Question 1

Other things the same,if the U.S.interest rate rises,what happens to the net capital outflow of other countries?

Accepted Answer

As the U.S. real interest rate rises, U.S. bonds become more attractive to both domestic and foreign residents. The resulting reduction in the purchase of foreign bonds by U.S. residents and increase in the purchase of U.S bonds by foreign residents both increase the net capital outflow of foreign countries.

Question 2

What happens to each of the following if investment becomes less desirable at each interest rate?
A.the interest rate
B.net capital outflow
C.the exchange rate

Accepted Answer

The interest rate falls, net capital outflow rises, the exchange rate falls.

Question 3

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 curve shifts right.

Question 4

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

Accepted Answer

The answer of A country recently had 500 billion euros...

Question 5

What happens to each of the following if investment becomes more desirable at each interest rate?
A.the interest rate
B.net capital outflow
C.the exchange rate

Accepted Answer

The answer of What happens to each of the following...

Question 6

What happens to each of the following if the supply of loanable funds shifts left?
A.the interest rate
B.net capital outflow
C.the exchange rate

Accepted Answer

The answer of What happens to each of the following...

Question 7

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 answer of If people in the U.S.choose to save...

Question 8

Other things the same, if the U.S. interest rate rises, U.S. assets become ____ attractive. So, desired net capital outflow _____. This change in net capital outflow, shifts the __________ curve in the market for foreign-currency exchange to the ______.

Accepted Answer

The answer of Other things the same, if the U.S....

Question 9

Which curve in the market for foreign-currency exchange shifts and which direction does it shift if the government budget deficit increases? Explain why an increase in the budget deficit shifts this curve.

Accepted Answer

The answer of Which curve in the market for foreign-currency...

Question 10

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

The answer of An economy recently had 800 billion euros...

Question 11

What do trade policies do to the standard of living?

Accepted Answer

The answer of What do trade policies do to the...

Question 12

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 13

If a country's government moves from a budget deficit to a budget surplus,which curve in the market for loanable funds shifts and which direction does it shift? What happens to the interest rate?

Accepted Answer

The answer of If a country's government moves from a...

Question 14

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 answer of A country reduces its government budget deficit...

Question 15

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

Accepted Answer

The answer of What happens to domestic investment as the...

Question 16

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

The answer of If the exchange rate rises, domestic goods...

Question 17

What are the sources of the demand for loanable funds? What happens to the quantity of loanable funds demanded when the interest rate rises?

Accepted Answer

The answer of What are the sources of the demand...

Question 18

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

Accepted Answer

The answer of If the exchange rate falls, domestic goods...

Question 19

State what,if anything,each of the following does to the supply or demand of loanable funds.
a.net capital outflow increases at each interest rate
b.domestic investment increases at each interest rate
c.the government deficit increases
d.private saving increases

Accepted Answer

The answer of State what,if anything,each of the following does...

Question 20

Political events convince people that the assets of country x are now riskier.As a result of this change which curves in the open-economy macroeconomic model shift and which direction do they shift for country x?

Accepted Answer

The answer of Political events convince people that the assets...

Exam 19: A Macroeconomic Theory of the Open Economy: Part A

Other things the same,if the U.S.interest rate rises,what happens to the net capital outflow of other countries?

What happens to each of the following if investment becomes less desirable at each interest rate? A.the interest rate B.net capital outflow C.the exchange rate

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?

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

What happens to each of the following if investment becomes more desirable at each interest rate? A.the interest rate B.net capital outflow C.the exchange rate

What happens to each of the following if the supply of loanable funds shifts left? A.the interest rate B.net capital outflow C.the exchange rate