Exam 14: A Macroeconomic Theory of the Open Economy

If a country experiences capital flight, which curves shift right?

If the government of Venezuela made policy changes that increased national saving, the real exchange rate of the peso would

Which of the following would tend to shift the supply of dollars in the market for foreign-currency exchange in the open-economy macroeconomic model to the right?

An economy recently had 800 billion euros of saving and 600 billion euros of net capital outflow. What was its investment? What was its quantity of loanable funds supplied?

Define net capital outflow.

Budget Reform Due to concerns about a rising level of debt relative to GDP, Congress and the President cut expenditures and raise taxes. -Refer to Budget Reform. What does this policy change do to the equilibrium values of the interest rate and the quantity of loanable funds?

In the open-economy macroeconomic model, the market for loanable funds identity can be written as

If the U.S. imposed import quotas on cotton, then which of the following would rise?

In the open-economy macroeconomic model, other things the same, an increase in the exchange rate raises the quantity of dollars supplied in the market for foreign-currency exchange.

An increase in the government budget deficit shifts the demand for loanable funds to the right.

If the U.S. imposed an import quota on corn, then in the U.S.

A government budget deficit

In the open-economy macroeconomic model, if foreign interest rates rise and the U.S interest rate stays the same then, U.S.

The key determinant of net capital outflow is the real interest rate.

When a country imposes an import quota, its

Which of the following would shift the supply of dollars in the market for foreign-currency exchange of the open- economy macroeconomic model to the left?

When Mexico suffered from capital flight in 1994, Mexico's real interest rate

When the U.S. real interest rate falls, purchasing U.S. assets becomes

If government policy encouraged households to save more at each interest rate, then

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. In the market for loanable funds which curves) does this change in the deficit shift? Which direction does it shift?