Question 1

A firm produces construction equipment, some of which it exports. Which of the following effects of an increase in the government budget deficit would likely reduce the quantity of equipment it sells?

Accepted Answer

A)   the change in the interest rate and the change in the exchange rate
B)   the change in the interest rate but not the change in the exchange rate
C)   the change in the exchange rate but not the change in the interest rate
D)   neither the change in the interest rate nor the change in the exchange rateE) A) and B)
F) C) and D)

Question 2

A German company wants to buy dollars to purchase U.S. bonds. In the open-economy macroeconomic model of the U.S., this transaction would be accounted for in

Accepted Answer

A)   the supply of currency in the foreign exchange market, and the supply of loanable funds.
B)   the supply of currency in the foreign exchange market, and the demand for loanable funds.
C)   the demand for currency in the foreign exchange market, and the supply of loanable funds.
D)   the demand for currency in the foreign exchange market, and the demand for loanable funds.E) A) and B)
F) All of the above

Question 3

If a country repeals an investment tax credit,

Accepted Answer

A)   net capital outflow and the real exchange rate rise.
B)   net capital outflow rises and the real exchange rate falls.
C)   net capital outflow falls and the real exchange rate rises.
D)   net capital outflow and the real exchange rate fall.E) B) and C)
F) C) and D)

Question 4

Refer to Depositors Move Funds Out of Greek Banks. What happened to the domestic equilibrium interest rate and quantity of loanable funds supplied?

Accepted Answer

Both the equilibrium...

Question 5

When a country experiences capital flight its currency

Accepted Answer

A)   appreciates and net exports rise.
B)   appreciates and net exports fall.
C)   depreciates and net exports rise.
D)   depreciates and net exports fall.E) B) and D)
F) None of the above

Question 6

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

Question 7

When the government budget deficit increases, national saving decreases.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

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

Question 9

A rise in the government budget deficit

Accepted Answer

A)   increases the interest rate so in the market for foreign-currency exchange, supply shifts right.
B)   increases the interest rate so in the market for foreign-currency exchange, supply shifts left.
C)   decreases the interest rate so in the market for foreign-currency exchange, supply shifts left.
D)   decreases the interest rate so in the market for foreign-currency exchange supply shifts right.E) B) and D)
F) None of the above

Question 10

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 demand curve for loanable ...

Question 11

If the U.S. imposed an import quota on corn, then in the U.S.

Accepted Answer

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

Question 12

Capital flight refers to

Accepted Answer

A)   the movement of workers across international borders in response to exchange rate changes.
B)   the movement of funds between financial intermediaries when interest rates change.
C)   the ability of foreign direct investment to lift a country out of poverty.
D)   a large and sudden movement of funds out of a country.E) A) and B)
F) B) and C)

Question 13

A country produces two goods, soda and chips. It currently exports soda and imports chips. If it were to impose a tariff on chips,

Accepted Answer

A)   both imports of chips and exports of sodas would rise.
B)   imports of chips would rise, but exports of sodas would fall.
C)   imports of chips would fall, but exports of sodas would rise.
D)   both imports of chips and exports of sodas would fall.E) A) and D)
F) A) and C)

Question 14

Capital flight shifts the NCO curve to the left.

Accepted Answer

A) True 
 B)False

Question 15

When a country imposes an import quota, its

Accepted Answer

A)   imports fall and its net exports rise.
B)   imports fall and its net exports are unchanged.
C)   imports rise and its net exports are unchanged.
D)   imports and exports are unchanged.E) B) and C)
F) A) and D)

Question 16

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) None of the above
F) A) and D)

Question 17

Because a government budget deficit represents

Accepted Answer

A)   negative public saving, it increases national saving.
B)   negative public saving, it decreases national saving.
C)   positive public saving, it increases national saving.
D)   positive public saving, it decreases national saving.E) A) and D)
F) None of the above

Question 18

If the U.S. government imposed quotas on imports of clothing, then U.S.

Accepted Answer

A)   imports and exports would both fall.
B)   imports would fall and exports would rise.
C)   imports would rise and exports would fall.
D)   None of the above is correct.E) B) and D)
F) A) and D)

Question 19

An increase in the budget deficit causes domestic interest rates

Accepted Answer

A)   and investment to rise.
B)   to rise and investment to fall.
C)   to fall and investment to rise.
D)   and investment to fall.E) A) and B)
F) C) and D)

Question 20

When the real exchange rate for the dollar depreciates, 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.E) B) and C)
F) A) and D)

Exam 32: A Macroeconomic Theory of the Open Economy

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?

Correct AnswerverifiedThe demand curve for loanable ...View AnswerShow Answer

When the government budget deficit increases, national saving decreases.

Correct AnswerverifiedShow Answer

If the U.S. imposed an import quota on corn, then in the U.S.

Correct AnswerverifiedShow Answer

A country produces two goods, soda and chips. It currently exports soda and imports chips. If it were to impose a tariff on chips,

Correct AnswerverifiedShow Answer

If the U.S. government imposed quotas on imports of clothing, then U.S.

Correct AnswerverifiedShow Answer

Refer to Depositors Move Funds Out of Greek Banks. What happened to the domestic equilibrium interest rate and quantity of loanable funds supplied?

Correct AnswerverifiedBoth the equilibrium...View AnswerShow Answer

A German company wants to buy dollars to purchase U.S. bonds. In the open-economy macroeconomic model of the U.S., this transaction would be accounted for in

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If a country repeals an investment tax credit,

Correct AnswerverifiedShow Answer

Capital flight refers to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Because a government budget deficit represents

Correct AnswerverifiedShow Answer

When a country imposes an import quota, its

Correct AnswerverifiedShow Answer

An increase in the budget deficit causes domestic interest rates

Correct AnswerverifiedShow Answer

When a country experiences capital flight its currency

Correct AnswerverifiedShow Answer

Capital flight shifts the NCO curve to the left.

Correct AnswerverifiedShow Answer

A rise in the government budget deficit

Correct AnswerverifiedShow 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

Correct AnswerverifiedShow Answer

A firm produces construction equipment, some of which it exports. Which of the following effects of an increase in the government budget deficit would likely reduce the quantity of equipment it sells?

Correct AnswerverifiedShow Answer

The open-economy macroeconomic model examines the determination of

Correct AnswerverifiedShow Answer

Correct Answer
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The demand curve for loanable ...
View Answer

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Both the equilibrium...
View Answer

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