Exam 32: A Macroeconomic Theory of the Open Economy

If the government of India implemented a policy that decreased national saving, its real exchange rate would

If the exchange rate rises, which of the following falls in the open-economy macroeconomic model?

If U.S. net exports are negative, then net capital outflow is

Suppose a country experiences capital flight. Of the demand for loanable funds and the supply of currency in the market for foreign-currency exchange, which shifts right?

In the open-economy macroeconomic model, the

Refer to Figure 32-3. Which curve is determined by net capital outflow only?

If imports = 500 billion euros, exports = 700 billion euros, purchases of domestic assets by foreign residents = 600 billion euros, and purchases of foreign assets by domestic residents = 800 billion euros, what is the quantity of euros demanded in the market for foreign-currency exchange?

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?

U.S. corporation Wright Air Conditions borrows funds to build a factory in the U.S. and a factory in Mexico. Borrowing for factories in which location(s) is included in the U.S. demand for loanable funds?

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?

If foreigners want to buy more U.S. bonds, then in the market for foreign-currency exchange the exchange rate

Refer to Figure 32-3. The curve in panel b shows that as the interest rate rises,

When a government raises its budget deficit, then that country's

Refer to Depositors Move Funds Out of Greek Banks. What happened to the domestic equilibrium interest rate and quantity of loanable funds supplied?

If a country's government moves from a budget deficit to a budget surplus, which curve in the market for loanable funds shifts and which direction does it shift? What happens to the interest rate?

When Mexico suffered from capital flight in 1994, U.S. demand for loanable funds

If the government budget deficit rises, what happens to the interest rate? What does this change in the interest rate do to net capital outflow? Provide a detailed explanation of why this change in the interest rate changes net capital outflow.

In the long run, import quotas increase net exports.

When Mexico suffered from capital flight in 1994, Mexico's real interest rate

What happens to domestic investment as the real interest rate rises? Explain your answer.