Question 1

If net exports are positive, then

Accepted Answer

A) exports are greater than imports. 
B) net capital outflow is negative. 
C) Both of the above are correct. 
D) Neither of the above is correct. 
A) exports are greater than imports. 
B) net capital outflow is negative. 
C) Both of the above are correct. 
D) Neither of the above is correct.

Question 2

If the budget deficit increases, then

Accepted Answer

A) U.S. residents will want to purchase more foreign assets and foreign residents will want to purchase more U.S. assets 
B) U.S. residents will want to purchase more foreign assets and foreign residents will want to purchase fewer U.S. assets 
C) U.S. residents will want to purchase fewer foreign assets and foreign residents will want to purchase more U.S. assets 
D) U.S. residents will want to purchase fewer foreign assets and foreign residents will want to purchase fewer U.S. assets 
A) U.S. residents will want to purchase more foreign assets and foreign residents will want to purchase more U.S. assets 
B) U.S. residents will want to purchase more foreign assets and foreign residents will want to purchase fewer U.S. assets 
C) U.S. residents will want to purchase fewer foreign assets and foreign residents will want to purchase more U.S. assets 
D) U.S. residents will want to purchase fewer foreign assets and foreign residents will want to purchase fewer U.S. assets

Question 3

If a government has a budget surplus, then public saving

Accepted Answer

A) is positive and increases national saving. 
B) is positive but decreases national saving. 
C) is negative and decreases national saving. 
D) is negative but increases national saving. 
A) is positive and increases national saving. 
B) is positive but decreases national saving. 
C) is negative and decreases national saving. 
D) is negative but increases national saving.

Question 4

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. 
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.

Question 5

The key determinant of net capital outflow is the real interest rate.

Accepted Answer

A) True 
 B)False

Question 6

A country recently had 500 billion euros of national saving and -200 billion euros of net capital outflow. What was its domestic investment? What was its quantity of loanable funds supplied?

Accepted Answer

700 billio

Question 7

If government policy encouraged households to save more at each interest rate, then

Accepted Answer

A) the real exchange rate and net exports would rise. 
B) the real exchange rate and net exports would fall. 
C) the real exchange rate would rise and net exports would fall. 
D) the real exchange rate would fall and net exports would rise. 
A) the real exchange rate and net exports would rise. 
B) the real exchange rate and net exports would fall. 
C) the real exchange rate would rise and net exports would fall. 
D) the real exchange rate would fall and net exports would rise.

Question 8

If U.S. citizens decide to save a larger fraction of their incomes, the real interest rate

Accepted Answer

A) decreases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases. 
B) decreases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases. 
C) increases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases. 
D) increases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases. 
A) decreases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases. 
B) decreases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases. 
C) increases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases. 
D) increases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases.

Question 9

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. 
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.

Question 10

Other things the same, if foreigners desire to purchase more U.S. bonds, then the demand for loanable funds shifts left.

Accepted Answer

A) True 
 B)False

Question 11

At the equilibrium real interest rate in the open-economy macroeconomic model

Accepted Answer

A) saving = domestic investment 
B) saving = net capital outflow 
C) net capital outflow = domestic investment 
D) net capital outflow + domestic investment = saving 
A) saving = domestic investment 
B) saving = net capital outflow 
C) net capital outflow = domestic investment 
D) net capital outflow + domestic investment = saving

Question 12

If the supply of loanable funds shifts right, then the equilibrium

Accepted Answer

A) levels of net capital outflow and domestic investment decrease. 
B) level of net capital outflow increases and the equilibrium level of domestic investment decreases. 
C) level of net capital outflow decreases and the equilibrium level of domestic investment increases. 
D) levels of net capital outflow and domestic investment increase. 
A) levels of net capital outflow and domestic investment decrease. 
B) level of net capital outflow increases and the equilibrium level of domestic investment decreases. 
C) level of net capital outflow decreases and the equilibrium level of domestic investment increases. 
D) levels of net capital outflow and domestic investment increase.

Question 13

Why do higher real interest rates lead to lower net capital outflow?

Accepted Answer

Higher domestic interest rates make dome

Question 14

Which of the following is correct?

Accepted Answer

A) capital flight from the United States decreases net capital outflow 
B) an increase in the government budget deficit creates no change in net capital outflow 
C) if the U.S. imposes a restriction on imports, net capital outflow increases 
D) None of the above is correct. 
A) capital flight from the United States decreases net capital outflow 
B) an increase in the government budget deficit creates no change in net capital outflow 
C) if the U.S. imposes a restriction on imports, net capital outflow increases 
D) None of the above is correct.

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. 
A) national saving. 
B) public saving. 
C) national saving - net capital outflow. 
D) national saving - domestic investment.

Question 16

Which of the following is consistent with moving from a surplus to equilibrium in the market for foreign-currency exchange?

Accepted Answer

A) the exchange rate appreciates making domestic goods relatively more expensive. 
B) the exchange rate appreciates making domestic goods relatively less expensive. 
C) the exchange rate depreciates making domestic goods relatively more expensive. 
D) the exchange rate depreciates making domestic goods relatively less expensive. 
A) the exchange rate appreciates making domestic goods relatively more expensive. 
B) the exchange rate appreciates making domestic goods relatively less expensive. 
C) the exchange rate depreciates making domestic goods relatively more expensive. 
D) the exchange rate depreciates making domestic goods relatively less expensive.

Question 17

According to the open-economy macroeconomic model, import quotas increase which of the following

Accepted Answer

A) net exports and net capital outflow 
B) net exports but not net capital outflow. 
C) net capital outflow but not net exports. 
D) neither net exports nor net capital outflow. 
A) net exports and net capital outflow 
B) net exports but not net capital outflow. 
C) net capital outflow but not net exports. 
D) neither net exports nor net capital outflow.

Question 18

In the open-economy macroeconomic model, the supply curve of currency is vertical because the quantity of currency supplied does not depend on the real exchange rate.

Accepted Answer

A) True 
 B)False

Question 19

If a country places tariffs on imported goods, then

Accepted Answer

A) its currency appreciates which reduces exports. 
B) its currency appreciates which increases exports. 
C) its currency depreciates which reduces exports. 
D) its currency depreciates which increases exports. 
A) its currency appreciates which reduces exports. 
B) its currency appreciates which increases exports. 
C) its currency depreciates which reduces exports. 
D) its currency depreciates which increases exports.

Question 20

At the equilibrium real interest rate in the open-economy macroeconomic model, the equilibrium quantity of loanable funds equals

Accepted Answer

A) net capital outflow. 
B) domestic investment. 
C) foreign currency supplied. 
D) national saving. 
A) net capital outflow. 
B) domestic investment. 
C) foreign currency supplied. 
D) national saving.

Exam 32: A Macroeconomic Theory of the Open Economy

If net exports are positive, then

If the budget deficit increases, then

If a government has a budget surplus, then public saving

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

The key determinant of net capital outflow is the real interest rate.

A country recently had 500 billion euros of national saving and -200 billion euros of net capital outflow. What was its domestic investment? What was its quantity of loanable funds supplied?

If government policy encouraged households to save more at each interest rate, then

If U.S. citizens decide to save a larger fraction of their incomes, the real interest rate

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

Other things the same, if foreigners desire to purchase more U.S. bonds, then the demand for loanable funds shifts left.

At the equilibrium real interest rate in the open-economy macroeconomic model

If the supply of loanable funds shifts right, then the equilibrium

Why do higher real interest rates lead to lower net capital outflow?

Which of the following is correct?

The value of net exports equals the value of

Which of the following is consistent with moving from a surplus to equilibrium in the market for foreign-currency exchange?

According to the open-economy macroeconomic model, import quotas increase which of the following

In the open-economy macroeconomic model, the supply curve of currency is vertical because the quantity of currency supplied does not depend on the real exchange rate.

If a country places tariffs on imported goods, then

At the equilibrium real interest rate in the open-economy macroeconomic model, the equilibrium quantity of loanable funds equals

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Applications: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters