Question 1

Other things the same, a lower real interest rate decreases the quantity of

Accepted Answer

A)  loanable funds demanded. 
B)  loanable funds supplied. 
C)  domestic investment. 
D)  net capital outflow. 
A)  loanable funds demanded. 
B)  loanable funds supplied. 
C)  domestic investment. 
D)  net capital outflow.

Question 2

An increase in the budget deficit causes domestic interest rates

Accepted Answer

A)  and net capital outflow to rise. 
B)  to rise and net capital outflow to fall. 
C)  to fall and net capital outflow to rise. 
D)  and net capital outflow to fall. 
A)  and net capital outflow to rise. 
B)  to rise and net capital outflow to fall. 
C)  to fall and net capital outflow to rise. 
D)  and net capital outflow to fall.

Question 3

Figure 32-2  
-Refer to Figure 32-2. What are the equilibrium values of the real exchange rate and net exports?

Accepted Answer

A)  1, 300 
B)  .8, 400 
C)  .6, 500 
D)  None of the above are correct. 
A)  1, 300 
B)  .8, 400 
C)  .6, 500 
D)  None of the above are correct.

Question 4

If a tariff on beef were implemented, which of the following would rise?

Accepted Answer

A)  exports and net exports 
B)  exports but not net exports 
C)  net exports but not exports 
D)  neither exports nor net exports 
A)  exports and net exports 
B)  exports but not net exports 
C)  net exports but not exports 
D)  neither exports nor net exports

Question 5

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 6

Explain how the relation between the real exchange rate and net exports explains the downward slope of the demand for foreign-currency exchange curve.

Accepted Answer

When the domestic real exchange rate app

Question 7

Which of the following can explain a decrease in the U.S. real exchange rate?

Accepted Answer

A)  the U.S. government budget deficit falls 
B)  the U.S. impose import quotas 
C)  the default risk of U.S. assets falls 
D)  All of the above are correct. 
A)  the U.S. government budget deficit falls 
B)  the U.S. impose import quotas 
C)  the default risk of U.S. assets falls 
D)  All of the above are correct.

Question 8

If the supply of dollars in the market for foreign-currency exchange shifts left, then the exchange rate

Accepted Answer

A)  rises and the quantity of dollars exchanged falls. 
B)  rises and the quantity of dollars exchanged does not change. 
C)  rises and the quantity of dollars exchanged rises. 
D)  falls and the quantity of dollars exchanged does not change. 
A)  rises and the quantity of dollars exchanged falls. 
B)  rises and the quantity of dollars exchanged does not change. 
C)  rises and the quantity of dollars exchanged rises. 
D)  falls and the quantity of dollars exchanged does not change.

Question 9

When a country experiences capital flight its interest rate

Accepted Answer

A)  and net capital outflow rise. 
B)  rises and net capital outflow falls. 
C)  falls and net capital outflow rises. 
D)  interest rate and net capital outflow fall. 
A)  and net capital outflow rise. 
B)  rises and net capital outflow falls. 
C)  falls and net capital outflow rises. 
D)  interest rate and net capital outflow fall.

Question 10

Other things the same, when a Canadian company imports bicycles from the U.S., the open-economy macroeconomic model treats this transaction as part of the demand for dollars in the U.S. foreign-currency exchange market.

Accepted Answer

A) True 
 B)False

Question 11

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?

Accepted Answer

Since the budget def

Question 12

An increase in the U.S. government budget deficit shifts the

Accepted Answer

A)  demand for loanable funds right and decreases investment spending. 
B)  supply of loanable funds right and increases investment spending. 
C)  supply of loanable funds left and decreases investment spending. 
D)  None of the above is correct. 
A)  demand for loanable funds right and decreases investment spending. 
B)  supply of loanable funds right and increases investment spending. 
C)  supply of loanable funds left and decreases investment spending. 
D)  None of the above is correct.

Question 13

Trade policies

Accepted Answer

A)  affect a country's overall trade balance, but affect all firms and industries the same. 
B)  affect a country's overall trade balance, but affect some firms or industries differently than others. 
C)  do not affect a country's overall trade balance, but affect some firms or industries differently than others. 
D)  do not affect either a country's overall trade balance or specific firms or industries. 
A)  affect a country's overall trade balance, but affect all firms and industries the same. 
B)  affect a country's overall trade balance, but affect some firms or industries differently than others. 
C)  do not affect a country's overall trade balance, but affect some firms or industries differently than others. 
D)  do not affect either a country's overall trade balance or specific firms or industries.

Question 14

Other things the same, as the real interest rate falls

Accepted Answer

A)  domestic investment and net capital outflow both rise. 
B)  domestic investment and net capital outflow both fall. 
C)  domestic investment rises and net capital outflow falls. 
D)  domestic investment falls and net capital outflow rises. 
A)  domestic investment and net capital outflow both rise. 
B)  domestic investment and net capital outflow both fall. 
C)  domestic investment rises and net capital outflow falls. 
D)  domestic investment falls and net capital outflow rises.

Question 15

Which of the following would not be a consequence of an increase in the U.S. government budget deficit?

Accepted Answer

A)  the U.S. trade balance rises 
B)  the U.S. interest rate rises 
C)  domestic investment in the U.S. falls 
D)  the real exchange rate of the U.S. dollar appreciates 
A)  the U.S. trade balance rises 
B)  the U.S. interest rate rises 
C)  domestic investment in the U.S. falls 
D)  the real exchange rate of the U.S. dollar appreciates

Question 16

According to the open-economy macroeconomic model, import quotas increase which of the following

Accepted Answer

A)  net exports and net capital outflow 
B)  net exports but not net capital outflow. 
C)  net capital outflow but not net exports. 
D)  neither net exports nor net capital outflow. 
A)  net exports and net capital outflow 
B)  net exports but not net capital outflow. 
C)  net capital outflow but not net exports. 
D)  neither net exports nor net capital outflow.

Question 17

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?

Accepted Answer

200 billio

Question 18

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

Accepted Answer

A)  U.S. exports and U.S. imports both increase 
B)  U.S. exports increase but U.S. imports are unchanged 
C)  U.S. imports increase but U.S. exports are unchanged 
D)  None of the above are correct 
A)  U.S. exports and U.S. imports both increase 
B)  U.S. exports increase but U.S. imports are unchanged 
C)  U.S. imports increase but U.S. exports are unchanged 
D)  None of the above are correct

Question 19

During the financial crisis it was proposed that firms be provided with a tax credit for investment projects. Such a tax credit would

Accepted Answer

A)  shift both the demand for loanable funds and the supply of dollars in the market for foreign-currency exchange right. 
B)  shift the demand for loanable funds right and shift the supply of dollars in the market for foreign-currency exchange left. 
C)  shift the demand for loanable funds left and shift the supply of dollars in the market for foreign-currency exchange right. 
D)  shift both the demand for loanable funds and the supply of dollars in the market for foreign-currency exchange left. 
A)  shift both the demand for loanable funds and the supply of dollars in the market for foreign-currency exchange right. 
B)  shift the demand for loanable funds right and shift the supply of dollars in the market for foreign-currency exchange left. 
C)  shift the demand for loanable funds left and shift the supply of dollars in the market for foreign-currency exchange right. 
D)  shift both the demand for loanable funds and the supply of dollars in the market for foreign-currency exchange left.

Question 20

Other things the same, which curve in the market for foreign-currency exchange shifts and which direction does it shift if net capital outflow rises?

Accepted Answer

The supply

Exam 19: A Macroeconomic Theory of the Open Economy

Other things the same, a lower real interest rate decreases the quantity of

An increase in the budget deficit causes domestic interest rates

Figure 32-2 -Refer to Figure 32-2. What are the equilibrium values of the real exchange rate and net exports?

If a tariff on beef were implemented, which of the following would rise?

Which of the following is most likely to increase exports?

Explain how the relation between the real exchange rate and net exports explains the downward slope of the demand for foreign-currency exchange curve.

Which of the following can explain a decrease in the U.S. real exchange rate?

If the supply of dollars in the market for foreign-currency exchange shifts left, then the exchange rate

When a country experiences capital flight its interest rate

Other things the same, when a Canadian company imports bicycles from the U.S., the open-economy macroeconomic model treats this transaction as part of the demand for dollars in the U.S. foreign-currency exchange market.

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?

An increase in the U.S. government budget deficit shifts the

Trade policies

Other things the same, as the real interest rate falls

Which of the following would not be a consequence of an increase in the U.S. government budget deficit?

According to the open-economy macroeconomic model, import quotas increase which of the following

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?

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

During the financial crisis it was proposed that firms be provided with a tax credit for investment projects. Such a tax credit would

Other things the same, which curve in the market for foreign-currency exchange shifts and which direction does it shift if net capital outflow rises?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

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 Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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