Question 1

If the U.S. imposed import quotas on cotton, then which of the following would rise?

Accepted Answer

A)  the U.S. real exchange rate and U.S. net exports 
B)  the U.S. real exchange rate but not U.S. net exports 
C)  U.S. net exports but not the U.S. real exchange rate 
D)  neither the U.S. real exchange rate nor U.S. net exports 
A)  the U.S. real exchange rate and U.S. net exports 
B)  the U.S. real exchange rate but not U.S. net exports 
C)  U.S. net exports but not the U.S. real exchange rate 
D)  neither the U.S. real exchange rate nor U.S. net exports

Question 2

At the equilibrium real interest rate in the open-economy macroeconomic model, the equilibrium quantity of loanable funds equals

Accepted Answer

A)  net capital outflow. 
B)  domestic investment. 
C)  foreign currency supplied. 
D)  national saving. 
A)  net capital outflow. 
B)  domestic investment. 
C)  foreign currency supplied. 
D)  national saving.

Question 3

If for some reason U.S. residents increase their purchases of foreign assets, then all else constant which curve in the market for foreign-currency exchange shifts and which direction does it shift? What happens to the exchange rate?

Accepted Answer

The supply of dollar

Question 4

If U.S. net exports are negative, 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 5

Which of the following would make both the equilibrium real interest rate and the equilibrium quantity of loanable funds increase?

Accepted Answer

A)  The demand for loanable funds shifts right. 
B)  The demand for loanable funds shifts left. 
C)  The supply of loanable funds shifts right. 
D)  The supply of loanable funds shifts left. 
A)  The demand for loanable funds shifts right. 
B)  The demand for loanable funds shifts left. 
C)  The supply of loanable funds shifts right. 
D)  The supply of loanable funds shifts left.

Question 6

Which of the following is included in the supply of U.S. dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

Accepted Answer

A)  a U.S. bank loans dollars to Tom to buy a U.S. made motorcycle 
B)  a U.S. tire maker wants to build a new factory in China 
C)  a U.S. company wants to import goods to sell in its retail stores 
D)  All of the above are correct. 
A)  a U.S. bank loans dollars to Tom to buy a U.S. made motorcycle 
B)  a U.S. tire maker wants to build a new factory in China 
C)  a U.S. company wants to import goods to sell in its retail stores 
D)  All of the above are correct.

Question 7

In an open economy, the source for the demand for loanable funds is

Accepted Answer

A)  national saving. 
B)  national saving + net capital outflow. 
C)  investment 
D)  investment + net capital outflow 
A)  national saving. 
B)  national saving + net capital outflow. 
C)  investment 
D)  investment + net capital outflow

Question 8

When a country experiences capital flight, its net capital outflow,

Accepted Answer

A)  which is part of the demand for loanable funds, increases. 
B)  which is part of the supply of loanable funds, increases. 
C)  which is part of the demand for loanable funds, decreases. 
D)  which is part of the supply of loanable funds, decreases. 
A)  which is part of the demand for loanable funds, increases. 
B)  which is part of the supply of loanable funds, increases. 
C)  which is part of the demand for loanable funds, decreases. 
D)  which is part of the supply of loanable funds, decreases.

Question 9

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

Accepted Answer

A)  U.S. national saving and the demand for dollars for U.S. net exports. 
B)  U.S. net capital outflow and the demand for dollars for U.S. net exports. 
C)  domestic investment and the demand for U.S. net exports. 
D)  foreign demand for U.S. goods and services and U.S. demand for foreign goods and services. 
A)  U.S. national saving and the demand for dollars for U.S. net exports. 
B)  U.S. net capital outflow and the demand for dollars for U.S. net exports. 
C)  domestic investment and the demand for U.S. net exports. 
D)  foreign demand for U.S. goods and services and U.S. demand for foreign goods and services.

Question 10

Refer to Budget in Recession. What does this change in the deficit do to net capital outflows? Defend your answer.

Accepted Answer

Net capital outflow falls because the do

Question 11

An increase in the budget deficit

Accepted Answer

A)  reduces net capital outflow and domestic investment. 
B)  reduces net capital outflow and raises domestic investment. 
C)  raises net capital outflow and domestic investment 
D)  raises net capital outflow and reduces domestic investment. 
A)  reduces net capital outflow and domestic investment. 
B)  reduces net capital outflow and raises domestic investment. 
C)  raises net capital outflow and domestic investment 
D)  raises net capital outflow and reduces domestic investment.

Question 12

Figure 32-1  
-Refer to Figure 32-1. If the real interest rate is 6 percent, there will be pressure for

Accepted Answer

A)  the real interest rate to fall. 
B)  the demand for loanable funds curve to shift left. 
C)  the supply for loanable funds curve to shift right. 
D)  All of the above are correct. 
A)  the real interest rate to fall. 
B)  the demand for loanable funds curve to shift left. 
C)  the supply for loanable funds curve to shift right. 
D)  All of the above are correct.

Question 13

In the open-economy macroeconomic model, which of the following increases net capital outflow?

Accepted Answer

A)  a fall in the real exchange rate, but not a fall in the real interest rate 
B)  a fall in the real interest rate, but not a fall in the real exchange rate 
C)  both a fall in the real exchange rate and a fall in the real interest rate 
D)  neither a fall in the real exchange rate nor a fall in the real interest rate 
A)  a fall in the real exchange rate, but not a fall in the real interest rate 
B)  a fall in the real interest rate, but not a fall in the real exchange rate 
C)  both a fall in the real exchange rate and a fall in the real interest rate 
D)  neither a fall in the real exchange rate nor a fall in the real interest rate

Question 14

When fear of default on bonds issued by U.S. corporations decline, then

Accepted Answer

A)  net capital outflow and the exchange rate both rise. 
B)  net capital outflow rises and the exchange rate falls. 
C)  net capital outflow falls and the exchange rate rises. 
D)  net capital outflow and the exchange rate both fall. 
A)  net capital outflow and the exchange rate both rise. 
B)  net capital outflow rises and the exchange rate falls. 
C)  net capital outflow falls and the exchange rate rises. 
D)  net capital outflow and the exchange rate both fall.

Question 15

Figure 32-1  
-Refer to Figure 32-1. If the real interest rate is 6 percent, the quantity of loanable funds demanded is

Accepted Answer

A)  $20 billion, and the quantity supplied is $40 billion. 
B)  $20 billion, and the quantity supplied is $60 billion. 
C)  $60 billion, and the quantity supplied is $20 billion. 
D)  $60 billion, and the quantity supplied is $40 billion. 
A)  $20 billion, and the quantity supplied is $40 billion. 
B)  $20 billion, and the quantity supplied is $60 billion. 
C)  $60 billion, and the quantity supplied is $20 billion. 
D)  $60 billion, and the quantity supplied is $40 billion.

Question 16

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

Accepted Answer

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

Question 17

The value of net exports equals the value of

Accepted Answer

A)  national saving. 
B)  public saving. 
C)  national saving - net capital outflow. 
D)  national saving - domestic investment. 
A)  national saving. 
B)  public saving. 
C)  national saving - net capital outflow. 
D)  national saving - domestic investment.

Question 18

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

Accepted Answer

A)  net capital outflow. 
B)  domestic investment. 
C)  net capital outflow plus domestic investment. 
D)  foreign currency supplied. 
A)  net capital outflow. 
B)  domestic investment. 
C)  net capital outflow plus domestic investment. 
D)  foreign currency supplied.

Question 19

The explanation for the slope of

Accepted Answer

A)  the supply of loanable funds curve is based on the logic that a higher real interest rate leads to higher saving. 
B)  the demand for loanable funds curve is based on the logic that a higher interest rate leads to higher saving. 
C)  the supply of loanable funds curve is based on the logic that a higher real interest rate leads to lower saving. 
D)  the demand for loanable funds curve is based on the logic that a higher interest rate leads to lower saving. 
A)  the supply of loanable funds curve is based on the logic that a higher real interest rate leads to higher saving. 
B)  the demand for loanable funds curve is based on the logic that a higher interest rate leads to higher saving. 
C)  the supply of loanable funds curve is based on the logic that a higher real interest rate leads to lower saving. 
D)  the demand for loanable funds curve is based on the logic that a higher interest rate leads to lower saving.

Question 20

The open-economy macroeconomic model takes

Accepted Answer

A)  GDP, but not the price level as given. 
B)  the price level, but not GDP as given. 
C)  both the price level and GDP as given. 
D)  the price level and GDP as variables to be determined by the model. 
A)  GDP, but not the price level as given. 
B)  the price level, but not GDP as given. 
C)  both the price level and GDP as given. 
D)  the price level and GDP as variables to be determined by the model.

Exam 32: A Macroeconomic Theory of the Open Economy

If the U.S. imposed import quotas on cotton, then which of the following would rise?

At the equilibrium real interest rate in the open-economy macroeconomic model, the equilibrium quantity of loanable funds equals

If for some reason U.S. residents increase their purchases of foreign assets, then all else constant which curve in the market for foreign-currency exchange shifts and which direction does it shift? What happens to the exchange rate?

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

Which of the following would make both the equilibrium real interest rate and the equilibrium quantity of loanable funds increase?

Which of the following is included in the supply of U.S. dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

In an open economy, the source for the demand for loanable funds is

When a country experiences capital flight, its net capital outflow,

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

Refer to Budget in Recession. What does this change in the deficit do to net capital outflows? Defend your answer.

An increase in the budget deficit

Figure 32-1 -Refer to Figure 32-1. If the real interest rate is 6 percent, there will be pressure for

In the open-economy macroeconomic model, which of the following increases net capital outflow?

When fear of default on bonds issued by U.S. corporations decline, then

Figure 32-1 -Refer to Figure 32-1. If the real interest rate is 6 percent, the quantity of loanable funds demanded is

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

The value of net exports equals the value of

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

The explanation for the slope of

The open-economy macroeconomic model takes

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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