Question 1

An increase in real interest rates in the United States

Accepted Answer

A)  discourages both U.S. and foreign residents from buying U.S. assets. 
B)  encourages both U.S. and foreign residents to buy U.S. assets. 
C)  encourages U.S. residents to buy U.S. assets, but discourages foreign residents from buying U.S. assets. 
D)  encourages foreign residents to buy U.S. assets, but discourages U.S. residents from buying U.S. assets. 
A)  discourages both U.S. and foreign residents from buying U.S. assets. 
B)  encourages both U.S. and foreign residents to buy U.S. assets. 
C)  encourages U.S. residents to buy U.S. assets, but discourages foreign residents from buying U.S. assets. 
D)  encourages foreign residents to buy U.S. assets, but discourages U.S. residents from buying U.S. assets.

Question 2

If U.S. citizens decide to purchase more foreign assets at each interest rate, the U.S. real interest rate

Accepted Answer

A)  increases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases. 
B)  increases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases. 
C)  decreases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow decreases. 
D)  decreases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow increases. 
A)  increases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases. 
B)  increases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases. 
C)  decreases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow decreases. 
D)  decreases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow increases.

Question 3

In equilibrium which of the following happens if the U.S. imposes tariffs on power tools?

Accepted Answer

A)  U.S. net exports rise 
B)  the exchange rate falls 
C)  U.S. production of power tools rises 
D)  All of the above are correct. 
A)  U.S. net exports rise 
B)  the exchange rate falls 
C)  U.S. production of power tools rises 
D)  All of the above are correct.

Question 4

In which cases does/do a country's supply of loanable funds shift left?

Accepted Answer

A)  both an increase in the budget deficit and capital flight 
B)  an increase in the budget deficit, but not capital flight 
C)  capital flight, but not an increase in the budget deficit 
D)  neither an increase in the budget deficit nor capital flight 
A)  both an increase in the budget deficit and capital flight 
B)  an increase in the budget deficit, but not capital flight 
C)  capital flight, but not an increase in the budget deficit 
D)  neither an increase in the budget deficit nor capital flight

Question 5

In the open-economy macroeconomic model, the supply of loanable funds comes from

Accepted Answer

A)  the sum of domestic investment and net capital outflow. 
B)  the sum of national saving and net capital outflow. 
C)  national saving. 
D)  net exports 
A)  the sum of domestic investment and net capital outflow. 
B)  the sum of national saving and net capital outflow. 
C)  national saving. 
D)  net exports

Question 6

From 1980 to 1987, U.S. net capital outflows decreased. According to the open-economy macroeconomic model, which of the following could have caused this?

Accepted Answer

A)  an increase in the demand for U.S. currency in the market for foreign-currency exchange 
B)  a decrease in the demand for U.S. currency in the market for foreign-currency exchange 
C)  an increase in the supply of loanable funds 
D)  a decrease in the supply of loanable funds 
A)  an increase in the demand for U.S. currency in the market for foreign-currency exchange 
B)  a decrease in the demand for U.S. currency in the market for foreign-currency exchange 
C)  an increase in the supply of loanable funds 
D)  a decrease in the supply of loanable funds

Question 7

Which of the following is most likely to increase U.S. exports?

Accepted Answer

A)  The government gives subsidies to U.S. firms that export goods or services. 
B)  The government reduces the size of the budget surplus. 
C)  The United States unilaterally reduces its restrictions on foreign imports. 
D)  Taxes on domestic saving rise. 
A)  The government gives subsidies to U.S. firms that export goods or services. 
B)  The government reduces the size of the budget surplus. 
C)  The United States unilaterally reduces its restrictions on foreign imports. 
D)  Taxes on domestic saving rise.

Question 8

Suppose the U.S. removes an import quota on steel. U.S. exports

Accepted Answer

A)  increase, the real exchange rate of the U.S. dollar appreciates, and U.S. net capital outflow increases. 
B)  increase, the real exchange rate of the U.S. dollar depreciates, and U.S. net capital outflow is unchanged. 
C)  decrease, the real exchange rate of the U.S. dollar appreciates, and U.S. net capital outflow is unchanged. 
D)  decrease, the real exchange rate of the U.S. dollar depreciates, and U.S. net capital outflow decreases. 
A)  increase, the real exchange rate of the U.S. dollar appreciates, and U.S. net capital outflow increases. 
B)  increase, the real exchange rate of the U.S. dollar depreciates, and U.S. net capital outflow is unchanged. 
C)  decrease, the real exchange rate of the U.S. dollar appreciates, and U.S. net capital outflow is unchanged. 
D)  decrease, the real exchange rate of the U.S. dollar depreciates, and U.S. net capital outflow decreases.

Question 9

In the open-economy macroeconomic model, net capital outflow links the markets for loanable funds and foreign- currency exchange.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is most likely to increase exports?

Accepted Answer

A)  a reduction in domestic political instability 
B)  ending investment tax credits 
C)  a reduction in the size of the government's budget surplus 
D)  None of the above will increase exports. 
A)  a reduction in domestic political instability 
B)  ending investment tax credits 
C)  a reduction in the size of the government's budget surplus 
D)  None of the above will increase exports.

Question 11

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 domestic investment? Why?

Accepted Answer

Domestic investment

Question 12

Other things the same, in the open-economy macroeconomic model, which of the following would make China's net capital outflow increase?

Accepted Answer

A)  an increase in U.S. interest rates 
B)  an increase in Chinese interest rates 
C)  an appreciation of the Chinese yuan 
D)  None of the above is correct. 
A)  an increase in U.S. interest rates 
B)  an increase in Chinese interest rates 
C)  an appreciation of the Chinese yuan 
D)  None of the above is correct.

Question 13

As the interest rate rises, it is possible that net capital outflow could move from a positive to a negative value.

Accepted Answer

A) True 
 B)False

Question 14

If the government of a country with a zero trade balance started with a budget deficit and moved to a budget surplus, domestic investment would

Accepted Answer

A)  rise and there would be a trade surplus. 
B)  rise and there would be a trade deficit. 
C)  fall and there would be a trade surplus. 
D)  fall and there would be a trade deficit. 
A)  rise and there would be a trade surplus. 
B)  rise and there would be a trade deficit. 
C)  fall and there would be a trade surplus. 
D)  fall and there would be a trade deficit.

Question 15

If the supply of loanable funds shifts right, 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 16

If the risk of holding assets in foreign countries rises relative to the risk of holding U.S assets, then

Accepted Answer

A)  U.S. net capital outflow rises which increases the U.S. exchange rate. 
B)  U.S. net capital outflow rises which decreases the U.S. exchange rate. 
C)  U.S. net capital outflow falls which increases the U.S. exchange rate. 
D)  U.S. net capital outflow falls which decreases the U.S. exchange rate. 
A)  U.S. net capital outflow rises which increases the U.S. exchange rate. 
B)  U.S. net capital outflow rises which decreases the U.S. exchange rate. 
C)  U.S. net capital outflow falls which increases the U.S. exchange rate. 
D)  U.S. net capital outflow falls which decreases the U.S. exchange rate.

Question 17

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)  the real exchange rate and the interest rate will rise. 
B)  the real exchange rate will rise and the interest rate will fall. 
C)  the real exchange rate will fall and the interest rate will rise. 
D)  the real exchange rate and the interest rate will fall. 
A)  the real exchange rate and the interest rate will rise. 
B)  the real exchange rate will rise and the interest rate will fall. 
C)  the real exchange rate will fall and the interest rate will rise. 
D)  the real exchange rate and the interest rate will fall.

Question 18

If there is a surplus in the market for loanable funds, the resulting change in the real interest rate

Accepted Answer

A)  reduces both the quantity of loanable funds supplied and the quantity of loanable funds demanded. 
B)  reduces the quantity of loanable funds supplied and raises the quantity of loanable funds demanded 
C)  raises both the quantity of loanable funds supplied and the quantity of loanable funds demanded. 
D)  raises the quantity of loanable funds supplied and reduces the quantity of loanable funds demanded. 
A)  reduces both the quantity of loanable funds supplied and the quantity of loanable funds demanded. 
B)  reduces the quantity of loanable funds supplied and raises the quantity of loanable funds demanded 
C)  raises both the quantity of loanable funds supplied and the quantity of loanable funds demanded. 
D)  raises the quantity of loanable funds supplied and reduces the quantity of loanable funds demanded.

Question 19

In the open-economy macroeconomic model, if the supply of loanable funds shifts left

Accepted Answer

A)  the interest rate rises and the supply of dollars in the market for foreign currency exchange shifts right. 
B)  the interest rate rises and the supply of dollars in the market for foreign currency exchange shifts left. 
C)  the interest rate falls and the demand for dollars in the market for foreign currency exchange shifts right. 
D)  the interest rate falls and the demand for dollars in the market for foreign currency exchange shifts left. 
A)  the interest rate rises and the supply of dollars in the market for foreign currency exchange shifts right. 
B)  the interest rate rises and the supply of dollars in the market for foreign currency exchange shifts left. 
C)  the interest rate falls and the demand for dollars in the market for foreign currency exchange shifts right. 
D)  the interest rate falls and the demand for dollars in the market for foreign currency exchange shifts left.

Question 20

The real exchange rate measures the

Accepted Answer

A)  price of domestic currency relative to foreign currency. 
B)  price of domestic goods relative to the price of foreign goods. 
C)  rate of domestic and foreign interest. 
D)  None of the above is correct. 
A)  price of domestic currency relative to foreign currency. 
B)  price of domestic goods relative to the price of foreign goods. 
C)  rate of domestic and foreign interest. 
D)  None of the above is correct.

An increase in real interest rates in the United States

If U.S. citizens decide to purchase more foreign assets at each interest rate, the U.S. real interest rate

In equilibrium which of the following happens if the U.S. imposes tariffs on power tools?

In which cases does/do a country's supply of loanable funds shift left?

In the open-economy macroeconomic model, the supply of loanable funds comes from

From 1980 to 1987, U.S. net capital outflows decreased. According to the open-economy macroeconomic model, which of the following could have caused this?

Which of the following is most likely to increase U.S. exports?

Suppose the U.S. removes an import quota on steel. U.S. exports

In the open-economy macroeconomic model, net capital outflow links the markets for loanable funds and foreign- currency exchange.

Which of the following is most likely to increase exports?

Other things the same, in the open-economy macroeconomic model, which of the following would make China's net capital outflow increase?

As the interest rate rises, it is possible that net capital outflow could move from a positive to a negative value.

If the government of a country with a zero trade balance started with a budget deficit and moved to a budget surplus, domestic investment would

If the supply of loanable funds shifts right, then

If the risk of holding assets in foreign countries rises relative to the risk of holding U.S assets, 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 there is a surplus in the market for loanable funds, the resulting change in the real interest rate

In the open-economy macroeconomic model, if the supply of loanable funds shifts left

The real exchange rate measures the

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

An increase in real interest rates in the United States

If U.S. citizens decide to purchase more foreign assets at each interest rate, the U.S. real interest rate

In equilibrium which of the following happens if the U.S. imposes tariffs on power tools?

In which cases does/do a country's supply of loanable funds shift left?

In the open-economy macroeconomic model, the supply of loanable funds comes from

From 1980 to 1987, U.S. net capital outflows decreased. According to the open-economy macroeconomic model, which of the following could have caused this?

Which of the following is most likely to increase U.S. exports?

Suppose the U.S. removes an import quota on steel. U.S. exports

In the open-economy macroeconomic model, net capital outflow links the markets for loanable funds and foreign- currency exchange.

Which of the following is most likely to increase exports?

Other things the same, in the open-economy macroeconomic model, which of the following would make China's net capital outflow increase?

As the interest rate rises, it is possible that net capital outflow could move from a positive to a negative value.

If the government of a country with a zero trade balance started with a budget deficit and moved to a budget surplus, domestic investment would

If the supply of loanable funds shifts right, then

If the risk of holding assets in foreign countries rises relative to the risk of holding U.S assets, 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 there is a surplus in the market for loanable funds, the resulting change in the real interest rate

In the open-economy macroeconomic model, if the supply of loanable funds shifts left

The real exchange rate measures the

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