Question 1

If there is a shortage of loanable funds, then

Accepted Answer

A)   the demand for loanable funds will shift right so the real interest rate rises.
B)   the supply of loanable funds will shift left so the real interest rate falls.
C)   there will be no shifts of the curves, but the real interest rate rises.
D)   there will be no shifts of the curves, but the real interest rate falls.E) All of the above
F) None of the above

Question 2

What do trade policies do to the standard of living?

Accepted Answer

Trade policies reduce both imports and e...

Question 3

In the open­economy macroeconomic model, if a country's supply of loanable funds shifts right, then

Accepted Answer

A)   net capital outflow rises, so the exchange rate rises.
B)   net capital outflow rises, so the exchange rate falls.
C)   net capital outflow falls, so the exchange rate rises.
D)   net capital outflow falls, so the exchange rate falls.E) All of the above
F) A) and D)

Question 4

In the open-economy macroeconomic model, if investment demand increases, then

Accepted Answer

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

Question 5

Other things the same, a decrease in the U.S. real interest rate induces

Accepted Answer

A)   Americans to buy more foreign assets, which increases U.S. net capital outflow.
B)   Americans to buy more foreign assets, which reduces U.S. net capital outflow.
C)   foreigners to buy more U.S. assets, which reduces U.S. net capital outflow.
D)   foreigners to buy more U.S. assets, which increases U.S. net capital outflow.E) A) and B)
F) A) and C)

Question 6

An increase in a country's real interest rate reduces that country's net capital outflow.

Accepted Answer

A) True 
 B)False

Question 7

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 8

If a government increases its budget deficit, then interest rates

Accepted Answer

A)   rise and the real exchange rate appreciates.
B)   fall and the real exchange rate depreciates.
C)   rise and the real exchange rate depreciates.
D)   fall and the real exchange rate appreciates.E) B) and D)
F) None of the above

Question 9

If the U.S. imposes a quota on cotton, then

Accepted Answer

A)   both exports and imports of other goods will rise.
B)   exports of other goods will rise and imports of other goods will fall.
C)   exports of other goods will fall and imports of other goods will rise.
D)   both imports and exports of other goods will fall.E) A) and D)
F) All of the above

Question 10

At a given real exchange rate, which of the following, by itself, would increase the supply of dollars in the market for foreign-currency exchange?

Accepted Answer

A)   foreign citizens want to buy more U.S. bonds
B)   U.S. citizens want to buy more foreign bonds
C)   foreign citizens want to buy more U.S. goods
D)   U.S. citizens want to buy more foreign goodsE) All of the above
F) A) and B)

Question 11

Figure 32-1 
-Refer to Figure 32-1. If the real interest rate is 6 percent, the quantity of loanable funds demanded is

Accepted Answer

A)   $20 billion, and the quantity supplied is $40 billion.
B)   $20 billion, and the quantity supplied is $60 billion.
C)   $60 billion, and the quantity supplied is $20 billion.
D)   $60 billion, and the quantity supplied is $40 billion.E) A) and B)
F) A) and C)

Question 12

If the risk of holding assets in foreign countries rises relative to the risk of holding U.S assets, then

Accepted Answer

A)   U.S. net capital outflow rises which increases the U.S. exchange rate.
B)   U.S. net capital outflow rises which decreases the U.S. exchange rate.
C)   U.S. net capital outflow falls which increases the U.S. exchange rate.
D)   U.S. net capital outflow falls which decreases the U.S. exchange rate.E) None of the above
F) All of the above

Question 13

Which of the following makes)  demand for U.S. dollars in the market for foreign-currency exchange higher than otherwise?

Accepted Answer

A)   a U.S. airline wanting buy jets made in France and a Swedish hospital wanting to buy medical equipment made in the U.S.
B)   a U.S. airline wanting to buy jets made in France, but not a Swedish hospital wanting to buy medical equipment made in the U.S.
C)   a Swedish hospital wanting to buy medical equipment made in the U.S., but not a U.S. airline wanting to buy jets made in France
D)   neither a U.S. bank wanting to lend money to a Canadian company nor a U.S. firm wanting to buy computers made in South KoreaE) B) and D)
F) B) and C)

Question 14

According to the open-economy macroeconomic model, if the U.S. government budget deficit increases, then both U.S. domestic investment and U.S. net capital outflow decrease.

Accepted Answer

A) True 
 B)False

Question 15

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) C) and D)
F) A) and B)

Question 16

What effect do protectionist policies have on the trade deficit?

Accepted Answer

Protectionist policies increase the dema...

Question 17

Other things the same, if the real interest rate in a country falls, domestic residents will desire to purchase

Accepted Answer

A)   more capital goods and more foreign bonds.
B)   more capital goods but fewer foreign bonds.
C)   more foreign bonds but fewer capital goods.
D)   fewer capital goods and fewer foreign bonds.E) A) and C)
F) B) and C)

Question 18

Suppose the U.S. supply of loanable funds shifts left. This will

Accepted Answer

A)   increase U.S. net capital outflow and increase the quantity of loanable funds demanded.
B)   increase U.S. net capital outflow and decrease the quantity of loanable funds demanded.
C)   decrease U.S. net capital outflow and increase the quantity of loanable funds demanded.
D)   decrease U.S. net capital outflow and decrease the quantity of loanable funds demanded.E) All of the above
F) A) and C)

Question 19

Refer to Budget in Recession. What does this change in the budget deficit do to the equilibrium values of the interest rate and the quantity of loanable funds?

Accepted Answer

Since the supply of loanable f...

Question 20

Capital flight raises a country's real exchange rate.

Accepted Answer

A) True 
 B)False

Exam 19: A Macroeconomic Theory of the Open Economy

When a country experiences capital flight its currency

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Refer to Budget in Recession. What does this change in the budget deficit do to the equilibrium values of the interest rate and the quantity of loanable funds?

Correct AnswerverifiedSince the supply of loanable f...View AnswerShow Answer

Which of the following makes) demand for U.S. dollars in the market for foreign-currency exchange higher than otherwise?

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What effect do protectionist policies have on the trade deficit?

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

What do trade policies do to the standard of living?

Correct AnswerverifiedTrade policies reduce both imports and e...View AnswerShow Answer

If there is a shortage of loanable funds, then

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Other things the same, a decrease in the U.S. real interest rate induces

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Other things the same, if the real interest rate in a country falls, domestic residents will desire to purchase

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If the U.S. imposes a quota on cotton, then

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If a government increases its budget deficit, then interest rates

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At a given real exchange rate, which of the following, by itself, would increase the supply of dollars in the market for foreign-currency exchange?

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An increase in a country's real interest rate reduces that country's net capital outflow.

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According to the open-economy macroeconomic model, if the U.S. government budget deficit increases, then both U.S. domestic investment and U.S. net capital outflow decrease.

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Suppose the U.S. supply of loanable funds shifts left. This will

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In the open-economy macroeconomic model, if investment demand increases, then

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Capital flight raises a country's real exchange rate.

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In the open­economy macroeconomic model, if a country's supply of loanable funds shifts right, then

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Figure 32-1 -Refer to Figure 32-1. If the real interest rate is 6 percent, the quantity of loanable funds demanded is

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If the risk of holding assets in foreign countries rises relative to the risk of holding U.S assets, then

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

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Since the supply of loanable f...
View Answer

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Protectionist policies increase the dema...
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Trade policies reduce both imports and e...
View Answer

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In the openeconomy macroeconomic model, if a country's supply of loanable funds shifts right, then

Correct Answer
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