Question 1

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

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) All of the above
F) C) and D)

Question 3

Fill in the table below with the direction of the variables that change in response to the events in the first column.

Accepted Answer

The answer of Fill in the table below with the...

Question 4

Which of the following is included in the demand for dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

Accepted Answer

A)   A German bank desires to purchase U.S. Treasury securities
B)   A firm in Canada wants to buy rice from a U.S. company.
C)   An U.S. citizen wants to buy a bond issued by a Swedish corporation.
D)   All of the above are correct.E) A) and D)
F) A) and B)

Question 5

Which of the following would do the most to reduce a trade deficit?

Accepted Answer

A)   increase domestic saving
B)   increase domestic political stability and respect of property rights
C)   other countries reduce their trade restrictions
D)   raise tariffsE) B) and C)
F) All of the above

Question 6

If for some reason Americans desired to increase their purchases of foreign assets, then other things the same

Accepted Answer

A)   both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency exchange would fall.
B)   both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency would rise.
C)   the real exchange rate would rise and the quantity of dollars exchanged in the market for foreign-currency would fall.
D)   the real exchange rate would fall and the quantity of dollars exchanged in the market for foreign-currency would rise.E) A) and B)
F) C) and D)

Question 7

If a country's budget deficit decreases, then the exchange rate

Accepted Answer

A)   rises, which raises net exports.
B)   rises, which reduces net exports.
C)   falls, which raises net exports.
D)   falls, which reduces net exports.E) A) and D)
F) All of the above

Question 8

In the open-economy macroeconomic model, the real exchange rate does not affect net capital outflow.

Accepted Answer

A) True 
 B)False

Question 9

In the open-economy macroeconomic model, other things the same, which of the following both make the exchange rate fall?

Accepted Answer

A)   U.S. investment demand falls and foreign demand for U.S. goods falls
B)   U.S. investment demand falls and foreign demand for U.S. goods rises
C)   U.S. investment demand rises and foreign demand for U.S. goods falls
D)   U.S. investment demand rises and foreign demand for U.S. goods risesE) A) and C)
F) None of the above

Question 10

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

Accepted Answer

A)   Americans to buy more foreign assets, which increases U.S. net capital outflow.
B)   Americans to buy more foreign assets, which reduces U.S. net capital outflow.
C)   foreigners to buy more U.S. assets, which reduces U.S. net capital outflow.
D)   foreigners to buy more U.S. assets, which increases U.S. net capital outflow.E) B) and C)
F) A) and B)

Question 11

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

Question 12

In an open economy, the demand for loanable funds comes from

Accepted Answer

A)   only those who want to borrow funds to buy domestic capital goods.
B)   only those who want to borrow funds to buy foreign assets.
C)   those who want to borrow funds to buy either domestic capital goods or foreign assets.
D)   neither those who want to borrow funds to buy domestic capital goods nor those who want to borrow funds to buy foreign assets.E) B) and C)
F) A) and C)

Question 13

Recently the Greek government had large deficits and people became worried about Greece's ability to continue to make payments on its debt. Which of the these events raise a country's interest rates?

Accepted Answer

A)   an increase in the budget deficit, and increased concerns about the ability of the government to pay back its debt
B)   an increase in the budget deficit, but not increased concerns about the ability of the government to pay back its debt
C)   increased concerns about the ability of the government to pay back its debt, but not an increase in the budget deficit
D)   neither an increase in the budget deficit, nor increased concerns about the ability of the government to pay back its debtE) B) and C)
F) None of the above

Question 14

In the 1980s, the U.S. government budget deficit rose. At the same time the U.S. trade deficit grew larger, the real exchange rate of the dollar appreciated, and U.S. net capital outflow decreased. Which of these events is contrary to what the open-economy macroeconomic model predicts concerning the effects of an increase in the budget deficit?

Accepted Answer

A)   The U.S. trade deficit grew.
B)   The real exchange rate of the dollar appreciated.
C)   U.S. net capital outflow fell.
D)   None of the above is contrary to the predictions of the model.E) None of the above
F) A) and B)

Question 15

Many U.S. business leaders argue that the current state of U.S. net exports is the result of

Accepted Answer

A)   U.S. export subsidies.
B)   free trade policies of foreign governments.
C)   unproductive U.S. workers.
D)   unfair foreign competition.E) A) and D)
F) A) and C)

Question 16

In which case(s)  does(do)  a country's supply of loanable funds shift right?

Accepted Answer

A)   both an increase in the budget deficit and capital flight
B)   an increase in the budget deficit, but not capital flight
C)   capital flight, but not an increase in the budget deficit
D)   neither an increase in the budget deficit nor capital flightE) None of the above
F) C) and D)

Question 17

From 2001 to 2004 the U.S. budget went from surplus to deficit. According to the open economy macroeconomic model, this change should have

Accepted Answer

A)   increased U.S. interest rates and increased the real exchange rate of the dollar.
B)   increased U.S. interest rates and decreased the real exchange rate of the dollar.
C)   decreased U.S. interest rates and increased the real exchange rate of the dollar.
D)   decreased U.S. interest rates and decreased the real exchange rate of the dollar.E) B) and D)
F) A) and D)

Question 18

The imposition of an import quota shifts

Accepted Answer

A)   the supply of currency right, so the exchange rate falls.
B)   the supply of currency left, so the exchange rate rises.
C)   the demand for currency right, so the exchange rate rises.
D)   the demand for currency left, so the exchange rate falls.E) B) and C)
F) A) and D)

Question 19

In the open-economy macroeconomic model, other things the same, when a U.S. resident imports a foreign good, the demand for dollars in the foreign-currency exchange market decreases.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following make(s)  demand for U.S. dollars in the market for foreign-currency exchange higher than otherwise?

Accepted Answer

A)   a Russian firm wanting to buy equipment from a U.S. manufacturer and a U.S. manufacturer wanting to buy zinc from Canada
B)   a Russian firm wanting to buy equipment from a U.S. manufacturer but not a U.S. manufacturer wanting to buy zinc from Canada
C)   a U.S. manufacturer wanting to buy zinc from Canada but not a Russian firm wanting to buy equipment from a U.S. manufacturer
D)   neither a Russian firm wanting to buy equipment from a U.S. manufacturer nor a U.S. manufacturer wanting to buy zinc from CanadaE) All of the above
F) A) and C)

Exam 14: A Macroeconomic Theory of the Open Economy

If for some reason Americans desired to increase their purchases of foreign assets, then other things the same

Correct Answer
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Correct Answer
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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 Answer
verified

From 2001 to 2004 the U.S. budget went from surplus to deficit. According to the open economy macroeconomic model, this change should have

Correct Answer
verified

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

Correct Answer
verified

Recently the Greek government had large deficits and people became worried about Greece's ability to continue to make payments on its debt. Which of the these events raise a country's interest rates?

Correct Answer
verified

In the open-economy macroeconomic model, other things the same, when a U.S. resident imports a foreign good, the demand for dollars in the foreign-currency exchange market decreases.

Correct Answer
verified

In an open economy, the demand for loanable funds comes from

Correct Answer
verified

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

Correct Answer
verified

A decrease in the budget deficit causes domestic interest rates

Correct Answer
verified

In the open-economy macroeconomic model, the real exchange rate does not affect net capital outflow.

Correct Answer
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Which of the following is included in the demand for dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

Correct Answer
verified

In the open-economy macroeconomic model, other things the same, which of the following both make the exchange rate fall?

Correct Answer
verified

Many U.S. business leaders argue that the current state of U.S. net exports is the result of

Correct Answer
verified

Which of the following would do the most to reduce a trade deficit?

Correct Answer
verified

Fill in the table below with the direction of the variables that change in response to the events in the first column.

Correct Answer
verified

If a country's budget deficit decreases, then the exchange rate

Correct Answer
verified

In which case(s) does(do) a country's supply of loanable funds shift right?

Correct Answer
verified

The imposition of an import quota shifts

Correct Answer
verified

Which of the following make(s) demand for U.S. dollars in the market for foreign-currency exchange higher than otherwise?

Correct Answer
verified

Exam 14: A Macroeconomic Theory of the Open Economy

If for some reason Americans desired to increase their purchases of foreign assets, then other things the same

Correct AnswerverifiedShow Answer

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

From 2001 to 2004 the U.S. budget went from surplus to deficit. According to the open economy macroeconomic model, this change should have

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Recently the Greek government had large deficits and people became worried about Greece's ability to continue to make payments on its debt. Which of the these events raise a country's interest rates?

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, other things the same, when a U.S. resident imports a foreign good, the demand for dollars in the foreign-currency exchange market decreases.

Correct AnswerverifiedShow Answer

In an open economy, the demand for loanable funds comes from

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A decrease in the budget deficit causes domestic interest rates

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, the real exchange rate does not affect net capital outflow.

Correct AnswerverifiedShow Answer

Which of the following is included in the demand for dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, other things the same, which of the following both make the exchange rate fall?

Correct AnswerverifiedShow Answer

Many U.S. business leaders argue that the current state of U.S. net exports is the result of

Correct AnswerverifiedShow Answer

Which of the following would do the most to reduce a trade deficit?

Correct AnswerverifiedShow Answer

Fill in the table below with the direction of the variables that change in response to the events in the first column.

Correct AnswerverifiedShow Answer

If a country's budget deficit decreases, then the exchange rate

Correct AnswerverifiedShow Answer

In which case(s) does(do) a country's supply of loanable funds shift right?

Correct AnswerverifiedShow Answer

The imposition of an import quota shifts

Correct AnswerverifiedShow Answer

Which of the following make(s) demand for U.S. dollars in the market for foreign-currency exchange higher than otherwise?

Correct AnswerverifiedShow Answer

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