Exam 14: A Macroeconomic Theory of the Open Economy

A country has output of $600 billion, consumption of $350 billion, government expenditures of $90 billion and investment of $60 billion. What is its supply of loanable funds?

If people decide that some country is now a more risky place to keep their saving, then at the original interest rate in that country there is a

Suppose that India has a government budget surplus, and then goes into deficit. This change would

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

Other things the same, if the U.S. interest rate rises, U.S. assets become ____ attractive. So, desired net capital outflow _____. This change in net capital outflow shifts the __________ curve in the market for foreign-currency exchange to the ______.

If a tariff on beef were implemented, which of the following would rise?

If U.S. citizens decide to save a larger fraction of their incomes, the real interest rate

If the exchange rate falls, domestic goods become relatively expensive. This change in the affordability of domestic goods makes domestic goods attractive to domestic residents. So, _______ ______.

When Mexico suffered from capital flight in 1994, the U.S. real interest rate

During the financial crisis it was proposed that firms be provided with a tax credit for investment projects. Such a tax credit would

Other things the same, a decrease in the real interest rate

If the U.S. were to impose import quotas

At the equilibrium real interest rate in the open-economy macroeconomic model

In an open economy, national saving equals

A decrease in the budget deficit causes domestic interest rates

If a country's exchange rate rises, what happens to its exports and what happens to its imports?

Other things the same, an increase in the U.S. real interest rate induces

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

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. This change in the deficit causes net capital outflow to change. How is this change in net capital outflow shown in the market for foreign-currency exchange? What happens to the exchange rate?

If at a given exchange rate foreign citizens want to buy fewer U.S bonds, then the