Question 1

Other things the same, a decrease in the real interest rate

Accepted Answer

A)  increases the quantity of loanable funds demanded. 
B)  shifts the demand for loanable funds curve to the right. 
C)  decreases the quantity of loanable funds demanded. 
D)  shifts the demand for loanable funds curve to the left. 
A)  increases the quantity of loanable funds demanded. 
B)  shifts the demand for loanable funds curve to the right. 
C)  decreases the quantity of loanable funds demanded. 
D)  shifts the demand for loanable funds curve to the left.

Question 2

If U.S. citizens decide to save a larger fraction of their incomes, the real interest rate

Accepted Answer

A)  decreases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases. 
B)  decreases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases. 
C)  increases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases. 
D)  increases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases. 
A)  decreases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases. 
B)  decreases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases. 
C)  increases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases. 
D)  increases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases.

Question 3

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)  national consumption minus domestic investment. 
D)  None of the above is correct. 
A)  domestic investment. 
B)  net capital outflow. 
C)  national consumption minus domestic investment. 
D)  None of the above is correct.

Question 4

What is the source of the demand for loanable funds in the open-economy macroeconomic model ?

Accepted Answer

investment

Question 5

Suppose the U.S. removes an import quota on steel. U.S. exports

Accepted Answer

A)  increase, the real exchange rate of the U.S. dollar appreciates, and U.S. net capital outflow increases. 
B)  increase, the real exchange rate of the U.S. dollar depreciates, and U.S. net capital outflow is unchanged. 
C)  decrease, the real exchange rate of the U.S. dollar appreciates, and U.S. net capital outflow is unchanged. 
D)  decrease, the real exchange rate of the U.S. dollar depreciates, and U.S. net capital outflow decreases. 
A)  increase, the real exchange rate of the U.S. dollar appreciates, and U.S. net capital outflow increases. 
B)  increase, the real exchange rate of the U.S. dollar depreciates, and U.S. net capital outflow is unchanged. 
C)  decrease, the real exchange rate of the U.S. dollar appreciates, and U.S. net capital outflow is unchanged. 
D)  decrease, the real exchange rate of the U.S. dollar depreciates, and U.S. net capital outflow decreases.

Question 6

Refer to Budget Reform. This policy change causes net capital outflow to change. How is this change in net capital outflow shown in the market for foreign-currency exchange? What happens to the exchange rate?

Accepted Answer

The supply of dollars in the m

Question 7

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 8

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

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 9

When a country suffers from capital flight, the demand for loanable funds in that country shifts

Accepted Answer

A)  right, which increases interest rates in that country. 
B)  right, which decreases interest rates in that country. 
C)  left, which increases interest rates in that country. 
D)  left, which decreases interest rates in that country. 
A)  right, which increases interest rates in that country. 
B)  right, which decreases interest rates in that country. 
C)  left, which increases interest rates in that country. 
D)  left, which decreases interest rates in that country.

Question 10

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

Accepted Answer

A)  Americans to buy more foreign assets, which increases U.S. net capital outflow. 
B)  Americans to buy more foreign assets, which reduces U.S. net capital outflow. 
C)  foreigners to buy more U.S. assets, which reduces U.S. net capital outflow. 
D)  foreigners to buy more U.S. assets, which increases U.S. net capital outflow. 
A)  Americans to buy more foreign assets, which increases U.S. net capital outflow. 
B)  Americans to buy more foreign assets, which reduces U.S. net capital outflow. 
C)  foreigners to buy more U.S. assets, which reduces U.S. net capital outflow. 
D)  foreigners to buy more U.S. assets, which increases U.S. net capital outflow.

Question 11

A country has national saving of $50 billion, government expenditures of $30 billion, domestic investment of $10 billion, and net capital outflow of $40 billion. What is its supply of loanable funds?

Accepted Answer

A)  $20 billion 
B)  $30 billion 
C)  $50 billion 
D)  $60 billion 
A)  $20 billion 
B)  $30 billion 
C)  $50 billion 
D)  $60 billion

Question 12

If a U.S. resident purchases a foreign bond, her transactions are included

Accepted Answer

A)  in the U.S. supply of loanable funds and the supply of dollars in the market for foreign-currency exchange. 
B)  in the U.S. supply of loanable funds and the demand for dollars in the market for foreign-currency exchange. 
C)  in the U.S. demand for loanable funds and the supply of dollars in the market for foreign-currency exchange. 
D)  in the U.S. demand for loanable funds and the demand for dollars in the market for foreign-currency exchange. 
A)  in the U.S. supply of loanable funds and the supply of dollars in the market for foreign-currency exchange. 
B)  in the U.S. supply of loanable funds and the demand for dollars in the market for foreign-currency exchange. 
C)  in the U.S. demand for loanable funds and the supply of dollars in the market for foreign-currency exchange. 
D)  in the U.S. demand for loanable funds and the demand for dollars in the market for foreign-currency exchange.

Question 13

In the open-economy macroeconomic model, the amount of net capital outflow represents the quantity of dollars

Accepted Answer

A)  supplied for the purpose of selling assets domestically. 
B)  supplied for the purpose of buying foreign assets. 
C)  demanded for the purpose of buying U.S. net exports of goods and services. 
D)  demanded for the purpose of importing foreign goods and services. 
A)  supplied for the purpose of selling assets domestically. 
B)  supplied for the purpose of buying foreign assets. 
C)  demanded for the purpose of buying U.S. net exports of goods and services. 
D)  demanded for the purpose of importing foreign goods and services.

Question 14

In the open-economy macroeconomic model, other things the same, which of the following both make the exchange rate fall?

Accepted Answer

A)  U.S. investment demand falls and foreign demand for U.S. goods falls 
B)  U.S. investment demand falls and foreign demand for U.S. goods rises 
C)  U.S. investment demand rises and foreign demand for U.S. goods falls 
D)  U.S. investment demand rises and foreign demand for U.S. goods rises 
A)  U.S. investment demand falls and foreign demand for U.S. goods falls 
B)  U.S. investment demand falls and foreign demand for U.S. goods rises 
C)  U.S. investment demand rises and foreign demand for U.S. goods falls 
D)  U.S. investment demand rises and foreign demand for U.S. goods rises

Question 15

Which of the following is most likely to increase exports?

Accepted Answer

A)  a reduction in domestic political instability 
B)  ending investment tax credits 
C)  a reduction in the size of the government's budget surplus 
D)  None of the above will increase exports. 
A)  a reduction in domestic political instability 
B)  ending investment tax credits 
C)  a reduction in the size of the government's budget surplus 
D)  None of the above will increase exports.

Question 16

A country has output of $600 billion, consumption of $350 billion, government expenditures of $90 billion and investment of $60 billion. What is its supply of loanable funds?

Accepted Answer

A)  $160 billion 
B)  $150 billion 
C)  $60 billion 
D)  $30 billion 
A)  $160 billion 
B)  $150 billion 
C)  $60 billion 
D)  $30 billion

Question 17

If the U.S. raised its tariff on tires, then at the original exchange rate there would be a

Accepted Answer

A)  surplus in the market for foreign-currency exchange, so the real exchange rate would appreciate. 
B)  surplus in the market for foreign-currency exchange, so the real exchange rate would depreciate. 
C)  shortage in the market for foreign-currency exchange, so the real exchange rate would appreciate. 
D)  shortage in the market for foreign-currency exchange, so the real exchange rate would depreciate. 
A)  surplus in the market for foreign-currency exchange, so the real exchange rate would appreciate. 
B)  surplus in the market for foreign-currency exchange, so the real exchange rate would depreciate. 
C)  shortage in the market for foreign-currency exchange, so the real exchange rate would appreciate. 
D)  shortage in the market for foreign-currency exchange, so the real exchange rate would depreciate.

Question 18

Figure 32-2  
-Refer to Figure 32-2. If the real exchange rate is 1, then there is a

Accepted Answer

A)  surplus of 100 so the real exchange rate will fall. 
B)  surplus of 100 so the real exchange rate will rise. 
C)  shortage of 100 so the real exchange rate will fall. 
D)  shortage of 100 so the real exchange rate will rise. 
A)  surplus of 100 so the real exchange rate will fall. 
B)  surplus of 100 so the real exchange rate will rise. 
C)  shortage of 100 so the real exchange rate will fall. 
D)  shortage of 100 so the real exchange rate will rise.

Question 19

When Mexico suffered from capital flight in 1994, the U.S. real interest rate

Accepted Answer

A)  rose and the real exchange rate of the dollar appreciated. 
B)  rose and the real exchange rate of the dollar depreciated. 
C)  fell and the real exchange rate of the dollar appreciated. 
D)  fell and the real exchange rate of the dollar depreciated. 
A)  rose and the real exchange rate of the dollar appreciated. 
B)  rose and the real exchange rate of the dollar depreciated. 
C)  fell and the real exchange rate of the dollar appreciated. 
D)  fell and the real exchange rate of the dollar depreciated.

Question 20

Which of the following would not be a consequence of an increase in the U.S. government budget deficit?

Accepted Answer

A)  the U.S. trade balance rises 
B)  the U.S. interest rate rises 
C)  domestic investment in the U.S. falls 
D)  the real exchange rate of the U.S. dollar appreciates 
A)  the U.S. trade balance rises 
B)  the U.S. interest rate rises 
C)  domestic investment in the U.S. falls 
D)  the real exchange rate of the U.S. dollar appreciates

Exam 32: A Macroeconomic Theory of the Open Economy

Other things the same, a decrease in the real interest rate

If U.S. citizens decide to save a larger fraction of their incomes, the real interest rate

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

What is the source of the demand for loanable funds in the open-economy macroeconomic model ?

Suppose the U.S. removes an import quota on steel. U.S. exports

Refer to Budget Reform. This policy change causes net capital outflow to change. How is this change in net capital outflow shown in the market for foreign-currency exchange? What happens to the exchange rate?

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

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

When a country suffers from capital flight, the demand for loanable funds in that country shifts

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

A country has national saving of $50 billion, government expenditures of $30 billion, domestic investment of $10 billion, and net capital outflow of $40 billion. What is its supply of loanable funds?

If a U.S. resident purchases a foreign bond, her transactions are included

In the open-economy macroeconomic model, the amount of net capital outflow represents the quantity of dollars

In the open-economy macroeconomic model, other things the same, which of the following both make the exchange rate fall?

Which of the following is most likely to increase exports?

A country has output of $600 billion, consumption of $350 billion, government expenditures of $90 billion and investment of $60 billion. What is its supply of loanable funds?

If the U.S. raised its tariff on tires, then at the original exchange rate there would be a

Figure 32-2 -Refer to Figure 32-2. If the real exchange rate is 1, then there is a

When Mexico suffered from capital flight in 1994, the U.S. real interest rate

Which of the following would not be a consequence of an increase in the U.S. government budget deficit?

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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