Question 1

Over the past three decades, the United States has

Accepted Answer

A)  generally had, or been very near to a trade balance. 
B)  had trade deficits in about as many years as it has trade surpluses. 
C)  persistently had a trade deficit. 
D)  persistently had a trade surplus. 
A)  generally had, or been very near to a trade balance. 
B)  had trade deficits in about as many years as it has trade surpluses. 
C)  persistently had a trade deficit. 
D)  persistently had a trade surplus.

Question 2

If there is a surplus of loanable funds, the quantity demanded is

Accepted Answer

A)  greater than the quantity supplied and the interest rate will rise. 
B)  greater than the quantity supplied and the interest rate will fall. 
C)  less than the quantity supplied and the interest rate will rise. 
D)  less than the quantity supplied and the interest rate will fall. 
A)  greater than the quantity supplied and the interest rate will rise. 
B)  greater than the quantity supplied and the interest rate will fall. 
C)  less than the quantity supplied and the interest rate will rise. 
D)  less than the quantity supplied and the interest rate will fall.

Question 3

Other things the same, a decrease 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 4

If the demand for net exports rises, which of the following happens in the open-economy macroeconomic model?

Accepted Answer

A)  the exchange rate rises 
B)  the interest rate falls 
C)  net capital outflow rises 
D)  All of the above are correct. 
A)  the exchange rate rises 
B)  the interest rate falls 
C)  net capital outflow rises 
D)  All of the above are correct.

Question 5

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

Accepted Answer

A)  the sum of domestic investment and net capital outflow. 
B)  net capital outflow alone. 
C)  domestic investment alone. 
D)  None of the above is correct. 
A)  the sum of domestic investment and net capital outflow. 
B)  net capital outflow alone. 
C)  domestic investment alone. 
D)  None of the above is correct.

Question 6

Which of the following can explain a decrease in the U.S. real exchange rate?

Accepted Answer

A)  the U.S. government budget deficit falls 
B)  the U.S. impose import quotas 
C)  the default risk of U.S. assets falls 
D)  All of the above are correct. 
A)  the U.S. government budget deficit falls 
B)  the U.S. impose import quotas 
C)  the default risk of U.S. assets falls 
D)  All of the above are correct.

Question 7

An increase in a country's budget surplus shifts its

Accepted Answer

A)  demand for loanable funds right and decreases investment spending. 
B)  supply of loanable funds right and increases investment spending. 
C)  supply of loanable funds left and decreases investment spending. 
D)  None of the above is correct. 
A)  demand for loanable funds right and decreases investment spending. 
B)  supply of loanable funds right and increases investment spending. 
C)  supply of loanable funds left and decreases investment spending. 
D)  None of the above is correct.

Question 8

If the government budget deficit rises, what happens to the interest rate? What does this change in the interest rate do to net capital outflow? Provide a detailed explanation of why this change in the interest rate changes net capital outflow.

Accepted Answer

The interest rate rises. The increase in

Question 9

Suppose the U.S. supply of loanable funds shifts left. This will

Accepted Answer

A)  increase U.S. net capital outflow and increase the quantity of loanable funds demanded. 
B)  increase U.S. net capital outflow and decrease the quantity of loanable funds demanded. 
C)  decrease U.S. net capital outflow and increase the quantity of loanable funds demanded. 
D)  decrease U.S. net capital outflow and decrease the quantity of loanable funds demanded. 
A)  increase U.S. net capital outflow and increase the quantity of loanable funds demanded. 
B)  increase U.S. net capital outflow and decrease the quantity of loanable funds demanded. 
C)  decrease U.S. net capital outflow and increase the quantity of loanable funds demanded. 
D)  decrease U.S. net capital outflow and decrease the quantity of loanable funds demanded.

Question 10

Other things the same, which of the following would shift the supply of dollars in the market for foreign exchange to the right?

Accepted Answer

A)  foreigners want to buy more U.S. bonds 
B)  foreigners want to buy fewer U.S. bonds 
C)  foreigners want to buy more U.S. goods and services. 
D)  foreigners want to buy fewer U.S. goods and services. 
A)  foreigners want to buy more U.S. bonds 
B)  foreigners want to buy fewer U.S. bonds 
C)  foreigners want to buy more U.S. goods and services. 
D)  foreigners want to buy fewer U.S. goods and services.

Question 11

In the open-economy macroeconomic model, a higher U.S. real exchange rate makes

Accepted Answer

A)  U.S. goods more expensive relative to foreign goods and reduces the quantity of dollars supplied. 
B)  U.S. goods more expensive relative to foreign goods and reduces the quantity of dollars demanded. 
C)  foreign goods more expensive relative to U.S. goods and reduces the quantity of dollars supplied. 
D)  foreign goods more expensive relative to U.S. goods and reduces the quantity of dollars demanded. 
A)  U.S. goods more expensive relative to foreign goods and reduces the quantity of dollars supplied. 
B)  U.S. goods more expensive relative to foreign goods and reduces the quantity of dollars demanded. 
C)  foreign goods more expensive relative to U.S. goods and reduces the quantity of dollars supplied. 
D)  foreign goods more expensive relative to U.S. goods and reduces the quantity of dollars demanded.

Question 12

If the exchange rate rises, domestic goods become relatively ______ expensive. This change in the affordability of domestic goods makes domestic goods _____ attractive to foreigners. So, _______ ______.

Accepted Answer

more, less

Question 13

If a country removes an import quota, what happens to its exchange rate, its exports, and its net exports?

Accepted Answer

Its exchange rate fa

Question 14

A country has private saving of $500 billion, public saving of -$100 billion, domestic investment of $150 billion, and net capital outflow of $250 billion. What is its supply of loanable funds?

Accepted Answer

A)  $650 billion 
B)  $600 billion 
C)  $400 billion 
D)  $350 billion 
A)  $650 billion 
B)  $600 billion 
C)  $400 billion 
D)  $350 billion

Question 15

Refer to U.S. Investment Tax Credit. In the market for loanable funds which curve shifts and which direction does it shift?

Accepted Answer

The demand

Question 16

Which of the following would make the equilibrium real interest rate decrease 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 17

In the open-economy macroeconomic model, net capital outflow rises if

Accepted Answer

A)  either the exchange rate rises or the real interest rate falls. 
B)  either the exchange rate falls or the real interest rate rises. 
C)  the real interest rate rises. Net capital outflow does not depend on the exchange rate. 
D)  the real interest rate falls. Net capital outflow does not depend on the exchange rate. 
A)  either the exchange rate rises or the real interest rate falls. 
B)  either the exchange rate falls or the real interest rate rises. 
C)  the real interest rate rises. Net capital outflow does not depend on the exchange rate. 
D)  the real interest rate falls. Net capital outflow does not depend on the exchange rate.

Question 18

When a government increases its budget deficit, then that country's

Accepted Answer

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

Question 19

Define net capital outflow.

Accepted Answer

Net capital outflow equals the

Question 20

If the Japanese government raised its budget deficit, then the yen would

Accepted Answer

A)  depreciate and Japanese net exports would rise. 
B)  depreciate and Japanese net exports would fall. 
C)  appreciate and Japanese net exports would rise. 
D)  appreciate and Japanese net exports would fall. 
A)  depreciate and Japanese net exports would rise. 
B)  depreciate and Japanese net exports would fall. 
C)  appreciate and Japanese net exports would rise. 
D)  appreciate and Japanese net exports would fall.

Exam 32: A Macroeconomic Theory of the Open Economy

Over the past three decades, the United States has

If there is a surplus of loanable funds, the quantity demanded is

Other things the same, a decrease in the U.S. real interest rate induces

If the demand for net exports rises, which of the following happens in the open-economy macroeconomic model?

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

Which of the following can explain a decrease in the U.S. real exchange rate?

An increase in a country's budget surplus shifts its

If the government budget deficit rises, what happens to the interest rate? What does this change in the interest rate do to net capital outflow? Provide a detailed explanation of why this change in the interest rate changes net capital outflow.

Suppose the U.S. supply of loanable funds shifts left. This will

Other things the same, which of the following would shift the supply of dollars in the market for foreign exchange to the right?

In the open-economy macroeconomic model, a higher U.S. real exchange rate makes

If the exchange rate rises, domestic goods become relatively ______ expensive. This change in the affordability of domestic goods makes domestic goods _____ attractive to foreigners. So, _______ ______.

If a country removes an import quota, what happens to its exchange rate, its exports, and its net exports?

A country has private saving of $500 billion, public saving of -$100 billion, domestic investment of $150 billion, and net capital outflow of $250 billion. What is its supply of loanable funds?

Refer to U.S. Investment Tax Credit. In the market for loanable funds which curve shifts and which direction does it shift?

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

In the open-economy macroeconomic model, net capital outflow rises if

When a government increases its budget deficit, then that country's

Define net capital outflow.

If the Japanese government raised its budget deficit, then the yen would

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

Filters

If the exchange rate rises, domestic goods become relatively ____ expensive. This change in the affordability of domestic goods makes domestic goods _ attractive to foreigners. So, _ __.