Question 1

When a country imposes a trade restriction,the real exchange rate of that country's currency appreciates.

Accepted Answer

A) True 
 B)False

Question 2

The open-economy macroeconomic model examines the determination of

Accepted Answer

A)  the output growth rate and the real interest rate.
B)  unemployment and the exchange rate.
C)  the output growth rate and the inflation rate.
D)  the trade balance and the exchange rate.E) A) and B)
F) A) and C)

Question 3

Figure 33-3
Refer to this diagram to answer the questions below.

-Refer to Figure 33-3.At an interest rate of 3 percent,the diagram indicates that

Accepted Answer

A)  there is a surplus in the market for foreign-currency exchange.
B)  national saving equals domestic investment.
C)  net capital outflow + domestic investment = national saving.
D)  in the market for foreign-currency exchange the quantity of dollars supplied equals the quantity of dollars demanded.E) A) and C)
F) All of the above

Question 4

In the open-economy macroeconomic model,if the supply of loanable funds increases,then the interest rate

Accepted Answer

A)  and the real exchange rate increase.
B)  and the real exchange rate decrease.
C)  increases and the real exchange rate decreases.
D)  decreases and the real exchange rate increases.E) B) and C)
F) None of the above

Question 5

In the open-economy macroeconomic model,a decrease in the domestic interest rate shifts

Accepted Answer

A)  demand in the market for foreign-currency exchange to the right.
B)  demand in the market for foreign-currency exchange to the left.
C)  supply in the market for foreign-currency exchange to the right.
D)  supply in the market for foreign-currency exchange to the left.E) C) and D)
F) A) and B)

Question 6

A drop in a country's real interest rate reduces that country's net capital outflow.

Accepted Answer

A) True 
 B)False

Question 7

A trade policy is a government policy

Accepted Answer

A)  directed toward the goal of improving the tradeoff between equity and efficiency.
B)  that directly influences the quantity of goods and services that a country imports or exports.
C)  intended to exploit the tradeoff between inflation and unemployment by altering the budget deficit.
D)  concerning employment laws.E) All of the above
F) A) and D)

Question 8

Other things the same,a higher real exchange rate reduces net exports.

Accepted Answer

A) True 
 B)False

Question 9

When the government budget deficit increases,national saving increases.

Accepted Answer

A) True 
 B)False

Question 10

Capital flight raises a country's interest rate.

Accepted Answer

A) True 
 B)False

Question 11

If there is a surplus in the market for loanable funds,the resulting change in the real interest rate

Accepted Answer

A)  reduces both the quantity of loanable funds supplied and the quantity of loanable funds demanded.
B)  reduces the quantity of loanable funds supplied and raises the quantity of loanable funds demanded
C)  raises both the quantity of loanable funds supplied and the quantity of loanable funds demanded.
D)  raises the quantity of loanable funds supplied and reduces the quantity of loanable funds demanded.E) All of the above
F) B) and C)

Question 12

In the open-economy macroeconomic model,as the exchange rate rises,

Accepted Answer

A)  desired net exports fall,so the quantity of dollars supplied rise.
B)  desired net exports fall,so the quantity of dollars demanded falls.
C)  desired net exports rise ,so the quantity of dollars supplied falls.
D)  desired net exports rise,so the quantity of dollars demanded rises.E) A) and B)
F) None of the above

Question 13

Figure 33-6 2 and E3 and the government removed import quotas,the exchange rate would A) appreciate to E4. B) appreciate to E2. C) depreciate to E1. D) depreciate to E2." class="answers-bank-image d-inline" rel="preload" >

-Refer to Figure 33-6.If the economy were initially in equilibrium at r2 and E3 and the government removed import quotas,the exchange rate would

Accepted Answer

A)  appreciate to E4.
B)  appreciate to E2.
C)  depreciate to E1.
D)  depreciate to E2.E) None of the above
F) C) and D)

Question 14

If a government increases its budget deficit,then domestic interest rates

Accepted Answer

A)  and net exports rise.
B)  rise and net exports fall.
C)  fall and net exports rise.
D)  and net exports fall.E) A) and B)
F) A) and D)

Question 15

Which of the following is correct in an open economy?

Accepted Answer

A)  S = I
B)  S = NX + NCO
C)  S = NCO
D)  S = I + NCOE) B) and C)
F) A) and C)

Question 16

Suppose that the Turkish government budget deficit increases.What curves in the open-economy macroeconomic model shift?
 Explain why each curve shifts the direction it does.

Accepted Answer

The supply of Turkish loanable funds cur...

Question 17

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

Accepted Answer

A)  net exports
B)  net capital outflow
C)  net exports + net capital outflow
D)  net exports - net capital outflowE) A) and D)
F) All of the above

Question 18

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 a country's real exchange rate ...

Question 19

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.E) A) and D)
F) B) and C)

Question 20

In the open-economy macroeconomic model,if there is currently a surplus in the foreign exchange market,the quantity of desired net exports will increase as the market moves to equilibrium.

Accepted Answer

A) True 
 B)False

Exam 33: A Macroeconomic Theory of the Open Economy

In the open-economy macroeconomic model,if there is currently a surplus in the foreign exchange market,the quantity of desired net exports will increase as the market moves to equilibrium.

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

Correct AnswerverifiedWhen the a country's real exchange rate ...View AnswerShow Answer

When the government budget deficit increases,national saving increases.

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A drop in a country's real interest rate reduces that country's net capital outflow.

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A trade policy is a government policy

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The open-economy macroeconomic model examines the determination of

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If there is a surplus in the market for loanable funds,the resulting change in the real interest rate

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Figure 33-3 Refer to this diagram to answer the questions below. -Refer to Figure 33-3.At an interest rate of 3 percent,the diagram indicates that

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Which of the following is correct in an open economy?

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Figure 33-6 -Refer to Figure 33-6.If the economy were initially in equilibrium at r2 and E3 and the government removed import quotas,the exchange rate would

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The real exchange rate measures the

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Suppose that the Turkish government budget deficit increases.What curves in the open-economy macroeconomic model shift? Explain why each curve shifts the direction it does.

Correct AnswerverifiedThe supply of Turkish loanable funds cur...View AnswerShow Answer

In the open-economy macroeconomic model,as the exchange rate rises,

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

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Capital flight raises a country's interest rate.

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model,if the supply of loanable funds increases,then the interest rate

Correct AnswerverifiedShow Answer

Other things the same,a higher real exchange rate reduces net exports.

Correct AnswerverifiedShow Answer

When a country imposes a trade restriction,the real exchange rate of that country's currency appreciates.

Correct AnswerverifiedShow Answer

If a government increases its budget deficit,then domestic interest rates

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model,a decrease in the domestic interest rate shifts

Correct AnswerverifiedShow Answer

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When the a country's real exchange rate ...
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Figure 33-6 -Refer to Figure 33-6.If the economy were initially in equilibrium at r₂and E₃ and the government removed import quotas,the exchange rate would

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The supply of Turkish loanable funds cur...
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