Question 1

In 2002, the United States placed higher tariffs on imports of steel. According to the open-economy macroeconomic model this policy should have

Accepted Answer

A) reduced imports into the United States and made U.S. net exports rise. 
B) reduced imports into the United States and made the net supply of dollars in the foreign exchange market shift right. 
C) reduced imports of steel into the United States, but reduced U.S. exports of other goods by an equal amount. 
D) reduced imports of steel into the United States and increased U.S. exports of other goods by an equal amount. 
A) reduced imports into the United States and made U.S. net exports rise. 
B) reduced imports into the United States and made the net supply of dollars in the foreign exchange market shift right. 
C) reduced imports of steel into the United States, but reduced U.S. exports of other goods by an equal amount. 
D) reduced imports of steel into the United States and increased U.S. exports of other goods by an equal amount.

Question 2

At a given real exchange rate, which of the following, by itself, would increase the supply of dollars in the market for foreign-currency exchange?

Accepted Answer

A) foreign citizens want to buy more U.S. bonds 
B) U.S. citizens want to buy more foreign bonds 
C) foreign citizens want to buy more U.S. goods 
D) U.S. citizens want to buy more foreign goods 
A) foreign citizens want to buy more U.S. bonds 
B) U.S. citizens want to buy more foreign bonds 
C) foreign citizens want to buy more U.S. goods 
D) U.S. citizens want to buy more foreign goods

Question 3

Other things the same, people in the U.S. would want to save more if the real interest rate in the U.S.

Accepted Answer

A) fell. The increased saving would increase the quantity of loanable funds demanded. 
B) fell. The increased saving would increase the quantity of loanable funds supplied. 
C) rose. The increased saving would increase the quantity of loanable funds demanded. 
D) rose. The increased saving would increase the quantity of loanable funds supplied. 
A) fell. The increased saving would increase the quantity of loanable funds demanded. 
B) fell. The increased saving would increase the quantity of loanable funds supplied. 
C) rose. The increased saving would increase the quantity of loanable funds demanded. 
D) rose. The increased saving would increase the quantity of loanable funds supplied.

Question 4

Imposing an import quota causes the domestic real exchange rate to

Accepted Answer

A) appreciate, which increases foreign demand for domestic goods. 
B) appreciate, which decreases foreign demand for domestic goods. 
C) depreciate, which increases foreign demand for domestic goods. 
D) depreciate, which decreases foreign demand for domestic goods. 
A) appreciate, which increases foreign demand for domestic goods. 
B) appreciate, which decreases foreign demand for domestic goods. 
C) depreciate, which increases foreign demand for domestic goods. 
D) depreciate, which decreases foreign demand for domestic goods.

Question 5

In the open-economy macroeconomic model, at the equilibrium real interest rate, the amount that people (including government) want to save equals desired quantities of domestic investment and net capital outflow.

Accepted Answer

A) True 
 B)False

Question 6

If at a given exchange rate foreign citizens wanted to buy fewer U.S bonds, then the

Accepted Answer

A) supply of dollars in the market for foreign-currency exchange shfits right. 
B) supply of dollars in the market for foreign-currency exchange shfits left. 
C) demand for dollars in the market for foreign-currency exchange shfits right. 
D) demand for dollars in the market for foreign-currency exchange shfits left. 
A) supply of dollars in the market for foreign-currency exchange shfits right. 
B) supply of dollars in the market for foreign-currency exchange shfits left. 
C) demand for dollars in the market for foreign-currency exchange shfits right. 
D) demand for dollars in the market for foreign-currency exchange shfits left.

Question 7

Because a government budget deficit represents

Accepted Answer

A) negative public saving, it increases national saving. 
B) negative public saving, it decreases national saving. 
C) positive public saving, it increases national saving. 
D) positive public saving, it decreases national saving. 
A) negative public saving, it increases national saving. 
B) negative public saving, it decreases national saving. 
C) positive public saving, it increases national saving. 
D) positive public saving, it decreases national saving.

Question 8

If the demand for dollars in the market for foreign-currency exchange shifts left, 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. 
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.

Question 9

In the open-economy macroeconomic model, the market for loanable funds equates national saving with

Accepted Answer

A) domestic investment. 
B) net capital outflow. 
C) the sum of national consumption and government spending. 
D) the sum of domestic investment and net capital outflow. 
A) domestic investment. 
B) net capital outflow. 
C) the sum of national consumption and government spending. 
D) the sum of domestic investment and net capital outflow.

Question 10

An increase in a country's budget surplus shifts its

Accepted Answer

A) demand for loanable funds right and decreases investment spending. 
B) supply of loanable funds right and increases investment spending. 
C) supply of loanable funds left and decreases investment spending. 
D) None of the above is correct. 
A) demand for loanable funds right and decreases investment spending. 
B) supply of loanable funds right and increases investment spending. 
C) supply of loanable funds left and decreases investment spending. 
D) None of the above is correct.

Question 11

Which of the following would shift the supply of dollars in the market for foreign-currency exchange of the open-economy macroeconomic model to the left?

Accepted Answer

A) The exchange rate rises. 
B) The exchange rate falls. 
C) The expected rate of return on U.S. assets rises. 
D) The expected rate of return on U.S. assets falls. 
A) The exchange rate rises. 
B) The exchange rate falls. 
C) The expected rate of return on U.S. assets rises. 
D) The expected rate of return on U.S. assets falls.

Question 12

In the open-economy macroeconomic model, if the real exchange rate of the U.S. dollar were above its equilibrium level, the real exchange rate of the U.S. dollar would appreciate.

Accepted Answer

A) True 
 B)False

Question 13

In the open-economy macroeconomic model, the supply of loanable funds comes from

Accepted Answer

A) national saving. Demand comes from only domestic investment. 
B) national saving. Demand comes from domestic investment and net capital outflow. 
C) Only net capital outflow. Demand for loanable funds comes from national saving. 
D) domestic investment and net capital outflow. Demand for loanable funds comes from national saving. 
A) national saving. Demand comes from only domestic investment. 
B) national saving. Demand comes from domestic investment and net capital outflow. 
C) Only net capital outflow. Demand for loanable funds comes from national saving. 
D) domestic investment and net capital outflow. Demand for loanable funds comes from national saving.

Question 14

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 15

If net exports are negative, then

Accepted Answer

A) net capital outflow is positive, so foreign assets bought by Americans are greater than American assets bought by foreigners. 
B) net capital outflow is positive, so American assets bought by foreigners are greater than foreign assets bought by Americans. 
C) net capital outflow is negative, so foreign assets bought by Americans are greater than American assets bought by foreigners. 
D) net capital outflow is negative, so American assets bought by foreigners are greater than foreign assets bought by Americans. 
A) net capital outflow is positive, so foreign assets bought by Americans are greater than American assets bought by foreigners. 
B) net capital outflow is positive, so American assets bought by foreigners are greater than foreign assets bought by Americans. 
C) net capital outflow is negative, so foreign assets bought by Americans are greater than American assets bought by foreigners. 
D) net capital outflow is negative, so American assets bought by foreigners are greater than foreign assets bought by Americans.

Question 16

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 Canada 
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 Canada

Question 17

Capital flight increases a country's interest rate. This increase in the interest rate makes net capital outflow lower than it would be had the interest rate stayed the same.

Accepted Answer

A) True 
 B)False

Question 18

A country has I = $200 billion, S = $400 billion, and purchased $600 billion of foreign assets, how many of its assets did foreigners purchase?

Accepted Answer

A) $0 
B) $200 billion 
C) $400 billion 
D) $800 billion 
A) $0 
B) $200 billion 
C) $400 billion 
D) $800 billion

Question 19

An increase in the budget deficit makes domestic interest rates

Accepted Answer

A) rise because the supply of loanable funds shifts left. 
B) fall because the supply of loanable funds shifts left. 
C) rise because the demand for loanable funds shifts right. 
D) fall because the demand for loanable funds shifts right. 
A) rise because the supply of loanable funds shifts left. 
B) fall because the supply of loanable funds shifts left. 
C) rise because the demand for loanable funds shifts right. 
D) fall because the demand for loanable funds shifts right.

Question 20

A U.S.-imposed quota on appliances would shift

Accepted Answer

A) both the demand and supply curves in the market for foreign-currency exchange right. 
B) Both the demand and supply curves in the market for foreign-currency exchange right 
C) only the demand curve in the market for foreign-currency exchange right. 
D) Only the supply curve in the market for foreign-currency exchange right 
A) both the demand and supply curves in the market for foreign-currency exchange right. 
B) Both the demand and supply curves in the market for foreign-currency exchange right 
C) only the demand curve in the market for foreign-currency exchange right. 
D) Only the supply curve in the market for foreign-currency exchange right

Exam 19: A Macroeconomic Theory of the Open Economy

In 2002, the United States placed higher tariffs on imports of steel. According to the open-economy macroeconomic model this policy should have

At a given real exchange rate, which of the following, by itself, would increase the supply of dollars in the market for foreign-currency exchange?

Other things the same, people in the U.S. would want to save more if the real interest rate in the U.S.

Imposing an import quota causes the domestic real exchange rate to

In the open-economy macroeconomic model, at the equilibrium real interest rate, the amount that people (including government) want to save equals desired quantities of domestic investment and net capital outflow.

If at a given exchange rate foreign citizens wanted to buy fewer U.S bonds, then the

Because a government budget deficit represents

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

In the open-economy macroeconomic model, the market for loanable funds equates national saving with

An increase in a country's budget surplus shifts its

Which of the following would shift the supply of dollars in the market for foreign-currency exchange of the open-economy macroeconomic model to the left?

In the open-economy macroeconomic model, if the real exchange rate of the U.S. dollar were above its equilibrium level, the real exchange rate of the U.S. dollar would appreciate.

In the open-economy macroeconomic model, the supply of loanable funds comes from

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

If net exports are negative, then

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

Capital flight increases a country's interest rate. This increase in the interest rate makes net capital outflow lower than it would be had the interest rate stayed the same.

A country has I = $200 billion, S = $400 billion, and purchased $600 billion of foreign assets, how many of its assets did foreigners purchase?

An increase in the budget deficit makes domestic interest rates

A U.S.-imposed quota on appliances would shift

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

Application: The Costs of Taxation

Application: International Trade

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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