Question 1

If the Japanese government raised its budget deficit, then the yen would

Accepted Answer

A)  depreciate and Japanese net exports would rise.
B)  depreciate and Japanese net exports would fall.
C)  appreciate and Japanese net exports would rise.
D)  appreciate and Japanese net exports would fall.E) A) and D)
F) B) and D)

Question 2

Other things the same, a decrease in the real interest rate

Accepted Answer

A)  decreases the quantity of loanable funds demanded.
B)  increases the quantity of loanable funds demand
C)  shifts the demand for loanable funds to the right.
D)  shifts the demand for loanable funds to the left.E) B) and C)
F) All of the above

Question 3

An increase in the budget deficit causes domestic interest rates

Accepted Answer

A)  and net capital outflow to rise.
B)  to rise and net capital outflow to fall.
C)  to fall and net capital outflow to rise.
D)  and net capital outflow to fall.E) All of the above
F) A) and B)

Question 4

A rise in the government budget deficit

Accepted Answer

A)  increases the interest rate so in the market for foreign-currency exchange, supply shifts right.
B)  increases the interest rate so in the market for foreign-currency exchange,supply shifts left.
C)  decreases the interest rate so in the market for foreign-currency exchange, supply shifts left.
D)  decreases the interest rate so in the market for foreign-currency exchange supply shifts right.E) A) and C)
F) A) and D)

Question 5

If the demand for dollars in the market for foreign-currency exchange shifts left, then the exchange rate

Accepted Answer

A)  rises and the quantity of dollars exchanged rises.
B)  rises and the quantity of dollars exchanged does not change.
C)  falls and the quantity of dollars exchanged falls.
D)  falls and the quantity of dollars exchanged does not change.E) None of the above
F) All of the above

Question 6

If the demand for loanable funds shifts right, 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 quantify of loanable funds falls.E) C) and D)
F) All of the above

Question 7

A country has private saving of $500 billion, public saving of -$100 billion, domestic investment of $150 billion, and net capital outflow of $250 billion. What is its supply of loanable funds?

Accepted Answer

A)  $650 billion
B)  $600 billion
C)  $400 billion
D)  $350 billionE) None of the above
F) A) and C)

Question 8

Other things the same, a decrease in the interest rate

Accepted Answer

A)  reduces domestic investment which reduces the quantity of loanable funds supplied.
B)  reduces domestic investment which reduces the quantity of loan funds demanded.
C)  raises domestic investment which raises the quantity of loanable funds supplied.
D)  raises domestic investment which raises the quantity of loanable funds demanded.E) A) and B)
F) All of the above

Question 9

Which of the following would shift the supply of dollars in the market for foreign-currency exchange of the open-economy macroeconomic model to the left?

Accepted Answer

A)  the exchange rate rises
B)  the exchange rate falls
C)  the expected rate of return on U.S. assets rises
D)  the expected rate of return on U.S. assets fallsE) B) and C)
F) A) and D)

Question 10

In the open-economy macroeconomic model, if the supply of loanable funds shifts right

Accepted Answer

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

Question 11

Which of the following is the most likely result from an increase in a country's government budget surplus?

Accepted Answer

A)  higher interest rates
B)  lower imports
C)  lower net capital outflows
D)  lower domestic investmentE) All of the above
F) None of the above

Question 12

Other things the same, an increase in the U.S. interest rate causes

Accepted Answer

A)  demand in the market for foreign-currency exchange to increase so the exchange rate increases.
B)  demand in the market for foreign-currency exchange to decrease so the exchange rate decreases.
C)  supply in the market for foreign-currency exchange to increase so the exchange rate decreases.
D)  supply in the market for foreign-currency exchange to decrease so the exchange rate increases.E) B) and C)
F) A) and B)

Question 13

If at a given real interest rate desired national saving is $200 billion, domestic investment is $100 billion, and net capital outflow is $80 billion, then at that real interest rate in the loanable funds market there is a

Accepted Answer

A)  surplus. The real interest rate will rise.
B)  surplus. The real interest rate will fall.
C)  shortage. The real interest rate will rise.
D)  shortage. The real interest rate will fall.E) A) and B)
F) None of the above

Question 14

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

Question 15

In an open economy, the source for the demand for loanable funds is

Accepted Answer

A)  national saving.
B)  national saving + net capital outflow.
C)  investment
D)  investment + net capital outflowE) C) and D)
F) A) and B)

Question 16

A U.S. bank wants to buy euros in order to buy German bonds. In the open-economy macroeconomic model, this transaction would be part of

Accepted Answer

A)  the supply of currency in the foreign exchange market, and part of the supply of loanable funds.
B)  the demand for currency in the foreign exchange market, and part of the supply of loanable funds.
C)  the supply of currency in the foreign exchange market, and part of the demand for loanable funds.
D)  the demand for currency in the foreign exchange market, and part of the demand for loanable funds.E) B) and C)
F) All of the above

Question 17

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) B) and C)

Question 18

If at a given real interest rate desired national saving is $60 billion, domestic investment is $30 billion, and net capital outflow is $20 billion, then at that real interest rate in the loanable funds market there is a

Accepted Answer

A)  surplus. The real interest rate will rise.
B)  surplus. The real interest rate will fall.
C)  shortage. The real interest rate will rise.
D)  shortage. The real interest rate will fall.E) A) and C)
F) None of the above

Question 19

When a country imposes a trade quota, the demand for currency in the market for foreign exchange shifts to the right

Accepted Answer

A) True 
 B)False

Question 20

If the U.S. government went from a budget deficit to a budget surplus then

Accepted Answer

A)  the interest rate and the real exchange rate would increase.
B)  the interest rate and the real exchange rate would decrease.
C)  the interest rate would increase and the real exchange rate would decrease.
D)  the interest rate would decrease and the real exchange rate would increase.E) All of the above
F) B) and C)

Exam 32: A Macroeconomic Theory of the Open Economy

In the open-economy macroeconomic model, if the supply of loanable funds shifts right

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If the Japanese government raised its budget deficit, then the yen would

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Other things the same, a decrease in the interest rate

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Which of the following is the most likely result from an increase in a country's government budget surplus?

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A country has private saving of $500 billion, public saving of -$100 billion, domestic investment of $150 billion, and net capital outflow of $250 billion. What is its supply of loanable funds?

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

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If the demand for dollars in the market for foreign-currency exchange shifts left, then the exchange rate

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Other things the same, a decrease in the real interest rate

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Which of the following would shift the supply of dollars in the market for foreign-currency exchange of the open-economy macroeconomic model to the left?

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If the demand for loanable funds shifts right, then

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A U.S. bank wants to buy euros in order to buy German bonds. In the open-economy macroeconomic model, this transaction would be part of

Correct AnswerverifiedShow Answer

If at a given real interest rate desired national saving is $60 billion, domestic investment is $30 billion, and net capital outflow is $20 billion, then at that real interest rate in the loanable funds market there is a

Correct AnswerverifiedShow Answer

In an open economy, the source for the demand for loanable funds is

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If the U.S. government went from a budget deficit to a budget surplus then

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A rise in the government budget deficit

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When a country imposes a trade quota, the demand for currency in the market for foreign exchange shifts to the right

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If at a given real interest rate desired national saving is $200 billion, domestic investment is $100 billion, and net capital outflow is $80 billion, then at that real interest rate in the loanable funds market there is a

Correct AnswerverifiedShow Answer

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

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Other things the same, an increase in the U.S. interest rate causes

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An increase in the budget deficit causes domestic interest rates

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