Question 1

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

Accepted Answer

A)  national saving
B)  national saving + net capital outflow
C)  investment + the government budget deficit
D)  investment + net capital outflowE) None of the above
F) A) and D)

Question 2

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

Accepted Answer

A)  raises net capital outflow which decreases the quantity of loanable funds demanded.
B)  raises net capital outflow which increases the quantity of loanable funds demanded.
C)  lowers net capital outflow which decreases the quantity of loanable funds demanded.
D)  lowers net capital outflow which increases the quantity of loanable funds demanded.E) B) and C)
F) None of the above

Question 3

Other things the same,if the real interest rate in a country falls,domestic residents will desire to purchase

Accepted Answer

A)  more capital goods and more foreign bonds.
B)  more capital goods but fewer foreign bonds.
C)  more foreign bonds but fewer capital goods.
D)  fewer capital goods and fewer foreign bonds.E) None of the above
F) A) and C)

Question 4

In an open economy,

Accepted Answer

A)  net capital outflow = imports.
B)  net capital outflow = net exports.
C)  net capital outflow = exports.
D)  None of the above is correct.E) B) and C)
F) B) and D)

Question 5

If the demand for dollars in the market for foreign-currency exchange shifts right,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) B) and D)
F) B) and C)

Question 6

Figure 32-2 
-Refer to Figure 32-2.If the real exchange rate is 1,then there is a

Accepted Answer

A)  surplus of 100 so the real exchange rate will fall.
B)  surplus of 100 so the real exchange rate will rise.
C)  shortage of 100 so the real exchange rate will fall.
D)  shortage of 100 so the real exchange rate will rise.E) All of the above
F) A) and B)

Question 7

If the supply of 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 quantity of loanable funds falls.E) B) and C)
F) A) and D)

Question 8

A country has domestic investment of $200 billion.Its citizens purchase $600 of foreign assets and foreign citizens purchase $300 of its assets.What is national saving?

Accepted Answer

A)  $400 billion
B)  $500 billion
C)  $600 billion
D)  $800 billionE) A) and B)
F) A) and C)

Question 9

When the real exchange rate for the dollar appreciates,U.S.goods become

Accepted Answer

A)  less expensive relative to foreign goods,which makes exports rise and imports fall.
B)  less expensive relative to foreign goods,which makes exports fall and imports rise.
C)  more expensive relative to foreign goods,which makes exports rise and imports fall.
D)  more expensive relative to foreign goods,which makes exports fall and imports rise.E) A) and C)
F) All of the above

Question 10

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) B) and C)
F) C) and D)

Question 11

Which of the following is considered part of the supply of U.S.dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

Accepted Answer

A)  both a U.S.bank wanting to lend money to a Canadian company and a U.S.firm wanting to buy computers made in South Korea
B)  a U.S.bank wanting to lend money to a Canadian company,but not a U.S.firm wanting to buy computers made in South Korea
C)  a U.S.firm wanting to buy computers made in South Korea,but not a U.S.bank wanting to lend money to a Canadian company
D)  neither a U.S.bank wanting to lend money to a Canadian company nor a U.S.firm wanting to buy computers made in South KoreaE) None of the above
F) All of the above

Question 12

Which of the following is the most likely 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) None of the above
F) All of the above

Question 13

Figure 32-2 
-Refer to Figure 32-2.At what real exchange rate is the quantity of dollars demanded equal to 500?

Accepted Answer

A)  1
B)  .8
C)  .6
D)  None of the above are correct.E) B) and D)
F) B) and C)

Question 14

Figure 32-1 
-Refer to Figure 32-1.If the real interest rate is 6 percent,the quantity of loanable funds demanded is

Accepted Answer

A)  $20 billion,and the quantity supplied is $40 billion.
B)  $20 billion,and the quantity supplied is $60 billion.
C)  $60 billion,and the quantity supplied is $20 billion.
D)  $60 billion,and the quantity supplied is $40 billion.E) A) and C)
F) None of the above

Question 15

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

Question 16

In the open-economy macroeconomic model,the

Accepted Answer

A)  exchange rate adjusts to equate private saving with the sum of investment,net exports,and net capital outflow.
B)  exchange rate adjusts to equate national saving with the sum of investment and net capital outflow.
C)  interest rate adjusts to equate private saving with the sum of investment,net exports,and net capital outflow.
D)  interest rate adjusts to equate national saving with the sum of investment and net capital outflow.E) All of the above
F) B) and C)

Question 17

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

Question 18

If there is a surplus in the market for loanable funds,the resulting change in the real interest rate

Accepted Answer

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

Question 19

Which of the following would make the equilibrium real interest rate decrease 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 D)
F) All of the above

Question 20

Other things the same,a decrease in the real interest rate raises the quantity of

Accepted Answer

A)  domestic investment and net capital outflow.
B)  domestic investment but not net capital outflow.
C)  net capital outflow but not domestic investment.
D)  neither domestic investment nor net capital outflow.E) B) and D)
F) A) and C)

Exam 19: A Macroeconomic Theory of the Open Economy: Supply and Demand for Loanable Funds and for Foreign-Currency Exchange

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

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If the supply of loanable funds shifts right,then

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In an open economy,

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

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

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

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Other things the same,if the real interest rate in a country falls,domestic residents will desire to purchase

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When the real exchange rate for the dollar appreciates,U.S.goods become

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Other things the same,a decrease in the real interest rate raises the quantity of

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Figure 32-2 -Refer to Figure 32-2.If the real exchange rate is 1,then there is a

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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

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

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If there is a surplus in the market for loanable funds,the resulting change in the real interest rate

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Which of the following is considered part of the supply of U.S.dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

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Figure 32-1 -Refer to Figure 32-1.If the real interest rate is 6 percent,the quantity of loanable funds demanded is

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In the open-economy macroeconomic model,the

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A country has domestic investment of $200 billion.Its citizens purchase $600 of foreign assets and foreign citizens purchase $300 of its assets.What is national saving?

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The value of net exports equals the value of

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

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Figure 32-2 -Refer to Figure 32-2.At what real exchange rate is the quantity of dollars demanded equal to 500?

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