Question 1

In the open-economy macroeconomic model,the key determinant of net capital outflow is the

Accepted Answer

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

Question 2

Figure 32-1
 
-Refer to Figure 32-1.The loanable funds market is in equilibrium at

Accepted Answer

A)  1 percent, $30 billion.
B)  2 percent, $20 billion.
C)  4 percent, $10 billion.
D)  None of the above is correct.E) None of the above
F) All of the above

Question 3

In an open economy,the demand for loanable funds comes from both domestic investment and net capital outflow.

Accepted Answer

A) True 
 B)False

Question 4

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

Question 5

Which of the following would make both the equilibrium 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) B) and C)
F) C) and D)

Question 6

If the U.S.were to impose restrictions on imports

Accepted Answer

A)  the demand for loanable funds and the demand for dollars in the market for foreign-currency exchange would both increase.
B)  nether the demand for loanable funds nor the demand for dollars in the market for foreign-currency exchange would increase.
C)  the demand for loanable funds would increase, but the demand for dollars in the market for foreign-currency exchange would not.
D)  the demand for dollars in the market for foreign-currency exchange would increase, but the demand for loanable funds would not.E) A) and B)
F) A) and C)

Question 7

Figure 32-3
 
-Refer to Figure 32-4.Starting from r₂ and E₃,an increase in the budget deficit can be illustrated as a move to

Accepted Answer

A)  r₁ and E₄.
B)  r₁ and E₂.
C)  r₃ and E₄.
D)  r₃ and E₂.E) None of the above
F) C) and D)

Question 8

If the real exchange rate for the dollar is below the equilibrium level,the quantity of dollars supplied in the market for foreign-currency exchange is

Accepted Answer

A)  less than the quantity demanded and the dollar will appreciate.
B)  less than the quantity demanded and the dollar will depreciate.
C)  greater than the quantity demanded and the dollar will appreciate.
D)  greater than the quantity demanded and the dollar will depreciate.E) B) and C)
F) A) and D)

Question 9

-Refer to Figure 32-5.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 10

In the market for foreign-currency exchange in the open-economy macroeconomic model,a higher U.S.real exchange rate makes

Accepted Answer

A)  U.S.goods more expensive relative to foreign goods and reduces the quantity of dollars supplied.
B)  U.S.goods more expensive relative to foreign goods and reduces the quantity of dollars demanded.
C)  foreign goods more expensive relative to U.S.goods and reduces the quantity of dollars supplied.
D)  foreign goods more expensive relative to U.S.goods and reduces the quantity of dollars demanded.E) A) and B)
F) None of the above

Question 11

U.S.corporation Well's Petroleum borrows money to build an oil well in Texas and to build another in Venezuela.

Accepted Answer

A)  The borrowing for the well in the U.S.and the well in Venezuela both count as part of the demand for loanable funds in the U.S.market.
B)  Neither the borrowing for the well in the U.S.nor the well in Venezuela count as part of the demand for loanable funds in the U.S.market.
C)  The borrowing for the well in the U.S.counts as part of the demand for loanable funds in the U.S.The borrowing for the well in Venezuela does not count as part of the demand for loanable funds in the U.S.market.
D)  The borrowing for the well in Venezuela counts as part of the demand for loanable funds in the U.S.The borrowing for the well in the US.does not counts as part of the demand for loanable funds in the U.S.market.E) C) and D)
F) A) and D)

Question 12

At the equilibrium interest rate in the open economy macroeconomic model,the amount that people want to save equals the desired quantity of

Accepted Answer

A)  net capital outflow.
B)  domestic investment.
C)  net capital outflow plus domestic investment.
D)  foreign currency supplied.E) A) and D)
F) B) and C)

Question 13

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

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) All of the above
F) A) and B)

Question 14

Other things the same,if the Canadian real interest rate were to increase,Canadian net capital outflow

Accepted Answer

A)  and net capital outflow of other countries would rise.
B)  and net capital outflow of other countries would fall.
C)  would rise, while net capital outflow of other countries would fall.
D)  would fall, while net capital outflow of other countries would rise.E) A) and B)
F) A) and C)

Question 15

A tax on imported goods is called a(n)

Accepted Answer

A)  excise tax.
B)  tariff.
C)  import quota.
D)  None of the above is correct.E) B) and C)
F) A) and D)

Question 16

If a government increases its budget deficit,then the real exchange rate

Accepted Answer

A)  and domestic investment rise.
B)  and domestic investment fall.
C)  rises and domestic investment falls.
D)  falls and domestic investment rises.E) A) and B)
F) C) and D)

Question 17

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

Accepted Answer

A)  Increase domestic saving.
B)  Increase political stability and respect for property rights.
C)  Negotiate with other countries to get them to reduce their trade restrictions.
D)  Impose higher tariffs on imported goods.E) A) and B)
F) B) and C)

Question 18

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

Question 19

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 20

The diagram below represents the market for loanable funds and the market for foreign-currency exchange in Mexico. Use the diagram to answer the following questions.
Figure 32-6
 
-Refer to Figure 32-6.Supposing that the Mexican economy starts at r₀ and E₁.Which of the following is consistent with the effects of capital flight?

Accepted Answer

A)  the shift from D₀ to D₁ in Panel A
B)  the shift from NCO₀ to NCO₁ in Panel B
C)  the shift from S₀ to S₁ in Panel C
D)  All of the above shifts are consistent with the effects of capital flight.E) B) and C)
F) None of the above

Exam 32: A Macroeconomic Theory of the Open Economy

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

Correct Answer
verified

In the market for foreign-currency exchange in the open-economy macroeconomic model,a higher U.S.real exchange rate makes

Correct Answer
verified

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

Correct Answer
verified

Figure 32-1 -Refer to Figure 32-1.The loanable funds market is in equilibrium at

Correct Answer
verified

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

If the U.S.were to impose restrictions on imports

Correct Answer
verified

Correct Answer
verified

In an open economy,the demand for loanable funds comes from both domestic investment and net capital outflow.

Correct Answer
verified

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

Correct Answer
verified

U.S.corporation Well's Petroleum borrows money to build an oil well in Texas and to build another in Venezuela.

Correct Answer
verified

At the equilibrium interest rate in the open economy macroeconomic model,the amount that people want to save equals the desired quantity of

Correct Answer
verified

Figure 32-3 -Refer to Figure 32-4.Starting from r₂ and E₃,an increase in the budget deficit can be illustrated as a move to

Correct Answer
verified

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

Correct Answer
verified

Other things the same,if the Canadian real interest rate were to increase,Canadian net capital outflow

Correct Answer
verified

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

Correct Answer
verified

If a government increases its budget deficit,then the real exchange rate

Correct Answer
verified

In the open-economy macroeconomic model,the key determinant of net capital outflow is the

Correct Answer
verified

-Refer to Figure 32-5.If the interest rate were initially at r₂ and an import quota were imposed,the interest rate would

Correct Answer
verified

If the real exchange rate for the dollar is below the equilibrium level,the quantity of dollars supplied in the market for foreign-currency exchange is

Correct Answer
verified

A tax on imported goods is called a(n)

Correct Answer
verified

Exam 32: A Macroeconomic Theory of the Open Economy

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

Correct AnswerverifiedShow Answer

In the market for foreign-currency exchange in the open-economy macroeconomic model,a higher U.S.real exchange rate makes

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 32-1 -Refer to Figure 32-1.The loanable funds market is in equilibrium at

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

If the U.S.were to impose restrictions on imports

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In an open economy,the demand for loanable funds comes from both domestic investment and net capital outflow.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

U.S.corporation Well's Petroleum borrows money to build an oil well in Texas and to build another in Venezuela.

Correct AnswerverifiedShow Answer

At the equilibrium interest rate in the open economy macroeconomic model,the amount that people want to save equals the desired quantity of

Correct AnswerverifiedShow Answer

Figure 32-3 -Refer to Figure 32-4.Starting from r₂ and E₃,an increase in the budget deficit can be illustrated as a move to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Other things the same,if the Canadian real interest rate were to increase,Canadian net capital outflow

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If a government increases its budget deficit,then the real exchange rate

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model,the key determinant of net capital outflow is the

Correct AnswerverifiedShow Answer

-Refer to Figure 32-5.If the interest rate were initially at r₂ and an import quota were imposed,the interest rate would

Correct AnswerverifiedShow Answer

If the real exchange rate for the dollar is below the equilibrium level,the quantity of dollars supplied in the market for foreign-currency exchange is

Correct AnswerverifiedShow Answer

A tax on imported goods is called a(n)

Correct AnswerverifiedShow Answer

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

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