Question 1

What is the source of the supply of dollars in the market for foreign-currency exchange?

Accepted Answer

The answer of What is the source of the supply...

Question 2

A country has national saving of $80 billion, government expenditures of $40 billion, domestic investment of $50 billion, and net capital outflow of $30 billion. What is its supply of loanable funds?

Accepted Answer

A)  $30 billion 
B)  $40 billion 
C)  $50 billion 
D)  $80 billion 
A)  $30 billion 
B)  $40 billion 
C)  $50 billion 
D)  $80 billion

Question 3

If the exchange rate rises, domestic goods become relatively ______ expensive. This change in the affordability of domestic goods makes domestic goods _____ attractive to foreigners. So, _______ ______.

Accepted Answer

more, less

Question 4

Which of the following is the most likely response to an increase in the U.S. real interest rate?

Accepted Answer

A)  a London bank purchases a U.S. bond instead of a Japanese bond it had considered purchasing 
B)  U.S. firms decide to buy more capital goods 
C)  a U.S. citizen decides to put less money in his savings account than he had planned. 
D)  All of the above are consistent. 
A)  a London bank purchases a U.S. bond instead of a Japanese bond it had considered purchasing 
B)  U.S. firms decide to buy more capital goods 
C)  a U.S. citizen decides to put less money in his savings account than he had planned. 
D)  All of the above are consistent.

Question 5

In the open-economy macroeconomic model, the source of the supply of loanable funds is

Accepted Answer

A)  personal saving 
B)  public saving 
C)  public saving + personal saving 
D)  public saving + personal saving + net capital outflows 
A)  personal saving 
B)  public saving 
C)  public saving + personal saving 
D)  public saving + personal saving + net capital outflows

Question 6

Refer to Shoe Quota. Overall as a result of this change in policy, what happens to exports, imports, and net exports?

Accepted Answer

Exports and imports

Question 7

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

Accepted Answer

A)  both a U.S. bank wanting to lend money to a Canadian company and a U.S. firm wanting to buy computers made in South Korea 
B)  a U.S. bank wanting to lend money to a Canadian company, but not a U.S. firm wanting to buy computers made in South Korea 
C)  a U.S. firm wanting to buy computers made in South Korea, but not a U.S.bank wanting to lend money to a Canadian company 
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)  both a U.S. bank wanting to lend money to a Canadian company and a U.S. firm wanting to buy computers made in South Korea 
B)  a U.S. bank wanting to lend money to a Canadian company, but not a U.S. firm wanting to buy computers made in South Korea 
C)  a U.S. firm wanting to buy computers made in South Korea, but not a U.S.bank wanting to lend money to a Canadian company 
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 8

A country reduces its government budget deficit and also makes political reforms that lead people to believe this country's assets are less risky. Given the combination of a reduced deficit and lower asset risk, what happens to the interest rate?

Accepted Answer

The intere

Question 9

Other things the same, if the expected return on U.S. assets increases, the

Accepted Answer

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

Question 10

An increase in real interest rates in the United States

Accepted Answer

A)  discourages both U.S. and foreign residents from buying U.S. assets. 
B)  encourages both U.S. and foreign residents to buy U.S. assets. 
C)  encourages U.S. residents to buy U.S. assets, but discourages foreign residents from buying U.S. assets. 
D)  encourages foreign residents to buy U.S. assets, but discourages U.S. residents from buying U.S. assets. 
A)  discourages both U.S. and foreign residents from buying U.S. assets. 
B)  encourages both U.S. and foreign residents to buy U.S. assets. 
C)  encourages U.S. residents to buy U.S. assets, but discourages foreign residents from buying U.S. assets. 
D)  encourages foreign residents to buy U.S. assets, but discourages U.S. residents from buying U.S. assets.

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

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 13

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

Accepted Answer

A)  only the demand for loanable funds. 
B)  only the supply of dollars in the market for foreign-currency exchange. 
C)  only the net capital outflow curve and the supply of dollars in the market for foreign currency exchange. 
D)  the demand for loanable funds, the net capital outflow curve, and the supply of dollars in the market for foreign currency exchange. 
A)  only the demand for loanable funds. 
B)  only the supply of dollars in the market for foreign-currency exchange. 
C)  only the net capital outflow curve and the supply of dollars in the market for foreign currency exchange. 
D)  the demand for loanable funds, the net capital outflow curve, and the supply of dollars in the market for foreign currency exchange.

Question 14

Other things the same, if foreigners desire to purchase more U.S. bonds, then the demand for loanable funds shifts left.

Accepted Answer

A) True 
 B)False

Question 15

A firm produces construction equipment, some of which it sells to domestic businesses and some of which it exports. Which of the following effects of capital flight in the country where it produces would likely increase the quantity of equipment it sells?

Accepted Answer

A)  both what happens to the interest rate and what happens to the exchange rate 
B)  what happens to the interest rate but not what happens to the exchange rate 
C)  what happens to the exchange rate but not what happens to the interest rate 
D)  neither what happens to the interest rate nor what happens to the interest rate. 
A)  both what happens to the interest rate and what happens to the exchange rate 
B)  what happens to the interest rate but not what happens to the exchange rate 
C)  what happens to the exchange rate but not what happens to the interest rate 
D)  neither what happens to the interest rate nor what happens to the interest rate.

Question 16

In the open-economy macroeconomic model, a higher U.S. real exchange rate makes

Accepted Answer

A)  U.S. goods more expensive relative to foreign goods and reduces the quantity of dollars supplied. 
B)  U.S. goods more expensive relative to foreign goods and reduces the quantity of dollars demanded. 
C)  foreign goods more expensive relative to U.S. goods and reduces the quantity of dollars supplied. 
D)  foreign goods more expensive relative to U.S. goods and reduces the quantity of dollars demanded. 
A)  U.S. goods more expensive relative to foreign goods and reduces the quantity of dollars supplied. 
B)  U.S. goods more expensive relative to foreign goods and reduces the quantity of dollars demanded. 
C)  foreign goods more expensive relative to U.S. goods and reduces the quantity of dollars supplied. 
D)  foreign goods more expensive relative to U.S. goods and reduces the quantity of dollars demanded.

Question 17

If at a given real interest rate desired national saving is $200 billion, domestic investment is $100 billion, and net capital outflow is $80 billion, then at that real interest rate in the loanable funds market there is a

Accepted Answer

A)  surplus. The real interest rate will rise. 
B)  surplus. The real interest rate will fall. 
C)  shortage. The real interest rate will rise. 
D)  shortage. The real interest rate will fall. 
A)  surplus. The real interest rate will rise. 
B)  surplus. The real interest rate will fall. 
C)  shortage. The real interest rate will rise. 
D)  shortage. The real interest rate will fall.

Question 18

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

Accepted Answer

A)  S = I 
B)  S = NCO 
C)  S = I + NCO 
D)  S + I = NCO 
A)  S = I 
B)  S = NCO 
C)  S = I + NCO 
D)  S + I = NCO

Question 19

A country has national saving of $100 billion, government expenditures of $30 billion, domestic investment of $80 billion, and net capital outflow of $20 billion. What is its demand for loanable funds?

Accepted Answer

A)  $60 billion 
B)  $70 billion 
C)  $100 billion 
D)  $120 billion 
A)  $60 billion 
B)  $70 billion 
C)  $100 billion 
D)  $120 billion

Question 20

When the real exchange rate for the dollar appreciates, U.S. goods become

Accepted Answer

A)  less expensive relative to foreign goods, which makes exports rise and imports fall. 
B)  less expensive relative to foreign goods, which makes exports fall and imports rise. 
C)  more expensive relative to foreign goods, which makes exports rise and imports fall. 
D)  more expensive relative to foreign goods, which makes exports fall and imports rise. 
A)  less expensive relative to foreign goods, which makes exports rise and imports fall. 
B)  less expensive relative to foreign goods, which makes exports fall and imports rise. 
C)  more expensive relative to foreign goods, which makes exports rise and imports fall. 
D)  more expensive relative to foreign goods, which makes exports fall and imports rise.

Exam 19: A Macroeconomic Theory of the Open Economy

What is the source of the supply of dollars in the market for foreign-currency exchange?

A country has national saving of $80 billion, government expenditures of $40 billion, domestic investment of $50 billion, and net capital outflow of $30 billion. What is its supply of loanable funds?

If the exchange rate rises, domestic goods become relatively ______ expensive. This change in the affordability of domestic goods makes domestic goods _____ attractive to foreigners. So, _______ ______.

Which of the following is the most likely response to an increase in the U.S. real interest rate?

In the open-economy macroeconomic model, the source of the supply of loanable funds is

Refer to Shoe Quota. Overall as a result of this change in policy, what happens to exports, imports, and net exports?

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

A country reduces its government budget deficit and also makes political reforms that lead people to believe this country's assets are less risky. Given the combination of a reduced deficit and lower asset risk, what happens to the interest rate?

Other things the same, if the expected return on U.S. assets increases, the

An increase in real interest rates in the United States

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

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

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

Other things the same, if foreigners desire to purchase more U.S. bonds, then the demand for loanable funds shifts left.

A firm produces construction equipment, some of which it sells to domestic businesses and some of which it exports. Which of the following effects of capital flight in the country where it produces would likely increase the quantity of equipment it sells?

In the open-economy macroeconomic model, a higher U.S. real exchange rate makes

If at a given real interest rate desired national saving is $200 billion, domestic investment is $100 billion, and net capital outflow is $80 billion, then at that real interest rate in the loanable funds market there is a

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

A country has national saving of $100 billion, government expenditures of $30 billion, domestic investment of $80 billion, and net capital outflow of $20 billion. What is its demand for loanable funds?

When the real exchange rate for the dollar appreciates, U.S. goods become

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

If the exchange rate rises, domestic goods become relatively ____ expensive. This change in the affordability of domestic goods makes domestic goods _ attractive to foreigners. So, _ __.