Exam 14: A Macroeconomic Theory of the Open Economy

If a country's budget deficit increases, then in the market for foreign­currency exchange,

Figure 32-1 -Refer to Figure 32-1. The loanable funds market is in equilibrium at

Figure 32-2 -Refer to Figure 32-2. At what real exchange rate is the quantity of dollars demanded equal to 500?

A limit on the quantity of a good produced abroad that can be purchased domestically is called an)

An increase in the U.S. interest rate discourages Americans from buying foreign assets and encourages foreigners to buy U.S. assets.

Suppose the U.S. government institutes a "Buy American" campaign, in order to encourage spending on domestic goods. What effect will this have on the U.S. trade balance?

An increase in the budget deficit

Which of the following leads to an increase in net exports in the long run?

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

If for some reason U.S. residents increase their purchases of foreign assets, then all else constant which curve in the market for foreign-currency exchange shifts and which direction does it shift? What happens to the exchange rate?

Although trade policies do not affect a country's overall trade balance, they do affect specific firms and industries.

What are the sources of the demand for loanable funds? What happens to the quantity of loanable funds demanded when the interest rate rises?

If the U.S. government imposes an import quota on beef, U.S. net exports will

If U.S. net exports are positive, then net capital outflow is

Which of the following contains a list only of things that increase when the budget deficit of the U.S. increases?

Net capital outflow represents the quantity of dollars supplied in the foreign-currency exchange market.

If the exchange rate rises, which of the following falls in the open-economy macroeconomic model?

Suppose that the U.S. imposed an import quota on beef. Sales of U.S. beef producers would

If U.S. net exports are negative, then net capital outflow is

Suppose that the U.S. government budget deficit decreases. What curves in the open-economy macroeconomic model shift? Explain why each curve shifts the direction it does.