Question 1

In the long run import quotas do not affect the size of net exports.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following decrease if the U.S. imposes an import quota on computer components?

Accepted Answer

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

Question 3

If people in the U.S. choose to save a smaller percentage of income, what will happen to the interest rate, net capital outflow, the exchange rate, and net exports?

Accepted Answer

The interest rate will rise, n

Question 4

In the open-economy macroeconomic model, the supply of dollars in the market for foreign-currency exchange comes from

Accepted Answer

A)  national saving 
B)  domestic investment 
C)  net exports 
D)  net capital outflow 
A)  national saving 
B)  domestic investment 
C)  net exports 
D)  net capital outflow

Question 5

In which cases) doesdo) a country's supply of loanable funds shift right?

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 6

If a government of a country with a zero trade balance increases its budget deficit, then the real exchange rate

Accepted Answer

A)  appreciates and there is a trade surplus. 
B)  appreciates and there is a trade deficit. 
C)  depreciates and there is a trade surplus. 
D)  depreciates and there is a trade deficit. 
A)  appreciates and there is a trade surplus. 
B)  appreciates and there is a trade deficit. 
C)  depreciates and there is a trade surplus. 
D)  depreciates and there is a trade deficit.

Question 7

Which of the following is the most accurate statement?

Accepted Answer

A)  Trade policy has neither microeconomic nor macroeconomic effects. 
B)  Trade policy has similar microeconomic and macroeconomic effects. 
C)  The effects of trade policy are more macroeconomic than microeconomic. 
D)  The effects of trade policy are more microeconomic than macroeconomic. 
A)  Trade policy has neither microeconomic nor macroeconomic effects. 
B)  Trade policy has similar microeconomic and macroeconomic effects. 
C)  The effects of trade policy are more macroeconomic than microeconomic. 
D)  The effects of trade policy are more microeconomic than macroeconomic.

Question 8

In the open-economy macroeconomic model, the demand for dollars shifts right if at any given exchange rate

Accepted Answer

A)  foreign residents want to buy more U.S. goods and services. 
B)  U.S. residents want to buy fewer foreign goods and services. 
C)  Both A and B are correct. 
D)  None of the above is correct. 
A)  foreign residents want to buy more U.S. goods and services. 
B)  U.S. residents want to buy fewer foreign goods and services. 
C)  Both A and B are correct. 
D)  None of the above is correct.

Question 9

In 2009 Greece's budget deficit rose and people became worried about the ability of the Greek government to continue to make payments on its debt. Which of these events raise a country's interest rates?

Accepted Answer

A)  an increase in the budget deficit and increased concerns about the ability of the government to pay back its debt 
B)  an increase in the budget deficit, but not increased concerns about the ability of the government to pay back its debt 
C)  increased concerns about the ability of the government to pay back its debt, but not an increase in the budget deficit 
D)  neither an increase in the budget deficit nor increased concerns about the ability of the government to pay back its debt 
A)  an increase in the budget deficit and increased concerns about the ability of the government to pay back its debt 
B)  an increase in the budget deficit, but not increased concerns about the ability of the government to pay back its debt 
C)  increased concerns about the ability of the government to pay back its debt, but not an increase in the budget deficit 
D)  neither an increase in the budget deficit nor increased concerns about the ability of the government to pay back its debt

Question 10

Which of the following is included in the supply of U.S. dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

Accepted Answer

A)  a U.S. bank loans dollars to Tom to buy a U.S. made motorcycle 
B)  a U.S. tire maker wants to build a new factory in China 
C)  a U.S. company wants to import goods to sell in its retail stores 
D)  All of the above are correct. 
A)  a U.S. bank loans dollars to Tom to buy a U.S. made motorcycle 
B)  a U.S. tire maker wants to build a new factory in China 
C)  a U.S. company wants to import goods to sell in its retail stores 
D)  All of the above are correct.

Question 11

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 12

Which of the following is the most likely result from an increase in a country's government budget surplus?

Accepted Answer

A)  higher interest rates 
B)  lower imports 
C)  lower net capital outflows 
D)  lower domestic investment 
A)  higher interest rates 
B)  lower imports 
C)  lower net capital outflows 
D)  lower domestic investment

Question 13

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.

Accepted Answer

The supply of loanable funds curve shift

Question 14

If there is a surplus of loanable funds, the quantity demanded is

Accepted Answer

A)  greater than the quantity supplied and the interest rate will rise. 
B)  greater than the quantity supplied and the interest rate will fall. 
C)  less than the quantity supplied and the interest rate will rise. 
D)  less than the quantity supplied and the interest rate will fall. 
A)  greater than the quantity supplied and the interest rate will rise. 
B)  greater than the quantity supplied and the interest rate will fall. 
C)  less than the quantity supplied and the interest rate will rise. 
D)  less than the quantity supplied and the interest rate will fall.

Question 15

Refer to Budget in Recession. What does this change in the deficit do to net capital outflows? Defend your answer.

Accepted Answer

Net capital outflow falls because the do

Question 16

In 2002 it looked like the Argentinean government might default on its debt which eventually it did). The open- economy macroeconomic model predicts that this should have

Accepted Answer

A)  raised Argentinean interest rates and caused the Argentinean currency to appreciate. 
B)  raised Argentinean interest rates and caused the Argentinean currency to depreciate. 
C)  lowered Argentinean interest rates and caused the Argentinean currency to appreciate. 
D)  lowered Argentinean interest rates and caused the Argentinean currency to depreciate. 
A)  raised Argentinean interest rates and caused the Argentinean currency to appreciate. 
B)  raised Argentinean interest rates and caused the Argentinean currency to depreciate. 
C)  lowered Argentinean interest rates and caused the Argentinean currency to appreciate. 
D)  lowered Argentinean interest rates and caused the Argentinean currency to depreciate.

Question 17

In the open-economy macroeconomic model, the key determinant of net capital outflow is the

Accepted Answer

A)  nominal exchange rate. 
B)  nominal interest rate. 
C)  real exchange rate. 
D)  real interest rate. 
A)  nominal exchange rate. 
B)  nominal interest rate. 
C)  real exchange rate. 
D)  real interest rate.

Question 18

Suppose that U.S. savers decide that holding Brazilian assets has become riskier. What happens to U.S. net capital outflow? What happens to the U.S. real interest rate?

Accepted Answer

U.S. net capital outflow decre

Question 19

A country has output of $900 billion, consumption of $600 billion, government expenditures of $150 billion and investment of $120 billion. What is its supply of loanable funds?

Accepted Answer

A)  $30 billion 
B)  $90 billion 
C)  $120 billion 
D)  $150 billion 
A)  $30 billion 
B)  $90 billion 
C)  $120 billion 
D)  $150 billion

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.

Exam 19: A Macroeconomic Theory of the Open Economy

In the long run import quotas do not affect the size of net exports.

Which of the following decrease if the U.S. imposes an import quota on computer components?

If people in the U.S. choose to save a smaller percentage of income, what will happen to the interest rate, net capital outflow, the exchange rate, and net exports?

In the open-economy macroeconomic model, the supply of dollars in the market for foreign-currency exchange comes from

In which cases) doesdo) a country's supply of loanable funds shift right?

If a government of a country with a zero trade balance increases its budget deficit, then the real exchange rate

Which of the following is the most accurate statement?

In the open-economy macroeconomic model, the demand for dollars shifts right if at any given exchange rate

In 2009 Greece's budget deficit rose and people became worried about the ability of the Greek government to continue to make payments on its debt. Which of these events raise a country's interest rates?

Which of the following is included in the supply of U.S. dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

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

Which of the following is the most likely result from an increase in a country's government budget surplus?

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.

If there is a surplus of loanable funds, the quantity demanded is

Refer to Budget in Recession. What does this change in the deficit do to net capital outflows? Defend your answer.

In 2002 it looked like the Argentinean government might default on its debt which eventually it did). The open- economy macroeconomic model predicts that this should have

In the open-economy macroeconomic model, the key determinant of net capital outflow is the

Suppose that U.S. savers decide that holding Brazilian assets has become riskier. What happens to U.S. net capital outflow? What happens to the U.S. real interest rate?

A country has output of $900 billion, consumption of $600 billion, government expenditures of $150 billion and investment of $120 billion. What is its supply of loanable funds?

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

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

Filters