Question 1

If policymakers impose import restrictions on clothing, the U.S. trade deficit will shrink.

Accepted Answer

A) True 
 B)False  False

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 B

Question 3

If the U.S. imposed an import quota on furniture, U.S. net exports of furniture

Accepted Answer

A)  and net exports of other U.S. goods and services would rise. 
B)  would rise but net exports of other goods and services would fall. 
C)  would fall but net exports of other goods and services would rise. 
D)  and net exports of other U.S. goods and services would fall. 
A)  and net exports of other U.S. goods and services would rise. 
B)  would rise but net exports of other goods and services would fall. 
C)  would fall but net exports of other goods and services would rise. 
D)  and net exports of other U.S. goods and services would fall. B

Question 4

Over the past two decades, the U.S. has persistently exported more goods and services than it has imported.

Accepted Answer

A) True 
 B)False

Question 5

In the open-economy macroeconomic model, if the supply of loanable funds shifts right

Accepted Answer

A)  the interest rate rises and the demand for dollars in the market for foreign currency exchange shifts right. 
B)  the interest rate rises and the demand for dollars in the market for foreign currency exchange shifts left. 
C)  the interest rate falls and the supply of dollars in the market for foreign-currency exchange shifts right. 
D)  the interest rate falls and the supply of dollars in the market for foreign currency exchange shifts left. 
A)  the interest rate rises and the demand for dollars in the market for foreign currency exchange shifts right. 
B)  the interest rate rises and the demand for dollars in the market for foreign currency exchange shifts left. 
C)  the interest rate falls and the supply of dollars in the market for foreign-currency exchange shifts right. 
D)  the interest rate falls and the supply of dollars in the market for foreign currency exchange shifts left.

Question 6

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 7

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

Accepted Answer

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

Question 8

In 1995 House Speaker Newt Gingrich threatened to send the United States into default on its debt. During the day of this announcement, U.S. interest rates rose and the real exchange rate of the U.S. dollar depreciated. Which of these changes is consistent with the results of the open-economy macroeconomic model?

Accepted Answer

A)  the increase in U.S. interest rates 
B)  the depreciation of the real exchange rate of the U.S. dollar 
C)  Both a and b are consistent. 
D)  Neither a nor b are consistent. 
A)  the increase in U.S. interest rates 
B)  the depreciation of the real exchange rate of the U.S. dollar 
C)  Both a and b are consistent. 
D)  Neither a nor b are consistent.

Question 9

Which of the following will decrease U.S. net capital outflow?

Accepted Answer

A)  capital flight from the United States 
B)  the government budget deficit increases 
C)  the U.S. imposes import quotas 
D)  None of the above is correct. 
A)  capital flight from the United States 
B)  the government budget deficit increases 
C)  the U.S. imposes import quotas 
D)  None of the above is correct.

Question 10

In the open-economy macroeconomic model, the real exchange rate does not affect net capital outflow.

Accepted Answer

A) True 
 B)False

Question 11

Other things the same, a higher real interest rate raises the quantity of

Accepted Answer

A)  domestic investment. 
B)  net capital outflow. 
C)  loanable funds demanded. 
D)  loanable funds supplied. 
A)  domestic investment. 
B)  net capital outflow. 
C)  loanable funds demanded. 
D)  loanable funds supplied.

Question 12

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

Accepted Answer

A)  and net capital outflow of other countries would rise. 
B)  and net capital outflow of other countries would fall. 
C)  would rise, while net capital outflow of other countries would fall. 
D)  would fall, while net capital outflow of other countries would rise. 
A)  and net capital outflow of other countries would rise. 
B)  and net capital outflow of other countries would fall. 
C)  would rise, while net capital outflow of other countries would fall. 
D)  would fall, while net capital outflow of other countries would rise.

Question 13

A government budget deficit

Accepted Answer

A)  increases both net capital outflow and net exports. 
B)  decreases both net capital outflow and net exports. 
C)  increases net capital outflow and decreases net exports. 
D)  decreases net capital outflow and increases net exports. 
A)  increases both net capital outflow and net exports. 
B)  decreases both net capital outflow and net exports. 
C)  increases net capital outflow and decreases net exports. 
D)  decreases net capital outflow and increases net exports.

Question 14

Other things the same, an increase in the U.S. interest rate causes the quantity of loanable funds supplied to

Accepted Answer

A)  rise because net capital outflow and domestic investment rise. 
B)  rise because national saving rises. 
C)  fall because net capital outflow and domestic investment rise. 
D)  fall because national saving falls. 
A)  rise because net capital outflow and domestic investment rise. 
B)  rise because national saving rises. 
C)  fall because net capital outflow and domestic investment rise. 
D)  fall because national saving falls.

Question 15

Which of the following is the most likely response to a decrease in the U.S. real interest rate?

Accepted Answer

A)  a U.S. company decides to expand its factory 
B)  a U.S. citizen decides to purchase fewer foreign bonds 
C)  a German mutual fund decides to increase its deposits at a U.S. bank 
D)  All of the above are consistent. 
A)  a U.S. company decides to expand its factory 
B)  a U.S. citizen decides to purchase fewer foreign bonds 
C)  a German mutual fund decides to increase its deposits at a U.S. bank 
D)  All of the above are consistent.

Question 16

Refer to Budget Reform. What does this policy change do to the equilibrium values of the interest rate and the quantity of loanable funds?

Accepted Answer

The interest rate fa

Question 17

Refer to Budget in Recession. What does this change in the budget deficit do to the equilibrium values of the interest rate and the quantity of loanable funds?

Accepted Answer

Since the supply of loanable f

Question 18

In which case(s) does(do) a country's supply of loanable funds shift right?

Accepted Answer

A)  both an increase in the budget deficit and capital flight 
B)  an increase in the budget deficit, but not capital flight 
C)  capital flight, but not an increase in the budget deficit 
D)  neither an increase in the budget deficit nor capital flight 
A)  both an increase in the budget deficit and capital flight 
B)  an increase in the budget deficit, but not capital flight 
C)  capital flight, but not an increase in the budget deficit 
D)  neither an increase in the budget deficit nor capital flight

Question 19

If the supply of loanable funds shifts right, then

Accepted Answer

A)  the real interest rate and the equilibrium quantity of loanable funds both fall. 
B)  the real interest rate falls and the equilibrium quantity of loanable funds rises. 
C)  the real interest rate and the equilibrium quantity of loanable funds both rise. 
D)  the real interest rate rises and the equilibrium quantity of loanable funds falls. 
A)  the real interest rate and the equilibrium quantity of loanable funds both fall. 
B)  the real interest rate falls and the equilibrium quantity of loanable funds rises. 
C)  the real interest rate and the equilibrium quantity of loanable funds both rise. 
D)  the real interest rate rises and the equilibrium quantity of loanable funds falls.

Question 20

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

Accepted Answer

A)  and the quantity of dollars traded rises. 
B)  rises and the quantity of dollars traded falls. 
C)  falls and the quantity of dollars traded rises. 
D)  and the quantity of dollars traded falls. 
A)  and the quantity of dollars traded rises. 
B)  rises and the quantity of dollars traded falls. 
C)  falls and the quantity of dollars traded rises. 
D)  and the quantity of dollars traded falls.

Exam 32: A Macroeconomic Theory of the Open Economy

If policymakers impose import restrictions on clothing, the U.S. trade deficit will shrink.

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?

If the U.S. imposed an import quota on furniture, U.S. net exports of furniture

Over the past two decades, the U.S. has persistently exported more goods and services than it has imported.

In the open-economy macroeconomic model, if the supply of loanable funds shifts right

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 U.S. net exports are positive, then net capital outflow is

Which of the following will decrease U.S. net capital outflow?

In the open-economy macroeconomic model, the real exchange rate does not affect net capital outflow.

Other things the same, a higher real interest rate raises the quantity of

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

A government budget deficit

Other things the same, an increase in the U.S. interest rate causes the quantity of loanable funds supplied to

Which of the following is the most likely response to a decrease in the U.S. real interest rate?

Refer to Budget Reform. What does this policy change do to the equilibrium values of the interest rate and the quantity of loanable funds?

Refer to Budget in Recession. What does this change in the budget deficit do to the equilibrium values of the interest rate and the quantity of loanable funds?

In which case(s) does(do) a country's supply of loanable funds shift right?

If the supply of loanable funds shifts right, then

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

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

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 of Microeconomics

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 Macroeconomics: Basic Concepts

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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