Exam 14: A Macroeconomic Theory of the Open Economy

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. What happened to the domestic equilibrium interest rate and quantity of loanable funds supplied?

If foreigners want to buy more U.S. bonds, then in the market for foreign-currency exchange the exchange rate

A German company wants to buy dollars to purchase U.S. bonds. In the open-economy macroeconomic model of the U.S., this transaction would be accounted for in

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?

Which of the following is correct?

In the open­economy macroeconomic model, if a country's interest rate rises, then its

Capital flight shifts the NCO curve to the left.

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

What is the source of the supply of loanable funds in the open-economy macroeconomic model?

Other things the same, if the interest rate falls, then

When the government budget deficit increases, national saving decreases.

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

Which curve in the market for foreign-currency exchange shifts and which direction does it shift if the government budget deficit increases? Explain why an increase in the budget deficit shifts this curve.

What is the source of the demand for loanable funds in the open-economy macroeconomic model ?

Which of the following is most likely to increase the exports of a country?

If a government started with a budget deficit and moved to a surplus, domestic investment

What happens to each of the following if investment becomes less desirable at each interest rate? a. the interest rate b. net capital outflow c. the exchange rate

In the United States in the early 1980s, there was a government budget

In the open-economy macroeconomic model, the market for loanable funds equates national saving with

Other things the same, if the U.S. interest rate falls, then U.S. residents will want to purchase