Question 1

In the open-economy macroeconomic model,the market for loanable funds identity can be written as

Accepted Answer

A)  S = I
B)  S = NCO
C)  S = I + NCO
D)  S + I = NCOE) None of the above
F) A) and B)

Question 2

A decrease in the budget deficit causes domestic interest rates

Accepted Answer

A)  and investment to rise.
B)  to rise and investment to fall.
C)  to fall and investment to rise.
D)  and investment to fall.E) A) and B)
F) A) and C)

Question 3

How are the identities S = NCO + I and NCO = NX related to the foreign currency exchange market and the loanable funds market?

Accepted Answer

S is national saving,which is the source...

Question 4

Other things the same,as the real interest rate rises

Accepted Answer

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

Question 5

Figure 33-6 2 and an import quota were imposed,the interest rate would A) stay at r2. B) decrease because supply would shift right. C) increase because supply would shift left. D) decrease because demand would shift left." class="answers-bank-image d-inline" rel="preload" >

-Refer to Figure 33-6.If the interest rate were initially at r2 and an import quota were imposed,the interest rate would

Accepted Answer

A)  stay at r2.
B)  decrease because supply would shift right.
C)  increase because supply would shift left.
D)  decrease because demand would shift left.E) A) and C)
F) A) and B)

Question 6

If the government of a country with a zero trade balance started with a budget deficit and moved to a budget surplus,domestic investment would

Accepted Answer

A)  rise and there would be a trade surplus.
B)  rise and there would be a trade deficit.
C)  fall and there would be a trade surplus.
D)  fall and there would be a trade deficit.E) A) and D)
F) A) and C)

Question 7

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 8

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) A) and D)
F) B) and D)

Question 9

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) A) and C)
F) A) and B)

Question 10

Other things the same,when a Canadian company imports bicycles from the U.S.,the open-economy macroeconomic model treats this transaction as an increase in the quantity of dollars demanded in the U.S.foreign-currency exchange market.

Accepted Answer

A) True 
 B)False

Question 11

The explanation for the slope of

Accepted Answer

A)  the supply of loanable funds curve is based on the logic that a higher real interest rate leads to higher saving.
B)  the demand for loanable funds curve is based on the logic that a higher interest rate leads to higher saving.
C)  the supply of loanable funds curve is based on the logic that a higher real interest rate leads to lower saving.
D)  the demand for loanable funds curve is based on the logic that a higher interest rate leads to lower saving.E) C) and D)
F) B) and C)

Question 12

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 13

A firm produces manufacturing equipment,some of which it exports.Which of the following effects of capital flight in the country it produces in would likely reduce the quantity of equipment it sells?

Accepted Answer

A)  both what happens to the interest rate and what happens to the exchange rate
B)  what happens to the interest rate but not what happens to the exchange rate
C)  what happens to the exchange rate but not what happens to the interest rate
D)  neither what happens to the interest rate nor what happens to the interest rate.E) All of the above
F) A) and C)

Question 14

Suppose that Chile has a government budget surplus,and then goes into deficit.This change would

Accepted Answer

A)  increase national saving and shift Chile's supply of loanable funds left.
B)  increase national saving and shift Chile's demand for loanable funds right.
C)  decrease national saving and shift Chile's supply of loanable funds left.
D)  decrease national saving and shift Chile's demand for loanable funds right.E) C) and D)
F) A) and B)

Question 15

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 D)
F) A) and C)

Question 16

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 17

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) A) and B)
F) A) and D)

Question 18

An increase in the budget surplus

Accepted Answer

A)  raises net exports and domestic investment.
B)  raises net exports and reduces domestic investment.
C)  reduces net exports and raises domestic investment.
D)  reduces net exports and domestic investment.E) A) and C)
F) All of the above

Question 19

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) None of the above
F) All of the above

Question 20

The value of net exports equals the value of

Accepted Answer

A)  national saving.
B)  public saving.
C)  national saving - net capital outflow.
D)  national saving - domestic investment.E) All of the above
F) A) and D)

Exam 33: A Macroeconomic Theory of the Open Economy

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If a country raises its budget deficit then

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

Other things the same,as the real interest rate rises

Correct AnswerverifiedShow Answer

The value of net exports equals the value of

Correct AnswerverifiedShow Answer

How are the identities S = NCO + I and NCO = NX related to the foreign currency exchange market and the loanable funds market?

Correct AnswerverifiedS is national saving,which is the source...View AnswerShow Answer

If the government of a country with a zero trade balance started with a budget deficit and moved to a budget surplus,domestic investment would

Correct AnswerverifiedShow Answer

Figure 33-6 -Refer to Figure 33-6.If the interest rate were initially at r2 and an import quota were imposed,the interest rate would

Correct AnswerverifiedShow Answer

A decrease in the budget deficit causes domestic interest rates

Correct AnswerverifiedShow Answer

A firm produces manufacturing equipment,some of which it exports.Which of the following effects of capital flight in the country it produces in would likely reduce the quantity of equipment it sells?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose that Chile has a government budget surplus,and then goes into deficit.This change would

Correct AnswerverifiedShow Answer

The explanation for the slope of

Correct AnswerverifiedShow Answer

Other things the same,when a Canadian company imports bicycles from the U.S.,the open-economy macroeconomic model treats this transaction as an increase in the quantity of dollars demanded in the U.S.foreign-currency exchange market.

Correct AnswerverifiedShow Answer

An increase in the budget surplus

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

If a country raises its budget deficit,then its

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model,the market for loanable funds identity can be written as

Correct AnswerverifiedShow Answer

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S is national saving,which is the source...
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Figure 33-6 -Refer to Figure 33-6.If the interest rate were initially at r₂ and an import quota were imposed,the interest rate would

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