Question 1

If the Canadian government raises it budget deficit, then Canada's net capital outflows will

Accepted Answer

A)   increase, so its exchange rate will rise.
B)   increase, so its exchange rate will fall.
C)   decrease, so its exchange rate will rise.
D)   decrease, so its exchange rate will fall.E) None of the above
F) B) and C)

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

When a government increases its budget deficit, then that country's

Accepted Answer

A)   supply of loanable funds shifts right.
B)   supply of loanable funds shifts left.
C)   demand for loanable funds shifts right.
D)   demand for loanable funds shifts left.E) A) and D)
F) C) and D)

Question 4

If U.S. citizens decide to purchase more foreign assets at each interest rate, the U.S. real interest rate

Accepted Answer

A)   increases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases.
B)   increases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases.
C)   decreases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow decreases.
D)   decreases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow increases.E) All of the above
F) A) and B)

Question 5

If a country's exchange rate rises, what happens to its exports and what happens to its imports?

Accepted Answer

Its export...

Question 6

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

Question 7

If the supply of loanable funds shifts right, then the equilibrium

Accepted Answer

A)   levels of net capital outflow and domestic investment decrease.
B)   level of net capital outflow increases and the equilibrium level of domestic investment decreases.
C)   level of net capital outflow decreases and the equilibrium level of domestic investment increases.
D)   levels of net capital outflow and domestic investment increase.E) B) and D)
F) A) and B)

Question 8

The primary focus of the open-economy macroeconomic model is the determination of GDP and the price level.

Accepted Answer

A) True 
 B)False

Question 9

If the real exchange rate for the dollar is above the equilibrium level, the quantity of dollars supplied in the market for foreign-currency exchange is

Accepted Answer

A)   greater than the quantity demanded and the dollar will appreciate.
B)   greater than the quantity demanded and the dollar will depreciate.
C)   less than the quantity demanded and the dollar will appreciate.
D)   less than the quantity demanded and the dollar will depreciate.E) B) and C)
F) All of the above

Question 10

In the open-economy macroeconomic model, the supply of loanable funds comes from

Accepted Answer

A)   national saving. Demand comes from only domestic investment.
B)   national saving. Demand comes from domestic investment and net capital outflow.
C)   Only net capital outflow. Demand for loanable funds comes from national saving.
D)   domestic investment and net capital outflow. Demand for loanable funds comes from national saving.E) All of the above
F) None of the above

Question 11

When a country suffers from capital flight, the exchange rate

Accepted Answer

A)   depreciates, because demand in the market for foreign-currency exchange shifts left.
B)   depreciates, because supply in the market for foreign-currency exchange shifts right.
C)   appreciates, because demand in the market for foreign-currency exchange shifts right.
D)   appreciates, because supply in the market for foreign-currency exchange shifts left.E) B) and C)
F) A) and C)

Question 12

Figure 32-1 
-Refer to Figure 32-1. The loanable funds market is in equilibrium at

Accepted Answer

A)   2 percent, $20 billion.
B)   4 percent, $40 billion.
C)   6 percent, $60 billion.
D)   None of the above is correct.E) B) and C)
F) None of the above

Question 13

If the supply of 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) None of the above
F) A) and B)

Question 14

Fill in the table below with the direction of the variables that change in response to the events in the first column.

Accepted Answer

The answer of Fill in the table below with the...

Question 15

A country recently had 500 billion euros of national saving and -200 billion euros of net capital outflow. What was its domestic investment? What was its quantity of loanable funds supplied?

Accepted Answer

700 billio...

Question 16

When the U.S. real interest rate falls, purchasing U.S. assets becomes

Accepted Answer

A)   more attractive to both U.S. and foreign residents.
B)   more attractive to U.S. residents and less attractive to foreign residents.
C)   less attractive to U.S. residents and more attractive to foreign residents.
D)   less attractive to both U.S. residents and foreign residents.E) A) and D)
F) B) and C)

Question 17

When a country imposes an import quota, its exchange rate

Accepted Answer

A)   rises because the supply of dollars in the market for foreign-currency exchange falls.
B)   falls because the supply of dollars in the market for foreign-currency exchange rises.
C)   rises because the demand for dollars in the market for foreign-currency exchange rises.
D)   falls because the demand for dollars in the market for foreign-currency exchange falls.E) All of the above
F) A) and B)

Question 18

An increase in the budget deficit makes domestic interest rates

Accepted Answer

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

Question 19

Other things the same, if the Japanese real interest rate were to increase, Japanese net capital outflow

Accepted Answer

A)   and net capital outflow of other countries would rise.
B)   and net capital outflow of other countries would fall.
C)   would rise, while net capital outflow of other countries would fall.
D)   would fall, while net capital outflow of other countries would rise.E) All of the above
F) A) and C)

Question 20

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) A) and D)

Exam 19: A Macroeconomic Theory of the Open Economy

An increase in the budget deficit makes domestic interest rates

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The primary focus of the open-economy macroeconomic model is the determination of GDP and the price level.

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Fill in the table below with the direction of the variables that change in response to the events in the first column.

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Figure 32-1 -Refer to Figure 32-1. The loanable funds market is in equilibrium at

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If U.S. citizens decide to purchase more foreign assets at each interest rate, the U.S. real interest rate

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A country recently had 500 billion euros of national saving and -200 billion euros of net capital outflow. What was its domestic investment? What was its quantity of loanable funds supplied?

Correct Answerverified700 billio...View AnswerShow Answer

When the U.S. real interest rate falls, purchasing U.S. assets becomes

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If the supply of loanable funds shifts left, then

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If a country's exchange rate rises, what happens to its exports and what happens to its imports?

Correct AnswerverifiedIts export...View AnswerShow Answer

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

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If the supply of loanable funds shifts right, then the equilibrium

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In the open-economy macroeconomic model, the supply of loanable funds comes from

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Other things the same, if the Japanese real interest rate were to increase, Japanese net capital outflow

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When a country suffers from capital flight, the exchange rate

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When a government increases its budget deficit, then that country's

Correct AnswerverifiedShow Answer

When a country imposes an import quota, its exchange rate

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If the real exchange rate for the dollar is above the equilibrium level, the quantity of dollars supplied in the market for foreign-currency exchange is

Correct AnswerverifiedShow Answer

If a country repeals an investment tax credit,

Correct AnswerverifiedShow Answer

If the Canadian government raises it budget deficit, then Canada's net capital outflows will

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

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700 billio...
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Its export...
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