Question 1

Which of the following would make the equilibrium interest rate increase and the equilibrium quantity of funds decrease?

Accepted Answer

A)  The supply of loanable funds shifts right.
B)  The supply of loanable funds shifts left.
C)  The demand for loanable funds shifts right.
D)  The demand for loanable funds shifts left.E) None of the above
F) A) and B)

Question 2

An increase in the real interest rate

Accepted Answer

A)  discourages people from saving and so increases the quantity of loanable funds demanded.
B)  discourages people from saving and so decreases the quantity of loanable funds demanded.
C)  encourages people to save and so increases the quantity of loanable funds supplied.
D)  encourages people to save and so decreases the quantity of loanable funds supplied.E) A) and C)
F) A) and B)

Question 3

If net exports are positive,then

Accepted Answer

A)  exports are greater than imports.
B)  net capital outflow is negative.
C)  Both of the above are correct.
D)  Neither of the above is correct.E) None of the above
F) B) and C)

Question 4

Figure 32-2

-Refer to Figure 32-2.The curve in panel b shows that as the interest rate rises,

Accepted Answer

A)  domestic investment declines.
B)  net capital outflow declines.
C)  net capital outflow and domestic investment decline.
D)  None of the above is correct.E) B) and C)
F) A) and C)

Question 5

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 = NCOE) A) and C)
F) A) and D)

Question 6

When the government increases the government budget deficit,national saving decreases.

Accepted Answer

A) True 
 B)False

Question 7

What effect do protectionist policies have on the trade deficit?

Accepted Answer

Protectionist policies increase the dema...

Question 8

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) All of the above
F) A) and B)

Question 9

Figure 32-1
 
-Refer to Figure 32-1.In the Figure shown,if the real interest rate is 3 percent,the quantity of loanable funds demanded is

Accepted Answer

A)  $10 billion, and the quantity supplied is 20.
B)  $10 billion, and the quantity supplied is 30.
C)  $30 billion, and the quantity supplied is 10.
D)  $30 billion, and the quantity supplied is 20.E) A) and D)
F) A) and C)

Question 10

In the market for foreign-currency exchange in the open economy macroeconomic model,the amount of net capital outflow represents the quantity of dollars

Accepted Answer

A)  supplied for the purpose of selling assets domestically.
B)  supplied for the purpose of buying assets abroad.
C)  demanded for the purpose of buying U.S.net exports of goods and services.
D)  demanded for the purpose of importing foreign goods and services.E) B) and D)
F) B) and C)

Question 11

The value of net exports equals the value of

Accepted Answer

A)  national saving.
B)  public saving.
C)  national saving - net exports.
D)  national saving - domestic investment.E) B) and C)
F) C) and D)

Question 12

If the U.S.put an import quota on vacuum cleaners,it would

Accepted Answer

A)  raise U.S.net exports of vacuum cleaners and raise net exports of other U.S.goods.
B)  raise U.S.net exports of vacuum cleaners and lower net exports of other U.S.goods.
C)  lower U.S.net exports of vacuum cleaners and raise net exports of other U.S.goods.
D)  lower U.S.net exports of vacuum cleaners and lower net exports of other U.S.goods.E) A) and D)
F) B) and C)

Question 13

The supply of loanable funds comes from

Accepted Answer

A)  national saving.
B)  national saving and domestic investment.
C)  domestic investment and net capital outflow.
D)  national saving, domestic investment, and net capital outflow.E) C) and D)
F) All of the above

Question 14

In the open-economy macroeconomic model we focus on the determination of GDP and the price level.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following would not be a consequence of an increase in the U.S.government budget deficit?

Accepted Answer

A)  U.S.interest rates rise.
B)  U.S.net capital outflow falls.
C)  The real exchange rate of the U.S.dollar depreciates.
D)  The U.S.supply of loanable funds shifts left.E) All of the above
F) A) and B)

Question 16

When a country experiences capital flight,the interest rate

Accepted Answer

A)  falls because the demand for loanable funds shifts left.
B)  falls because the supply for loanable funds shifts right.
C)  rises because the demand for loanable funds shifts right.
D)  rises because the supply for loanable funds shifts left.E) All of the above
F) A) and C)

Question 17

Which of the following increases if the U.S.imposes an import quota on computer components?

Accepted Answer

A)  U.S.exports
B)  U.S.imports
C)  U.S.net exports
D)  None of the above increases.E) A) and B)
F) A) and C)

Question 18

Figure 32-2

-Refer to Figure 32-2.Domestic investment plus net capital outflow is represented by the

Accepted Answer

A)  demand curve in panela
B)  demand curve in panelc
C)  supply curve in panel a.
D)  None of the above is correct.E) B) and C)
F) All of the above

Question 19

In the open-economy macroeconomic model,if a country's interest rate increases,its 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) A) and D)
F) B) and C)

Question 20

At the equilibrium interest rate in the open economy macroeconomic model,the equilibrium quantity of loanable funds equals

Accepted Answer

A)  net capital outflow.
B)  domestic investment.
C)  foreign currency supplied.
D)  national saving.E) A) and B)
F) A) and C)

Exam 32: A Macroeconomic Theory of the Open Economy

Which of the following increases if the U.S.imposes an import quota on computer components?

Correct AnswerverifiedShow Answer

An increase in the real interest rate

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What effect do protectionist policies have on the trade deficit?

Correct AnswerverifiedProtectionist policies increase the dema...View AnswerShow Answer

The supply of loanable funds comes from

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In the open-economy macroeconomic model we focus on the determination of GDP and the price level.

Correct AnswerverifiedShow Answer

When a country experiences capital flight,the interest rate

Correct AnswerverifiedShow Answer

Figure 32-1 -Refer to Figure 32-1.In the Figure shown,if the real interest rate is 3 percent,the quantity of loanable funds demanded is

Correct AnswerverifiedShow Answer

In the market for foreign-currency exchange in the open economy macroeconomic model,the amount of net capital outflow represents the quantity of dollars

Correct AnswerverifiedShow Answer

Which of the following would make the equilibrium interest rate increase and the equilibrium quantity of funds decrease?

Correct AnswerverifiedShow Answer

If net exports are positive,then

Correct AnswerverifiedShow Answer

When the government increases the government budget deficit,national saving decreases.

Correct AnswerverifiedShow Answer

The open-economy macroeconomic model examines the determination of

Correct AnswerverifiedShow Answer

At the equilibrium interest rate in the open economy macroeconomic model,the equilibrium quantity of loanable funds equals

Correct AnswerverifiedShow Answer

Figure 32-2 -Refer to Figure 32-2.Domestic investment plus net capital outflow is represented by the

Correct AnswerverifiedShow Answer

Which of the following would not be a consequence of an increase in the U.S.government budget deficit?

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model,if a country's interest rate increases,its net capital outflow

Correct AnswerverifiedShow Answer

If the U.S.put an import quota on vacuum cleaners,it would

Correct AnswerverifiedShow Answer

Figure 32-2 -Refer to Figure 32-2.The curve in panel b shows that as the interest rate rises,

Correct AnswerverifiedShow Answer

The value of net exports equals the value of

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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Protectionist policies increase the dema...
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