Question 1

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

Question 2

Which of the following could explain a decrease in the U.S.real exchange rate?

Accepted Answer

A)   the U.S.government budget deficit rises
B)   the U.S.impose import quotas
C)   the default risk of U.S.assets rise
D)   All of the above are correct.E) C) and D)
F) B) and D)

Question 3

At the equilibrium real interest rate in the open-economy macroeconomic model

Accepted Answer

A)   saving = domestic investment
B)   saving = net capital outflow
C)   net capital outflow = domestic investment
D)   net capital outflow + domestic investment = savingE) A) and C)
F) None of the above

Question 4

If a country institutes policies that lead domestic firms to desire more capital stock

Accepted Answer

A)   net capital outflows rise and the real exchange rate rises.
B)   net capital outflows rise and the real exchange rate falls.
C)   net capital outflows fall and the real exchange rate rises.
D)   net capital outflows and the real exchange rate falls.E) None of the above
F) B) and D)

Question 5

If a country's budget deficit rises,then its exchange rate

Accepted Answer

A)   rises,so its imports rise.
B)   rises,so its imports fall.
C)   falls,so its imports rise.
D)   falls so its imports fall.E) B) and C)
F) A) and D)

Question 6

In the open-economy macroeconomic model,other things the same,when a U.S.resident imports a foreign good,the demand for dollars in the foreign-currency exchange market decreases.

Accepted Answer

A) True 
 B)False

Question 7

In the open-economy macroeconomic model,if investment demand increases,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 D)
F) None of the above

Question 8

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 9

Although trade policies do not affect a country's overall trade balance,they do affect specific firms and industries.

Accepted Answer

A) True 
 B)False

Question 10

If the supply of dollars in the market for foreign-currency exchange shifts right,then the exchange rate

Accepted Answer

A)   rises and the quantity of dollars exchanged falls.
B)   rises and the quantity of dollars exchanged does not change.
C)   falls and the quantity of dollars exchanged rises.
D)   falls and the quantity of dollars exchanged does not change.E) C) and D)
F) B) and D)

Question 11

Which of the following is a consistent response to an increase in the U.S.real interest rate?

Accepted Answer

A)   a London bank purchases a U.S.bond instead of a Japanese bond it had considered purchasing.
B)   U.S.firms decide to buy more capital goods
C)   a U.S.citizen decides to put less money in his savings account than he had planned.
D)   All of the above are consistent.E) A) and B)
F) A) and C)

Question 12

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 foreign assets.
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 C)
F) A) and C)

Question 13

In 2002,the United States placed higher tariffs on imports of steel.According to the open-economy macroeconomic model this policy should have

Accepted Answer

A)   reduced imports into the United States and made U.S.net exports rise.
B)   reduced imports into the United States and made the net supply of dollars in the foreign exchange market shift right.
C)   reduced imports of steel into the United States,but reduced U.S.exports of other goods by an equal amount.
D)   reduced imports of steel into the United States and increased U.S.exports of other goods by an equal amount.E) A) and C)
F) A) and D)

Question 14

The country of Frequencia is politically very stable and has a long tradition of respecting property rights.If several other countries suddenly became politically unstable,we would expect Frequencia's

Accepted Answer

A)   real interest rate to rise.
B)   real exchange rate to fall.
C)   net exports to fall.
D)   None of the above is likely.E) A) and B)
F) A) and C)

Question 15

Which of the following contains a list only of things that decrease when the budget deficit of the U.S.increases?

Accepted Answer

A)   U.S.net exports,U.S.domestic investment,U.S.net capital outflow
B)   U.S.supply of loanable funds,U.S.interest rates,U.S.domestic investment
C)   U.S.imports,U.S.interest rates,the real exchange rate of the dollar
D)   None of the above is correct.E) A) and D)
F) A) and C)

Question 16

Other things the same,if the U.S.interest rate falls,then U.S.residents will want to purchase

Accepted Answer

A)   more foreign assets,which increases the quantity of loanable funds demanded.
B)   fewer foreign assets,which decreases the quantity of loanable funds demanded.
C)   more foreign assets,which increase the quantity of loanable funds supplied.
D)   fewer foreign assets,which decreases the quantity of loanable funds supplied.E) All of the above
F) B) and C)

Question 17

Which of the following will decrease U.S.net capital outflow?

Accepted Answer

A)   capital flight from the United States
B)   the government budget deficit increases
C)   the U.S.imposes import quotas
D)   None of the above is correct.E) A) and B)
F) None of the above

Question 18

Which of the following would make both the equilibrium real interest rate and the equilibrium quantity of loanable funds increase?

Accepted Answer

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

Question 19

When Mexico suffered from capital flight in 1994,the U.S.real interest rate

Accepted Answer

A)   rose and the real exchange rate of the dollar appreciated.
B)   rose and the real exchange rate of the dollar depreciated.
C)   fell and the real exchange rate of the dollar appreciated.
D)   fell and the real exchange rate of the dollar depreciated.E) A) and D)
F) All of the above

Question 20

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

Accepted Answer

A)   The U.S.trade balance rises.
B)   The U.S.interest rate rises.
C)   Domestic investment in the U.S.falls.
D)   The real exchange rate of the U.S.dollar appreciates.E) B) and C)
F) None of the above

Exam 32: A Macroeconomic Theory of the Open Economy

Other things the same,if the U.S.interest rate falls,then U.S.residents will want to purchase

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If the supply of dollars in the market for foreign-currency exchange shifts right,then the exchange rate

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Which of the following could explain a decrease in the U.S.real exchange rate?

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

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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.

Correct AnswerverifiedShow Answer

Which of the following contains a list only of things that decrease when the budget deficit of the U.S.increases?

Correct AnswerverifiedShow Answer

The country of Frequencia is politically very stable and has a long tradition of respecting property rights.If several other countries suddenly became politically unstable,we would expect Frequencia's

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model,other things the same,when a U.S.resident imports a foreign good,the demand for dollars in the foreign-currency exchange market decreases.

Correct AnswerverifiedShow Answer

If a country's budget deficit rises,then its exchange rate

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is a consistent response to an increase in the U.S.real interest rate?

Correct AnswerverifiedShow Answer

If a country institutes policies that lead domestic firms to desire more capital stock

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following would make both the equilibrium real interest rate and the equilibrium quantity of loanable funds increase?

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model,the amount of net capital outflow represents the quantity of dollars

Correct AnswerverifiedShow Answer

When Mexico suffered from capital flight in 1994,the U.S.real interest rate

Correct AnswerverifiedShow Answer

In 2002,the United States placed higher tariffs on imports of steel.According to the open-economy macroeconomic model this policy should have

Correct AnswerverifiedShow Answer

Which of the following will decrease U.S.net capital outflow?

Correct AnswerverifiedShow Answer

Although trade policies do not affect a country's overall trade balance,they do affect specific firms and industries.

Correct AnswerverifiedShow Answer

At the equilibrium real interest rate in the open-economy macroeconomic model

Correct AnswerverifiedShow Answer

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