Question 1

If a country raises its budget deficit,then its

Accepted Answer

A)   net capital outflow and net exports rise.
B)   net capital outflow rises and net exports fall.
C)   net capital outflow falls and net exports rise.
D)   net capital outflow and net exports fall.E) A) and C)
F) B) and D)

Question 2

If at a given real interest rate desired national saving were $50 billion,domestic investment were $40 billion,and net capital outflow were $20 billion,then at that real interest rate in the loanable funds market there would be a

Accepted Answer

A)   surplus.The real interest rate would rise.
B)   surplus.The real interest rate would fall.
C)   shortage.The real interest rate would rise.
D)   shortage.The interest rate would fall.E) A) and B)
F) C) and D)

Question 3

If the U.S.government imposes a quota on toy imports,then net exports of U.S.toys would

Accepted Answer

A)   rise.
B)   not change.
C)   fall.
D)   rise,not change,or fall depending on what happened to the exchange rate.E) A) and D)
F) A) and B)

Question 4

An import quota imposed by the U.S.would reduce U.S.imports,but have no impact on U.S.exports.

Accepted Answer

A) True 
 B)False

Question 5

Suppose the real exchange rate is such that the market for foreign-currency exchange has a surplus.This surplus will lead to

Accepted Answer

A)   an appreciation of the dollar,an increase in U.S.net exports,and so an increase in the quantity of dollars demanded in the foreign exchange market.
B)   an appreciation of the dollar,a decrease in U.S.net exports,and so a decrease in the quantity of dollars demanded in the foreign exchange market.
C)   a depreciation of the dollar,an increase in U.S.net exports,and so an increase in the quantity of dollars demanded in the foreign exchange market.
D)   a depreciation of the dollar,a decrease in U.S.net exports,and so a decrease in the quantity of dollars demanded in the foreign exchange market.E) A) and B)
F) A) and C)

Question 6

Figure 19-2 
-Refer to Figure 19-2.What are the equilibrium values of the real exchange rate and net exports?

Accepted Answer

A)   1.4,100
B)   1,200
C)   .6,300
D)   None of the above are correct.E) A) and B)
F) All of the above

Question 7

Other things the same,if foreigners desire to purchase more U.S.bonds then the demand for loanable funds shifts left.

Accepted Answer

A) True 
 B)False

Question 8

Suppose a presidential candidate promises to increase the government budget surplus and claims that doing so will stop U.S.citizens from investing in foreign companies and increase the value of the dollar.Evaluate this promise.

Accepted Answer

An increase in the government budget sur...

Question 9

U.S.corporation Titan Bikes borrows funds to build a factory in the U.S.and a factory in Denmark.Borrowing for factories in which location(s) is included in the U.S.demand for loanable funds?

Accepted Answer

A)   The U.S.only.
B)   Denmark only.
C)   The U.S.and Denmark.
D)   Neither the U.S.nor Denmark.E) C) and D)
F) None of the above

Question 10

Other things the same,which of the following would shift the supply of dollars in the market for foreign exchange to the right?

Accepted Answer

A)   foreigners want to buy more U.S.bonds
B)   foreigners want to buy fewer U.S.bonds
C)   foreigners want to buy more U.S.goods and services.
D)   foreigners want to buy fewer U.S.goods and services.E) A) and D)
F) B) and C)

Question 11

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

Accepted Answer

A)   national saving.The demand for loanable funds comes from domestic investment + net capital outflow.
B)   national saving.The demand for loanable funds comes only from domestic investment.
C)   private saving.The demand for loanable funds comes from domestic investment + net capital outflow.
D)   private saving.The demand for loanable funds comes only from domestic investment.E) All of the above
F) A) and B)

Question 12

In the open-economy macroeconomic model,if net capital outflow increases 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) None of the above
F) B) and C)

Question 13

If net exports are positive,then

Accepted Answer

A)   net capital outflow is positive,so foreign assets bought by Americans are greater than American assets bought by foreigners.
B)   net capital outflow is positive,so American assets bought by foreigners are greater than foreign assets bought by Americans.
C)   net capital outflow is negative,so foreign assets bought by Americans are greater than American assets bought by foreigners.
D)   net capital outflow is negative,so American assets bought by foreigners are greater than foreign assets bought by Americans.E) A) and B)
F) A) and C)

Question 14

Which of the following is correct?

Accepted Answer

A)   capital flight from the United States decreases net capital outflow
B)   an increase in the government budget deficit creates no change in net capital outflow
C)   if the U.S.imposes a restriction on imports,net capital outflow increases
D)   None of the above is correct.E) B) and C)
F) All of the above

Question 15

Suppose that U.S.citizens start saving more.What does this imply about the supply of loanable funds and the equilibrium real interest rate? What happens to the real exchange rate?

Accepted Answer

The supply of loanable funds increases,a...

Question 16

If a country had capital flight,then the real exchange rate would

Accepted Answer

A)   fall.To offset this fall the government could increase the budget deficit.
B)   fall.To offset this fall the government could decrease the budget deficit.
C)   rise.To offset this rise the government could increase the budget deficit.
D)   rise.To offset this rise the government could decrease the budget deficit.E) A) and C)
F) B) and C)

Question 17

If a country experiences capital flight,which of the following lists only curves that shift right?

Accepted Answer

A)   the demand for loanable funds and the demand for dollars in the market for foreign-currency exchange
B)   the demand for loanable funds and the supply of dollars in the market for foreign-currrency exchange
C)   the supply of loanable funds and the demand for dollars in the market for foreign-currency exchange
D)   the supply of loanable funds and the supply of dollars in the market for foreign-currency exchangeE) B) and C)
F) A) and C)

Question 18

If foreigners want to buy more U.S.bonds,then in the market for foreign-currency exchange the exchange rate

Accepted Answer

A)   and the quantity of dollars traded rises.
B)   rises and the quantity of dollars traded falls.
C)   falls and the quantity of dollars traded rises.
D)   and the quantity of dollars traded falls.E) A) and B)
F) A) and C)

Question 19

In the open-economy macroeconomic model,equilibrium in the market for foreign-currency exchange is determined by the equality between the supply of dollars which comes from

Accepted Answer

A)   U.S.national saving and the demand for dollars for U.S.net exports.
B)   U.S.net capital outflow and the demand for dollars for U.S.net exports.
C)   domestic investment and the demand for U.S.net exports.
D)   foreign demand for U.S.goods and services and U.S.demand for foreign goods and services.E) C) and D)
F) All of the above

Question 20

During the financial crisis it was proposed that firms be provided with a tax credit for investment projects.Such a tax credit would

Accepted Answer

A)   raise both the interest rate and the real exchange rate.
B)   raise the interest rate and reduce the real exchange rate.
C)   reduce the interest rate and raise the real exchange rate.
D)   reduce both the interest rate and the real exchange rate.E) A) and D)
F) A) and C)

Exam 32: A Macroeconomic Theory of the Open Economy

During the financial crisis it was proposed that firms be provided with a tax credit for investment projects.Such a tax credit would

Correct AnswerverifiedShow Answer

Suppose that U.S.citizens start saving more.What does this imply about the supply of loanable funds and the equilibrium real interest rate? What happens to the real exchange rate?

Correct AnswerverifiedThe supply of loanable funds increases,a...View AnswerShow Answer

In the open-economy macroeconomic model,if net capital outflow increases then

Correct AnswerverifiedShow Answer

If the U.S.government imposes a quota on toy imports,then net exports of U.S.toys would

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If a country had capital flight,then the real exchange rate would

Correct AnswerverifiedShow Answer

Suppose the real exchange rate is such that the market for foreign-currency exchange has a surplus.This surplus will lead to

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model,equilibrium in the market for foreign-currency exchange is determined by the equality between the supply of dollars which comes from

Correct AnswerverifiedShow Answer

If net exports are positive,then

Correct AnswerverifiedShow Answer

If a country raises its budget deficit,then its

Correct AnswerverifiedShow Answer

Other things the same,which of the following would shift the supply of dollars in the market for foreign exchange to the right?

Correct AnswerverifiedShow Answer

Figure 19-2 -Refer to Figure 19-2.What are the equilibrium values of the real exchange rate and net exports?

Correct AnswerverifiedShow Answer

Suppose a presidential candidate promises to increase the government budget surplus and claims that doing so will stop U.S.citizens from investing in foreign companies and increase the value of the dollar.Evaluate this promise.

Correct AnswerverifiedAn increase in the government budget sur...View AnswerShow Answer

If at a given real interest rate desired national saving were $50 billion,domestic investment were $40 billion,and net capital outflow were $20 billion,then at that real interest rate in the loanable funds market there would be a

Correct AnswerverifiedShow Answer

An import quota imposed by the U.S.would reduce U.S.imports,but have no impact on U.S.exports.

Correct AnswerverifiedShow Answer

Other things the same,if foreigners desire to purchase more U.S.bonds then the demand for loanable funds shifts left.

Correct AnswerverifiedShow Answer

U.S.corporation Titan Bikes borrows funds to build a factory in the U.S.and a factory in Denmark.Borrowing for factories in which location(s) is included in the U.S.demand for loanable funds?

Correct AnswerverifiedShow Answer

If foreigners want to buy more U.S.bonds,then in the market for foreign-currency exchange the exchange rate

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

If a country experiences capital flight,which of the following lists only curves that shift right?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
The supply of loanable funds increases,a...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
An increase in the government budget sur...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified