Exam 14: A Macroeconomic Theory of the Open Economy

The country of Solidia is politically very stable and has a long tradition of respecting property rights. If several other countries suddenly became politically unstable, we would expect Solidia's

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

In which cases does/do a country's supply of loanable funds shift right?

If interest rates rose more in Japan than in the U.S., then other things the same

In an open economy, the supply of loanable funds comes from national saving.

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

In the open-economy macroeconomic model, the purchase of a capital asset by domestic residents adds to the demand for loanable funds

The explanation for the slope of

If the demand for loanable funds shifts right, then

If C+I+G>Y, then net exports and net capital outflow are both greater than zero.

Because the open-economy macroeconomic model focuses on the long run, it is assumed that

U.S. Investment Tax Credit Suppose that Congress and the President enact legislation that provides a tax rebate to businesses that purchase capital goods. Assume other countries make no policy changes. -Refer to U.S. Investment Tax Credit. What happens to the interest rate, U.S. net capital outflow, and the net capital outflow of foreign countries?

What happens to each of the following if investment becomes more desirable at each interest rate? a. the interest rate b. net capital outflow c. the exchange rate

If the U.S. imposes an import quota on clothing, then the

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

Which of the following is correct concerning the open-economy macroeconomic model?

When a country's government budget deficit increases,

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

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

In 2002 it looked like the Argentinean government might default on its debt which eventually it did). The open- economy macroeconomic model predicts that this should have