Question 1

Because the open-economy macroeconomic model focuses on the long run,it is assumed that

Accepted Answer

A)   GDP,but not the price level is given.
B)   the price level,but not GDP is given.
C)   both the price level and GDP are given.
D)   the price level and GDP are variables to be determined by the model.E) A) and B)
F) A) and C)

Question 2

In the long run import quotas do not affect the size of net exports.

Accepted Answer

A) True 
 B)False

Question 3

If a country went from a government budget deficit to a surplus,national saving would

Accepted Answer

A)   increase,shifting the supply of loanable funds right.
B)   increase,shifting the supply of loanable funds left.
C)   decrease,shifting the demand for loanable funds right.
D)   decrease,shifting the demand for loanable funds left.E) A) and D)
F) B) and D)

Question 4

In the open-economy macroeconomic model,the supply of dollars in the market for foreign-currency exchange comes from

Accepted Answer

A)   net exports
B)   net capital outflow
C)   net exports + net capital outflow
D)   net exports - net capital outflowE) None of the above
F) A) and C)

Question 5

Suppose that the U.S.imposes an import quota on lumber.The quota makes the real exchange rate of the U.S.dollar

Accepted Answer

A)   appreciate but does not change the real interest rate in the United States.
B)   appreciate and the real interest rate in the United States increase.
C)   depreciate and the real interest rate in the United States decrease.
D)   depreciate but does not change the real interest rate in the United States.E) B) and D)
F) All of the above

Question 6

Explain how the relation between the real exchange rate and net exports explains the downward slope of the demand for foreign-currency exchange curve.

Accepted Answer

When the U.S.real exchange rate apprecia...

Question 7

In the open-economy macroeconomic model,at the equilibrium real interest rate,the amount that people (including government)want to save equals desired quantities of domestic investment and net capital outflow.

Accepted Answer

A) True 
 B)False

Question 8

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

Question 9

If the United States imposes an import quota on clothing,then U.S.exports

Accepted Answer

A)   increase,U.S.imports increase,and U.S.net exports will not change.
B)   increase,U.S.imports decrease,and U.S.net exports increase.
C)   decrease,U.S.imports increase,and U.S.net exports decrease.
D)   decrease,U.S.imports decrease,and U.S.net exports will not change.E) All of the above
F) None of the above

Question 10

If the risk of buying U.S.assets rises because it is discovered that lending institutions had not carefully evaluated borrowers prior to lending them funds,then

Accepted Answer

A)   the real exchange rate and the interest rate will rise.
B)   the real exchange rate will rise and the interest rate will fall.
C)   the real exchange rate will fall and the interest rate will rise.
D)   the real exchange rate and the interest rate will fall.E) None of the above
F) All of the above

Question 11

Figure 19-4 2 and E3,an increase in the budget surplus can be illustrated as a move to A)  r3 and E4. B)  r3 and E2. C)  r1 and E4. D)  r1 and E2." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 19-5.Starting from r2 and E3,an increase in the budget surplus can be illustrated as a move to

Accepted Answer

A)   r3 and E4.
B)   r3 and E2.
C)   r1 and E4.
D)   r1 and E2.E) C) and D)
F) A) and B)

Question 12

In the 1980s,both the U.S.government budget and U.S.trade deficits increased.

Accepted Answer

A) True 
 B)False

Question 13

Other things the same,which of the following would a drop in the real interest rate raise:
desired investment spending,desired national saving,desired net capital outflow?

Accepted Answer

desired investment s...

Question 14

The purchase of a capital asset adds to the demand for loanable funds only if that asset is a domestic one.

Accepted Answer

A) True 
 B)False

Question 15

If a country raises its budget deficit then

Accepted Answer

A)   both its supply of and demand for loanable funds shift.
B)   its supply of but not its demand for loanable funds shifts.
C)   its demand for but not its supply of loanable funds shifts.
D)   neither its supply nor its demand for loanable funds shift.E) C) and D)
F) A) and B)

Question 16

A large and sudden movement of funds out of a country is called

Accepted Answer

A)   arbitrage.
B)   capital flight.
C)   crowding out.
D)   capital mobility.E) B) and C)
F) A) and D)

Question 17

If the budget deficit increases,then

Accepted Answer

A)   an increase in the interest rate increases net capital outflow.
B)   an increase in the interest rate decreases net capital outflow.
C)   a decrease in the interest rate increases net capital outflow.
D)   a decrease in the interest rate decreases net capital outflow.E) B) and D)
F) C) and D)

Question 18

A country has domestic investment of $100 billion.Its citizens purchase $500 of foreign assets and foreign citizens purchase $300 of its assets.What is national saving?

Accepted Answer

A)   -$100 billion
B)   $100 billion
C)   $300 billion
D)   $600 billionE) None of the above
F) C) and D)

Question 19

In the open economy macroeconomic model,the price that balances supply and demand in the market for foreign-currency exchange model is the

Accepted Answer

A)   nominal exchange rate.
B)   nominal interest rate.
C)   real exchange rate.
D)   real interest rate.E) B) and D)
F) A) and C)

Question 20

If there is a surplus in the U.S.loanable funds market,then the interest rate

Accepted Answer

A)   rises,which increases quantity of loanable funds demanded.
B)   rises,which decreases the quantity of loanable funds demanded.
C)   falls,which increases the quantity of loanable funds demanded.
D)   falls,which decreases the quantity of loanable funds demanded.E) A) and D)
F) C) and D)

Exam 32: A Macroeconomic Theory of the Open Economy

Figure 19-4 -Refer to Figure 19-5.Starting from r2 and E3,an increase in the budget surplus can be illustrated as a move to

Correct AnswerverifiedShow Answer

If the United States imposes an import quota on clothing,then U.S.exports

Correct AnswerverifiedShow Answer

Other things the same,which of the following would a drop in the real interest rate raise: desired investment spending,desired national saving,desired net capital outflow?

Correct Answerverifieddesired investment s...View AnswerShow Answer

In the open economy macroeconomic model,the price that balances supply and demand in the market for foreign-currency exchange model is the

Correct AnswerverifiedShow Answer

If the budget deficit increases,then

Correct AnswerverifiedShow Answer

In the long run import quotas do not affect the size of net exports.

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model,at the equilibrium real interest rate,the amount that people (including government)want to save equals desired quantities of domestic investment and net capital outflow.

Correct AnswerverifiedShow Answer

If there is a surplus in the U.S.loanable funds market,then the interest rate

Correct AnswerverifiedShow Answer

Suppose that the U.S.imposes an import quota on lumber.The quota makes the real exchange rate of the U.S.dollar

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

A country has domestic investment of $100 billion.Its citizens purchase $500 of foreign assets and foreign citizens purchase $300 of its assets.What is national saving?

Correct AnswerverifiedShow Answer

Because the open-economy macroeconomic model focuses on the long run,it is assumed that

Correct AnswerverifiedShow Answer

Explain how the relation between the real exchange rate and net exports explains the downward slope of the demand for foreign-currency exchange curve.

Correct AnswerverifiedWhen the U.S.real exchange rate apprecia...View AnswerShow Answer

If a country raises its budget deficit then

Correct AnswerverifiedShow Answer

If the risk of buying U.S.assets rises because it is discovered that lending institutions had not carefully evaluated borrowers prior to lending them funds,then

Correct AnswerverifiedShow Answer

A large and sudden movement of funds out of a country is called

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model,the supply of dollars in the market for foreign-currency exchange comes from

Correct AnswerverifiedShow Answer

The purchase of a capital asset adds to the demand for loanable funds only if that asset is a domestic one.

Correct AnswerverifiedShow Answer

In the 1980s,both the U.S.government budget and U.S.trade deficits increased.

Correct AnswerverifiedShow Answer

If a country went from a government budget deficit to a surplus,national saving would

Correct AnswerverifiedShow Answer

Figure 19-4 -Refer to Figure 19-5.Starting from r₂ and E₃,an increase in the budget surplus can be illustrated as a move to

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desired investment s...
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When the U.S.real exchange rate apprecia...
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