Question 1

The imposition of an import quota shifts

Accepted Answer

A)   the supply of currency right, so the exchange rate falls.
B)   the supply of currency left, so the exchange rate rises.
C)   the demand for currency right, so the exchange rate rises.
D)   the demand for currency left, so the exchange rate falls.E) B) and D)
F) All of the above

Question 2

If there is a shortage in the market for foreign-currency exchange, what happens to the exchange rate and to net exports?

Accepted Answer

The exchange rate ri...

Question 3

If Argentina suffers from capital flight, Argentinean domestic investment and Argentinean net exports will both decline.

Accepted Answer

A) True 
 B)False

Question 4

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

Question 5

In the open-economy macroeconomic model, if the supply of loanable funds increases, net capital outflow

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 D)
F) A) and D)

Question 6

Other things the same, an increase in the U.S. interest rate causes the quantity of loanable funds supplied to

Accepted Answer

A)   rise because net capital outflow and domestic investment rise.
B)   rise because national saving rises.
C)   fall because net capital outflow and domestic investment rise.
D)   fall because national saving falls.E) A) and B)
F) B) and C)

Question 7

An increase in the budget deficit

Accepted Answer

A)   reduces net capital outflow and domestic investment.
B)   reduces net capital outflow and raises domestic investment.
C)   raises net capital outflow and domestic investment
D)   raises net capital outflow and reduces domestic investment.E) A) and B)
F) A) and C)

Question 8

In the open-economy macroeconomic model, the supply of dollars in the market for foreign-currency exchange is upward sloping.

Accepted Answer

A) True 
 B)False

Question 9

In the open-economy macroeconomic model, if the supply of loanable funds shifts right, then

Accepted Answer

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

Question 10

Figure 32-1 
-Refer to Figure 32-1. If the real interest rate is 2 percent, there will be a

Accepted Answer

A)   surplus of $20 billion.
B)   surplus of $40 billion.
C)   shortage of $20 billion.
D)   shortage of $40 billion.E) A) and B)
F) A) and C)

Question 11

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 outflowsE) A) and D)
F) C) and D)

Question 12

If the demand for loanable funds shifts left, then

Accepted Answer

A)   the real interest rate and the equilibrium quantity of loanable funds both fall.
B)   the real interest rate falls and the equilibrium quantity of loanable funds rises.
C)   the real interest rate and the equilibrium quantity of loanable funds both rise.
D)   the real interest rate rises and the equilibrium quantity of loanable funds falls.E) A) and C)
F) All of the above

Question 13

A country has national saving of $90 billion, government expenditures of $30 billion, domestic investment of $50 billion, and net capital outflow of $40 billion. What is its demand for loanable funds?

Accepted Answer

A)   $40 billion
B)   $60 billion
C)   $90 billion
D)   $130 billionE) B) and C)
F) A) and D)

Question 14

If the quantity of loanable funds supplied is less than the quantity demanded, then there is a

Accepted Answer

A)   shortage of loanable funds and the interest rate will fall.
B)   shortage of loanable funds and the interest rate will rise.
C)   surplus of loanable funds and the interest rate will fall.
D)   surplus of loanable funds and the interest rate will rise.E) B) and D)
F) None of the above

Question 15

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.E) A) and D)
F) All of the above

Question 16

In the open-economy macroeconomic model, if there were a surplus in the market for foreign-currency exchange, the real exchange rate would appreciate.

Accepted Answer

A) True 
 B)False

Question 17

If imports = 500 billion euros, exports = 700 billion euros, purchases of domestic assets by foreign residents = 600 billion euros, and purchases of foreign assets by domestic residents = 800 billion euros, what is the quantity of euros demanded in the market for foreign-currency exchange?

Accepted Answer

A)   1,100 billion euros
B)   600 billion euros
C)   500 billion euros
D)   200 billion eurosE) None of the above
F) All of the above

Question 18

In the open-economy macroeconomic model, if for some reason foreign citizens want to purchase more U.S. goods and services at each exchange rate, then

Accepted Answer

A)   the demand for dollars in the market for foreign-currency exchange shifts right.
B)   the demand for dollars in the market for foreign-currency exchange shifts left.
C)   the supply of dollars in the market for foreign-currency exchange shifts right.
D)   the supply of dollars in the market for foreign-currency exchange shifts left.E) None of the above
F) All of the above

Question 19

Figure 32-5
Refer to this diagram of the open-economy macroeconomic model to answer the questions below. 
-Refer to Figure 32-5. Starting from 3% and .75, an increase in the government budget deficit can be illustrated as a move to

Accepted Answer

A)   4% and 1
B)   4% and .5
C)   2% and 1
D)   2% and .5E) All of the above
F) B) and C)

Question 20

In the open economy macroeconomic model, the price that balances supply and demand in the market for foreign- currency exchange model is the

Accepted Answer

A)   nominal exchange rate.
B)   nominal interest rate.
C)   real exchange rate.
D)   real interest rate.E) A) and C)
F) A) and B)

Exam 14: A Macroeconomic Theory of the Open Economy

If Argentina suffers from capital flight, Argentinean domestic investment and Argentinean net exports will both decline.

Correct AnswerverifiedShow Answer

An increase in the budget deficit

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, if the supply of loanable funds increases, net capital outflow

Correct AnswerverifiedShow Answer

Figure 32-5 Refer to this diagram of the open-economy macroeconomic model to answer the questions below. -Refer to Figure 32-5. Starting from 3% and .75, an increase in the government budget deficit can be illustrated as a move to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 32-1 -Refer to Figure 32-1. If the real interest rate is 2 percent, there will be a

Correct AnswerverifiedShow Answer

If the demand for loanable funds shifts left, then

Correct AnswerverifiedShow Answer

Other things the same, an increase in the U.S. interest rate causes the quantity of loanable funds supplied to

Correct AnswerverifiedShow Answer

A country has national saving of $90 billion, government expenditures of $30 billion, domestic investment of $50 billion, and net capital outflow of $40 billion. What is its demand for loanable funds?

Correct AnswerverifiedShow Answer

In the open economy macroeconomic model, the price that balances supply and demand in the market for foreign- currency exchange model is the

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, if there were a surplus in the market for foreign-currency exchange, the real exchange rate would appreciate.

Correct AnswerverifiedShow Answer

If the quantity of loanable funds supplied is less than the quantity demanded, then there is a

Correct AnswerverifiedShow Answer

If there is a shortage in the market for foreign-currency exchange, what happens to the exchange rate and to net exports?

Correct AnswerverifiedThe exchange rate ri...View AnswerShow Answer

The imposition of an import quota shifts

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, if for some reason foreign citizens want to purchase more U.S. goods and services at each exchange rate, then

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, the supply of dollars in the market for foreign-currency exchange is upward sloping.

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, if the supply of loanable funds shifts right, then

Correct AnswerverifiedShow Answer

An increase in the budget deficit causes domestic interest rates

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If imports = 500 billion euros, exports = 700 billion euros, purchases of domestic assets by foreign residents = 600 billion euros, and purchases of foreign assets by domestic residents = 800 billion euros, what is the quantity of euros demanded in the market for foreign-currency exchange?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The exchange rate ri...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified