Question 1

If the United States imposes an import quota on clothing, then U.S. exports

Accepted Answer

A)  increase, U.S. imports increase, and U.S. net exports will not change. 
B)  increase, U.S. imports decrease, and U.S. net exports increase. 
C)  decrease, U.S. imports increase, and U.S. net exports decrease. 
D)  decrease, U.S. imports decrease, and U.S. net exports will not change. 
A)  increase, U.S. imports increase, and U.S. net exports will not change. 
B)  increase, U.S. imports decrease, and U.S. net exports increase. 
C)  decrease, U.S. imports increase, and U.S. net exports decrease. 
D)  decrease, U.S. imports decrease, and U.S. net exports will not change.

Question 2

If U.S. residents chose to travel overseas less due to concerns about the safety of foreign travel, then in the open- economy macroeconomic model

Accepted Answer

A)  the demand for dollars in the market for foreign-currency exchange shifts right. 
B)  the demand for dollars in the market for foreign-currency exchange shifts left. 
C)  the supply of dollars in the market for foreign-currency exchange shifts right. 
D)  the supply of dollars in the market for foreign-currency exchange shifts left. 
A)  the demand for dollars in the market for foreign-currency exchange shifts right. 
B)  the demand for dollars in the market for foreign-currency exchange shifts left. 
C)  the supply of dollars in the market for foreign-currency exchange shifts right. 
D)  the supply of dollars in the market for foreign-currency exchange shifts left.

Question 3

When a government increases its budget deficit, then that country's

Accepted Answer

A)  supply of loanable funds shifts right. 
B)  supply of loanable funds shifts left. 
C)  demand for loanable funds shifts right. 
D)  demand for loanable funds shifts left. 
A)  supply of loanable funds shifts right. 
B)  supply of loanable funds shifts left. 
C)  demand for loanable funds shifts right. 
D)  demand for loanable funds shifts left.

Question 4

What happens to each of the following if the supply of loanable funds shifts right?
a. the interest rate
b. net capital outflow
c. the exchange rate

Accepted Answer

The interest rate fa

Question 5

An increase in the government budget deficit shifts the supply of loanable funds to the left.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A)  increases the quantity of loanable funds demanded. 
B)  shifts the demand for loanable funds curve to the right. 
C)  decreases the quantity of loanable funds demanded. 
D)  shifts the demand for loanable funds curve to the left. 
A)  increases the quantity of loanable funds demanded. 
B)  shifts the demand for loanable funds curve to the right. 
C)  decreases the quantity of loanable funds demanded. 
D)  shifts the demand for loanable funds curve to the left.

Question 7

How are the identities S = NCO + I and NCO = NX related to the foreign currency exchange market and the loanable funds market?

Accepted Answer

S is national saving, which is the sourc

Question 8

If the real exchange rate for the dollar is below the equilibrium level, the quantity of dollars supplied in the market for foreign-currency exchange is

Accepted Answer

A)  less than the quantity demanded and the dollar will appreciate. 
B)  less than the quantity demanded and the dollar will depreciate. 
C)  greater than the quantity demanded and the dollar will appreciate. 
D)  greater than the quantity demanded and the dollar will depreciate. 
A)  less than the quantity demanded and the dollar will appreciate. 
B)  less than the quantity demanded and the dollar will depreciate. 
C)  greater than the quantity demanded and the dollar will appreciate. 
D)  greater than the quantity demanded and the dollar will depreciate.

Question 9

If a country places tariffs on imported goods, then

Accepted Answer

A)  its currency appreciates which reduces exports. 
B)  its currency appreciates which increases exports. 
C)  its currency depreciates which reduces exports. 
D)  its currency depreciates which increases exports. 
A)  its currency appreciates which reduces exports. 
B)  its currency appreciates which increases exports. 
C)  its currency depreciates which reduces exports. 
D)  its currency depreciates which increases exports.

Question 10

Which of the following makes) demand for U.S. dollars in the market for foreign-currency exchange higher than otherwise?

Accepted Answer

A)  a U.S. airline wanting buy jets made in France and a Swedish hospital wanting to buy medical equipment made in the U.S. 
B)  a U.S. airline wanting to buy jets made in France, but not a Swedish hospital wanting to buy medical equipment made in the U.S. 
C)  a Swedish hospital wanting to buy medical equipment made in the U.S., but not a U.S. airline wanting to buy jets made in France 
D)  neither a U.S. bank wanting to lend money to a Canadian company nor a U.S. firm wanting to buy computers made in South Korea 
A)  a U.S. airline wanting buy jets made in France and a Swedish hospital wanting to buy medical equipment made in the U.S. 
B)  a U.S. airline wanting to buy jets made in France, but not a Swedish hospital wanting to buy medical equipment made in the U.S. 
C)  a Swedish hospital wanting to buy medical equipment made in the U.S., but not a U.S. airline wanting to buy jets made in France 
D)  neither a U.S. bank wanting to lend money to a Canadian company nor a U.S. firm wanting to buy computers made in South Korea

Question 11

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. This policy change causes the exchange rate to change. What does the change in the exchange rate to do to net exports?

Accepted Answer

Because the exchange

Question 12

At the equilibrium real interest rate in the open-economy macroeconomic model, the equilibrium quantity of loanable funds equals

Accepted Answer

A)  net capital outflow. 
B)  domestic investment. 
C)  foreign currency supplied. 
D)  national saving. 
A)  net capital outflow. 
B)  domestic investment. 
C)  foreign currency supplied. 
D)  national saving.

Question 13

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. This policy change 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?

Accepted Answer

The supply of dollars in the m

Question 14

If the supply of loanable funds curve shifts right, then the equilibrium

Accepted Answer

A)  interest rate and level of net capital outflows rise. 
B)  interest rate rises and the equilibrium level of net capital outflow falls. 
C)  interest rate falls and the equilibrium level of net capital outflow rises. 
D)  interest rate and level of net capital outflows fall. 
A)  interest rate and level of net capital outflows rise. 
B)  interest rate rises and the equilibrium level of net capital outflow falls. 
C)  interest rate falls and the equilibrium level of net capital outflow rises. 
D)  interest rate and level of net capital outflows fall.

Question 15

Suppose a country experiences capital flight. Of the demand for loanable funds and the supply of currency in the market for foreign-currency exchange, which shifts right?

Accepted Answer

A)  only the demand for loanable funds 
B)  only the supply of its currency in the market for foreign-currency exchange 
C)  both curves shift right 
D)  neither curve shifts right 
A)  only the demand for loanable funds 
B)  only the supply of its currency in the market for foreign-currency exchange 
C)  both curves shift right 
D)  neither curve shifts right

Question 16

What happens to domestic investment as the real interest rate rises? Explain your answer.

Accepted Answer

As the real interest rate rise

Question 17

An increase in a country's budget deficit

Accepted Answer

A)  increases net capital outflow, so the demand for its currency in the market for foreign-currency exchange shifts right. 
B)  increases net capital outflow, so the supply of its currency in the market for foreign-currency exchange shifts right. 
C)  decreases net capital outflow, so the demand for its currency in the market for foreign-currency exchange shifts left. 
D)  decreases net capital outflow, so the supply of its currency in the market for foreign-currency exchange shifts left. 
A)  increases net capital outflow, so the demand for its currency in the market for foreign-currency exchange shifts right. 
B)  increases net capital outflow, so the supply of its currency in the market for foreign-currency exchange shifts right. 
C)  decreases net capital outflow, so the demand for its currency in the market for foreign-currency exchange shifts left. 
D)  decreases net capital outflow, so the supply of its currency in the market for foreign-currency exchange shifts left.

Question 18

A country recently had 500 billion euros of national saving and -200 billion euros of net capital outflow. What was its domestic investment? What was its quantity of loanable funds supplied?

Accepted Answer

700 billio

Question 19

Which of the following decreases if the U.S. removes an import quota on computer components?

Accepted Answer

A)  U.S. imports and U.S. exports. 
B)  U.S. imports but not U.S. exports. 
C)  U.S. exports but not U.S. imports. 
D)  Neither U.S. exports nor U.S. imports. 
A)  U.S. imports and U.S. exports. 
B)  U.S. imports but not U.S. exports. 
C)  U.S. exports but not U.S. imports. 
D)  Neither U.S. exports nor U.S. imports.

Question 20

In the open-economy macroeconomic model, the

Accepted Answer

A)  exchange rate adjusts to equate private saving with the sum of investment, net exports, and net capital outflow. 
B)  exchange rate adjusts to equate national saving with the sum of investment and net capital outflow. 
C)  interest rate adjusts to equate private saving with the sum of investment, net exports, and net capital outflow. 
D)  interest rate adjusts to equate national saving with the sum of investment and net capital outflow. 
A)  exchange rate adjusts to equate private saving with the sum of investment, net exports, and net capital outflow. 
B)  exchange rate adjusts to equate national saving with the sum of investment and net capital outflow. 
C)  interest rate adjusts to equate private saving with the sum of investment, net exports, and net capital outflow. 
D)  interest rate adjusts to equate national saving with the sum of investment and net capital outflow.

If the United States imposes an import quota on clothing, then U.S. exports

If U.S. residents chose to travel overseas less due to concerns about the safety of foreign travel, then in the open- economy macroeconomic model

When a government increases its budget deficit, then that country's

What happens to each of the following if the supply of loanable funds shifts right? a. the interest rate b. net capital outflow c. the exchange rate

An increase in the government budget deficit shifts the supply of loanable funds to the left.

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

How are the identities S = NCO + I and NCO = NX related to the foreign currency exchange market and the loanable funds market?

If the real exchange rate for the dollar is below the equilibrium level, the quantity of dollars supplied in the market for foreign-currency exchange is

If a country places tariffs on imported goods, then

Which of the following makes) demand for U.S. dollars in the market for foreign-currency exchange higher than otherwise?

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. This policy change causes the exchange rate to change. What does the change in the exchange rate to do to net exports?

At the equilibrium real interest rate in the open-economy macroeconomic model, the equilibrium quantity of loanable funds equals

If the supply of loanable funds curve shifts right, then the equilibrium

Suppose a country experiences capital flight. Of the demand for loanable funds and the supply of currency in the market for foreign-currency exchange, which shifts right?

What happens to domestic investment as the real interest rate rises? Explain your answer.

An increase in a country's budget deficit

A country recently had 500 billion euros of national saving and -200 billion euros of net capital outflow. What was its domestic investment? What was its quantity of loanable funds supplied?

Which of the following decreases if the U.S. removes an import quota on computer components?

In the open-economy macroeconomic model, 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

If the United States imposes an import quota on clothing, then U.S. exports

If U.S. residents chose to travel overseas less due to concerns about the safety of foreign travel, then in the open- economy macroeconomic model

When a government increases its budget deficit, then that country's

What happens to each of the following if the supply of loanable funds shifts right? a. the interest rate b. net capital outflow c. the exchange rate

An increase in the government budget deficit shifts the supply of loanable funds to the left.

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

How are the identities S = NCO + I and NCO = NX related to the foreign currency exchange market and the loanable funds market?

If the real exchange rate for the dollar is below the equilibrium level, the quantity of dollars supplied in the market for foreign-currency exchange is

If a country places tariffs on imported goods, then

Which of the following makes) demand for U.S. dollars in the market for foreign-currency exchange higher than otherwise?

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. This policy change causes the exchange rate to change. What does the change in the exchange rate to do to net exports?

At the equilibrium real interest rate in the open-economy macroeconomic model, the equilibrium quantity of loanable funds equals

If the supply of loanable funds curve shifts right, then the equilibrium

Suppose a country experiences capital flight. Of the demand for loanable funds and the supply of currency in the market for foreign-currency exchange, which shifts right?

What happens to domestic investment as the real interest rate rises? Explain your answer.

An increase in a country's budget deficit

A country recently had 500 billion euros of national saving and -200 billion euros of net capital outflow. What was its domestic investment? What was its quantity of loanable funds supplied?

Which of the following decreases if the U.S. removes an import quota on computer components?

In the open-economy macroeconomic model, 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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