Exam 19: A Macroeconomic Theory of the Open Economy

A U.S. bank wants to buy euros in order to buy German bonds. In the open-economy macroeconomic model, this transaction would be part of

Define net capital outflow.

Which of the following will not change the U.S. real interest rate?

If the demand for loanable funds shifts left, then

According to the open-economy macroeconomic model, a decrease in the U.S. government budget deficit increases U.S. net capital outflow, causes the real exchange rate of the dollar to depreciate, and increases U.S. net exports.

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

What happens to the quantity of loanable funds supplied when the interest rate rises? Explain why this change happens.

A country has GDP of $700 billion, consumption of $450 billion, government expenditures of $100 billion, and domestic investment of $200 billion. What is its supply of loanable funds?

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?

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

If China experienced capital flight, the supply of Chinese yuan in the market for foreign-currency exchange would shift

Suppose that the U.S. imposed an import quota on beef. Sales of U.S. beef producers would

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

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

If the U.S. government increased its deficit, then

A country has domestic investment of $200 billion. Its citizens purchase $600 of foreign assets and foreign citizens purchase $300 of its assets. What is national saving?

The theory of purchasing-power parity implies that the demand curve for foreign-currency exchange is

Suppose the U.S. government institutes a "Buy American" campaign, in order to encourage spending on domestic goods. What effect will this have on the U.S. trade balance?

In the open-economy macroeconomic model, equilibrium in the market for foreign-currency exchange is determined by the equality between the supply of dollars which comes from

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 locations) is included in the U.S. demand for loanable funds?