Question 1

If a country had capital flight, then the real exchange rate would

Accepted Answer

A)  fall. To offset this fall the government could increase the budget deficit. 
B)  fall. To offset this fall the government could decrease the budget deficit. 
C)  rise. To offset this rise the government could increase the budget deficit. 
D)  rise. To offset this rise the government could decrease the budget deficit. 
A)  fall. To offset this fall the government could increase the budget deficit. 
B)  fall. To offset this fall the government could decrease the budget deficit. 
C)  rise. To offset this rise the government could increase the budget deficit. 
D)  rise. To offset this rise the government could decrease the budget deficit.

Question 2

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

Accepted Answer

The answer of What is the source of the supply...

Question 3

U.S. net capital outflow

Accepted Answer

A)  is a source of the supply of loanable funds, and the source of the supply of dollars in the foreign exchange market. 
B)  is a source of the supply of loanable funds, and a source of the demand for dollars in the foreign exchange market. 
C)  is a part of the demand for loanable funds, and the source of the supply of dollars in the foreign exchange market. 
D)  is a part of the demand for loanable funds, and a source of the demand for dollars in the foreign exchange market. 
A)  is a source of the supply of loanable funds, and the source of the supply of dollars in the foreign exchange market. 
B)  is a source of the supply of loanable funds, and a source of the demand for dollars in the foreign exchange market. 
C)  is a part of the demand for loanable funds, and the source of the supply of dollars in the foreign exchange market. 
D)  is a part of the demand for loanable funds, and a source of the demand for dollars in the foreign exchange market.

Question 4

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

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 5

The quantity of U.S. bonds foreigners want to buy is taken into account

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 6

During the financial crisis it was proposed that firms be provided with a tax credit for investment projects. Such a tax credit would

Accepted Answer

A)  raise both the interest rate and the real exchange rate. 
B)  raise the interest rate and reduce the real exchange rate. 
C)  reduce the interest rate and raise the real exchange rate. 
D)  reduce both the interest rate and the real exchange rate. 
A)  raise both the interest rate and the real exchange rate. 
B)  raise the interest rate and reduce the real exchange rate. 
C)  reduce the interest rate and raise the real exchange rate. 
D)  reduce both the interest rate and the real exchange rate.

Question 7

Refer to Budget Reform. This policy change causes the exchange rate to change. What does the change in the exchange rate to do to net exports?

Accepted Answer

Because the exchange

Question 8

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

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 9

If there is a surplus in the U.S. loanable funds market, then

Accepted Answer

A) NCO > I. B) NCO S. D) NCO + I < S. A) NCO > I. B) NCO S. D) NCO + I < S.

Question 10

If at a given real interest rate desired national saving is $200 billion, domestic investment is $100 billion, and net capital outflow is $80 billion, then at that real interest rate in the loanable funds market there is a

Accepted Answer

A)  surplus. The real interest rate will rise. 
B)  surplus. The real interest rate will fall. 
C)  shortage. The real interest rate will rise. 
D)  shortage. The real interest rate will fall. 
A)  surplus. The real interest rate will rise. 
B)  surplus. The real interest rate will fall. 
C)  shortage. The real interest rate will rise. 
D)  shortage. The real interest rate will fall.

Question 11

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

Accepted Answer

A)  rise and exports of other industries would increase. 
B)  rise and exports of other industries would decrease. 
C)  not change, exports of other industries would increase. 
D)  not change, exports of other industries would decrease. 
A)  rise and exports of other industries would increase. 
B)  rise and exports of other industries would decrease. 
C)  not change, exports of other industries would increase. 
D)  not change, exports of other industries would decrease.

Question 12

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

Accepted Answer

A)  national saving 
B)  national saving + net capital outflow 
C)  investment + the government budget deficit 
D)  investment + net capital outflow 
A)  national saving 
B)  national saving + net capital outflow 
C)  investment + the government budget deficit 
D)  investment + net capital outflow

Question 13

An increase in a country's real interest rate reduces that country's net capital outflow.

Accepted Answer

A) True 
 B)False

Question 14

What happens to each of the following if the supply of loanable funds shifts right?
a. the interest rate
b. net capital outflow
c. the exchange rate

Accepted Answer

The interest rate fa

Question 15

At the original exchange rate an import quota

Accepted Answer

A)  creates a surplus in the market for foreign-currency exchange, so the exchange rate rises. 
B)  creates a surplus in the market for foreign-currency exchange, so the exchange rate falls. 
C)  creates a shortage in the market for foreign-currency exchange, so the exchange rate rises. 
D)  creates a shortage in the market for foreign-currency exchange, so the exchange rate falls. 
A)  creates a surplus in the market for foreign-currency exchange, so the exchange rate rises. 
B)  creates a surplus in the market for foreign-currency exchange, so the exchange rate falls. 
C)  creates a shortage in the market for foreign-currency exchange, so the exchange rate rises. 
D)  creates a shortage in the market for foreign-currency exchange, so the exchange rate falls.

Question 16

From 2001 to 2004 the U.S. budget went from surplus to deficit. According to the open economy macroeconomic model, this change should have

Accepted Answer

A)  increased U.S. interest rates and increased the real exchange rate of the dollar. 
B)  increased U.S. interest rates and decreased the real exchange rate of the dollar. 
C)  decreased U.S. interest rates and increased the real exchange rate of the dollar. 
D)  decreased U.S. interest rates and decreased the real exchange rate of the dollar. 
A)  increased U.S. interest rates and increased the real exchange rate of the dollar. 
B)  increased U.S. interest rates and decreased the real exchange rate of the dollar. 
C)  decreased U.S. interest rates and increased the real exchange rate of the dollar. 
D)  decreased U.S. interest rates and decreased the real exchange rate of the dollar.

Question 17

If the demand for loanable funds shifts left, 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 18

In an open economy,

Accepted Answer

A)  net capital outflow = imports. 
B)  net capital outflow = net exports. 
C)  net capital outflow = exports. 
D)  None of the above is correct. 
A)  net capital outflow = imports. 
B)  net capital outflow = net exports. 
C)  net capital outflow = exports. 
D)  None of the above is correct.

Question 19

If a country has a negative net capital outflow, then

Accepted Answer

A)  on net it is purchasing assets from abroad. This adds to its demand for domestically generated loanable funds. 
B)  on net it is purchasing assets from abroad. This subtracts from its demand for domestically generated loanable funds. 
C)  on net other countries are purchasing assets from it. This adds to its demand for domestically generated loanable funds. 
D)  on net other countries are purchasing assets from it. This subtracts from its demand for domestically generated loanable funds. 
A)  on net it is purchasing assets from abroad. This adds to its demand for domestically generated loanable funds. 
B)  on net it is purchasing assets from abroad. This subtracts from its demand for domestically generated loanable funds. 
C)  on net other countries are purchasing assets from it. This adds to its demand for domestically generated loanable funds. 
D)  on net other countries are purchasing assets from it. This subtracts from its demand for domestically generated loanable funds.

Question 20

In the open-economy macroeconomic model, as the exchange rate rises,

Accepted Answer

A)  desired net exports fall, so the quantity of dollars supplied rise. 
B)  desired net exports fall, so the quantity of dollars demanded falls. 
C)  desired net exports rise ,so the quantity of dollars supplied falls. 
D)  desired net exports rise, so the quantity of dollars demanded rises. 
A)  desired net exports fall, so the quantity of dollars supplied rise. 
B)  desired net exports fall, so the quantity of dollars demanded falls. 
C)  desired net exports rise ,so the quantity of dollars supplied falls. 
D)  desired net exports rise, so the quantity of dollars demanded rises.

Exam 32: A Macroeconomic Theory of the Open Economy

If a country had capital flight, then the real exchange rate would

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

U.S. net capital outflow

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

The quantity of U.S. bonds foreigners want to buy is taken into account

During the financial crisis it was proposed that firms be provided with a tax credit for investment projects. Such a tax credit would

Refer to Budget Reform. This policy change causes the exchange rate to change. What does the change in the exchange rate to do to net exports?

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

If there is a surplus in the U.S. loanable funds market, then

If at a given real interest rate desired national saving is $200 billion, domestic investment is $100 billion, and net capital outflow is $80 billion, then at that real interest rate in the loanable funds market there is a

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

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

An increase in a country's real interest rate reduces that country's net capital outflow.

What happens to each of the following if the supply of loanable funds shifts right? a. the interest rate b. net capital outflow c. the exchange rate

At the original exchange rate an import quota

From 2001 to 2004 the U.S. budget went from surplus to deficit. According to the open economy macroeconomic model, this change should have

If the demand for loanable funds shifts left, then

In an open economy,

If a country has a negative net capital outflow, then

In the open-economy macroeconomic model, as the exchange rate rises,

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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