports rise and imports fall. 
B)  less expensive relative to foreign goods, which makes exports fall and imports rise. 
C)  more expensive relative to foreign goods, which makes exports rise and imports fall. 
D)  more expensive relative to foreign goods, which makes exports fall and imports rise. 
A)  less expensive relative to foreign goods, which makes exports rise and imports fall. 
B)  less expensive relative to foreign goods, which makes exports fall and imports rise. 
C)  more expensive relative to foreign goods, which makes exports rise and imports fall. 
D)  more expensive relative to foreign goods, which makes exports fall and imports rise.

Question 17

In the open-economy macroeconomic model, a higher U.S. real exchange rate makes

Accepted Answer

A)  U.S. goods more expensive relative to foreign goods and reduces the quantity of dollars supplied. 
B)  U.S. goods more expensive relative to foreign goods and reduces the quantity of dollars demanded. 
C)  foreign goods more expensive relative to U.S. goods and reduces the quantity of dollars supplied. 
D)  foreign goods more expensive relative to U.S. goods and reduces the quantity of dollars demanded. 
A)  U.S. goods more expensive relative to foreign goods and reduces the quantity of dollars supplied. 
B)  U.S. goods more expensive relative to foreign goods and reduces the quantity of dollars demanded. 
C)  foreign goods more expensive relative to U.S. goods and reduces the quantity of dollars supplied. 
D)  foreign goods more expensive relative to U.S. goods and reduces the quantity of dollars demanded.

Question 18

A firm produces construction equipment, some of which it exports. Which of the following effects of an increase in the government budget deficit would likely reduce the quantity of equipment it sells?

Accepted Answer

A)  the change in the interest rate and the change in the exchange rate 
B)  the change in the interest rate but not the change in the exchange rate 
C)  the change in the exchange rate but not the change in the interest rate 
D)  neither the change in the interest rate nor the change in the exchange rate 
A)  the change in the interest rate and the change in the exchange rate 
B)  the change in the interest rate but not the change in the exchange rate 
C)  the change in the exchange rate but not the change in the interest rate 
D)  neither the change in the interest rate nor the change in the exchange rate

Question 19

Which of the following can explain a decrease in the U.S. real exchange rate?

Accepted Answer

A)  the U.S. government budget deficit falls 
B)  the U.S. impose import quotas 
C)  the default risk of U.S. assets falls 
D)  All of the above are correct. 
A)  the U.S. government budget deficit falls 
B)  the U.S. impose import quotas 
C)  the default risk of U.S. assets falls 
D)  All of the above are correct.

Question 20

Which of the following is consistent with moving from a surplus to equilibrium in the market for foreign-currency exchange?

Accepted Answer

A)  the exchange rate appreciates making domestic goods relatively more expensive. 
B)  the exchange rate appreciates making domestic goods relatively less expensive. 
C)  the exchange rate depreciates making domestic goods relatively more expensive. 
D)  the exchange rate depreciates making domestic goods relatively less expensive. 
A)  the exchange rate appreciates making domestic goods relatively more expensive. 
B)  the exchange rate appreciates making domestic goods relatively less expensive. 
C)  the exchange rate depreciates making domestic goods relatively more expensive. 
D)  the exchange rate depreciates making domestic goods relatively less expensive.

What happens to each of the following if the supply of loanable funds shifts left? a. the interest rate b. net capital outflow c. the exchange rate

An increase in the budget deficit causes net capital outflow to

In the open-economy macroeconomic model, if there is currently a surplus in the foreign exchange market, the quantity of desired net exports will increase as the market moves to equilibrium.

Figure 32-2 -Refer to Figure 32-2. What are the equilibrium values of the real exchange rate and net exports?

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

Which of the following will not change the U.S. real interest rate?

Which of the following is the most likely response to a decrease in the U.S. real interest rate?

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

Which of the following would shift the demand for dollars in the market for foreign currency exchange to the right?

Which of the following would not be a consequence of an increase in the U.S. government budget deficit?

If there is a surplus of loanable funds, the quantity demanded is

An increase in the budget deficit

Which of the following will decrease U.S. net capital outflow?

A country has national saving of $80 billion, government expenditures of $40 billion, domestic investment of $50 billion, and net capital outflow of $30 billion. What is its supply of loanable funds?

When Mexico suffered from capital flight in 1994, Mexico's net exports

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

In the open-economy macroeconomic model, a higher U.S. real exchange rate makes

A firm produces construction equipment, some of which it exports. Which of the following effects of an increase in the government budget deficit would likely reduce the quantity of equipment it sells?

Which of the following can explain a decrease in the U.S. real exchange rate?

Which of the following is consistent with moving from a surplus to equilibrium in the market for foreign-currency exchange?

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

Filters

Exam 14: A Macroeconomic Theory of the Open Economy

What happens to each of the following if the supply of loanable funds shifts left? a. the interest rate b. net capital outflow c. the exchange rate

An increase in the budget deficit causes net capital outflow to

In the open-economy macroeconomic model, if there is currently a surplus in the foreign exchange market, the quantity of desired net exports will increase as the market moves to equilibrium.

Figure 32-2 -Refer to Figure 32-2. What are the equilibrium values of the real exchange rate and net exports?

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

Which of the following will not change the U.S. real interest rate?

Which of the following is the most likely response to a decrease in the U.S. real interest rate?

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

Which of the following would shift the demand for dollars in the market for foreign currency exchange to the right?

Which of the following would not be a consequence of an increase in the U.S. government budget deficit?

If there is a surplus of loanable funds, the quantity demanded is

An increase in the budget deficit

Which of the following will decrease U.S. net capital outflow?

A country has national saving of $80 billion, government expenditures of $40 billion, domestic investment of $50 billion, and net capital outflow of $30 billion. What is its supply of loanable funds?

When Mexico suffered from capital flight in 1994, Mexico's net exports

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

In the open-economy macroeconomic model, a higher U.S. real exchange rate makes

A firm produces construction equipment, some of which it exports. Which of the following effects of an increase in the government budget deficit would likely reduce the quantity of equipment it sells?

Which of the following can explain a decrease in the U.S. real exchange rate?

Which of the following is consistent with moving from a surplus to equilibrium in the market for foreign-currency exchange?

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

Filters