Question 1

A rise in the government budget deficit

Accepted Answer

A)  increases the interest rate so in the market for foreign-currency exchange, supply shifts right. 
B)  increases the interest rate so in the market for foreign-currency exchange, supply shifts left. 
C)  decreases the interest rate so in the market for foreign-currency exchange, supply shifts left. 
D)  decreases the interest rate so in the market for foreign-currency exchange supply shifts right. 
A)  increases the interest rate so in the market for foreign-currency exchange, supply shifts right. 
B)  increases the interest rate so in the market for foreign-currency exchange, supply shifts left. 
C)  decreases the interest rate so in the market for foreign-currency exchange, supply shifts left. 
D)  decreases the interest rate so in the market for foreign-currency exchange supply shifts right.

Question 2

Refer to Depositors Move Funds Out of Greek Banks. What happened to the domestic equilibrium interest rate and quantity of loanable funds supplied?

Accepted Answer

Both the equilibrium

Question 3

What is the source of the demand for dollars in the market for foreign-currency exchange?

Accepted Answer

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

Question 4

When the government budget deficit increases, national saving decreases.

Accepted Answer

A) True 
 B)False

Question 5

Political events convince people that the assets of country x are now riskier. As a result of this change which curves in the open-economy macroeconomic model shift and which direction do they shift for country x?

Accepted Answer

The demand curve for loanable

Question 6

Because a government budget deficit represents

Accepted Answer

A)  negative public saving, it increases national saving. 
B)  negative public saving, it decreases national saving. 
C)  positive public saving, it increases national saving. 
D)  positive public saving, it decreases national saving. 
A)  negative public saving, it increases national saving. 
B)  negative public saving, it decreases national saving. 
C)  positive public saving, it increases national saving. 
D)  positive public saving, it decreases national saving.

Question 7

When a country imposes an import quota, its

Accepted Answer

A)  imports fall and its net exports rise. 
B)  imports fall and its net exports are unchanged. 
C)  imports rise and its net exports are unchanged. 
D)  imports and exports are unchanged. 
A)  imports fall and its net exports rise. 
B)  imports fall and its net exports are unchanged. 
C)  imports rise and its net exports are unchanged. 
D)  imports and exports are unchanged.

Question 8

An increase in the budget deficit causes domestic interest rates

Accepted Answer

A)  and investment to rise. 
B)  to rise and investment to fall. 
C)  to fall and investment to rise. 
D)  and investment to fall. 
A)  and investment to rise. 
B)  to rise and investment to fall. 
C)  to fall and investment to rise. 
D)  and investment to fall.

Question 9

If a country repeals an investment tax credit,

Accepted Answer

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

Question 10

A German company wants to buy dollars to purchase U.S. bonds. In the open-economy macroeconomic model of the U.S., this transaction would be accounted for in

Accepted Answer

A)  the supply of currency in the foreign exchange market, and the supply of loanable funds. 
B)  the supply of currency in the foreign exchange market, and the demand for loanable funds. 
C)  the demand for currency in the foreign exchange market, and the supply of loanable funds. 
D)  the demand for currency in the foreign exchange market, and the demand for loanable funds. 
A)  the supply of currency in the foreign exchange market, and the supply of loanable funds. 
B)  the supply of currency in the foreign exchange market, and the demand for loanable funds. 
C)  the demand for currency in the foreign exchange market, and the supply of loanable funds. 
D)  the demand for currency in the foreign exchange market, and the demand for loanable funds.

Question 11

If the U.S. government imposed quotas on imports of clothing, then U.S.

Accepted Answer

A)  imports and exports would both fall. 
B)  imports would fall and exports would rise. 
C)  imports would rise and exports would fall. 
D)  None of the above is correct. 
A)  imports and exports would both fall. 
B)  imports would fall and exports would rise. 
C)  imports would rise and exports would fall. 
D)  None of the above is correct.

Question 12

The open-economy macroeconomic model examines the determination of

Accepted Answer

A)  the output growth rate and the real interest rate. 
B)  unemployment and the exchange rate. 
C)  the output growth rate and the inflation rate. 
D)  the trade balance and the exchange rate. 
A)  the output growth rate and the real interest rate. 
B)  unemployment and the exchange rate. 
C)  the output growth rate and the inflation rate. 
D)  the trade balance and the exchange rate.

Question 13

In 2002 it looked like the Argentinean government might default on its debt (which eventually it did). The open- economy macroeconomic model predicts that this should have

Accepted Answer

A)  raised Argentinean interest rates and caused the Argentinean currency to appreciate. 
B)  raised Argentinean interest rates and caused the Argentinean currency to depreciate. 
C)  lowered Argentinean interest rates and caused the Argentinean currency to appreciate. 
D)  lowered Argentinean interest rates and caused the Argentinean currency to depreciate. 
A)  raised Argentinean interest rates and caused the Argentinean currency to appreciate. 
B)  raised Argentinean interest rates and caused the Argentinean currency to depreciate. 
C)  lowered Argentinean interest rates and caused the Argentinean currency to appreciate. 
D)  lowered Argentinean interest rates and caused the Argentinean currency to depreciate.

Question 14

Capital flight shifts the NCO curve to the left.

Accepted Answer

A) True 
 B)False

Question 15

When the real exchange rate for the dollar depreciates, U.S. goods become

Accepted Answer

A)  less expensive relative to foreign goods, which makes exports rise and imports fall. 
B)  less expensive relative to foreign goods, which makes exports fall and imports rise. 
C)  more expensive relative to foreign goods, which makes exports rise and imports fall. 
D)  more expensive relative to foreign goods, which makes exports fall and imports rise. 
A)  less expensive relative to foreign goods, which makes exports rise and imports fall. 
B)  less expensive relative to foreign goods, which makes exports fall and imports rise. 
C)  more expensive relative to foreign goods, which makes exports rise and imports fall. 
D)  more expensive relative to foreign goods, which makes exports fall and imports rise.

Question 16

When a country experiences capital flight its currency

Accepted Answer

A)  appreciates and net exports rise. 
B)  appreciates and net exports fall. 
C)  depreciates and net exports rise. 
D)  depreciates and net exports fall. 
A)  appreciates and net exports rise. 
B)  appreciates and net exports fall. 
C)  depreciates and net exports rise. 
D)  depreciates and net exports fall.

Question 17

A firm produces construction equipment, some of which it exports. Which of the following effects of an increase in the government budget deficit would likely reduce the quantity of equipment it sells?

Accepted Answer

A)  the change in the interest rate and the change in the exchange rate 
B)  the change in the interest rate but not the change in the exchange rate 
C)  the change in the exchange rate but not the change in the interest rate 
D)  neither the change in the interest rate nor the change in the exchange rate 
A)  the change in the interest rate and the change in the exchange rate 
B)  the change in the interest rate but not the change in the exchange rate 
C)  the change in the exchange rate but not the change in the interest rate 
D)  neither the change in the interest rate nor the change in the exchange rate

Question 18

If the U.S. imposed an import quota on corn, then in the U.S.

Accepted Answer

A)  exports and imports would rise. 
B)  exports and imports would fall. 
C)  exports would rise and imports would fall. 
D)  exports would fall and imports would rise. 
A)  exports and imports would rise. 
B)  exports and imports would fall. 
C)  exports would rise and imports would fall. 
D)  exports would fall and imports would rise.

Question 19

Capital flight refers to

Accepted Answer

A)  the movement of workers across international borders in response to exchange rate changes. 
B)  the movement of funds between financial intermediaries when interest rates change. 
C)  the ability of foreign direct investment to lift a country out of poverty. 
D)  a large and sudden movement of funds out of a country. 
A)  the movement of workers across international borders in response to exchange rate changes. 
B)  the movement of funds between financial intermediaries when interest rates change. 
C)  the ability of foreign direct investment to lift a country out of poverty. 
D)  a large and sudden movement of funds out of a country.

Question 20

A country produces two goods, soda and chips. It currently exports soda and imports chips. If it were to impose a tariff on chips,

Accepted Answer

A)  both imports of chips and exports of sodas would rise. 
B)  imports of chips would rise, but exports of sodas would fall. 
C)  imports of chips would fall, but exports of sodas would rise. 
D)  both imports of chips and exports of sodas would fall. 
A)  both imports of chips and exports of sodas would rise. 
B)  imports of chips would rise, but exports of sodas would fall. 
C)  imports of chips would fall, but exports of sodas would rise. 
D)  both imports of chips and exports of sodas would fall.

Exam 32: A Macroeconomic Theory of the Open Economy

A rise in the government budget deficit

Refer to Depositors Move Funds Out of Greek Banks. What happened to the domestic equilibrium interest rate and quantity of loanable funds supplied?

What is the source of the demand for dollars in the market for foreign-currency exchange?

When the government budget deficit increases, national saving decreases.

Political events convince people that the assets of country x are now riskier. As a result of this change which curves in the open-economy macroeconomic model shift and which direction do they shift for country x?

Because a government budget deficit represents

When a country imposes an import quota, its

An increase in the budget deficit causes domestic interest rates

If a country repeals an investment tax credit,

A German company wants to buy dollars to purchase U.S. bonds. In the open-economy macroeconomic model of the U.S., this transaction would be accounted for in

If the U.S. government imposed quotas on imports of clothing, then U.S.

The open-economy macroeconomic model examines the determination of

In 2002 it looked like the Argentinean government might default on its debt (which eventually it did). The open- economy macroeconomic model predicts that this should have

Capital flight shifts the NCO curve to the left.

When the real exchange rate for the dollar depreciates, U.S. goods become

When a country experiences capital flight its currency

A firm produces construction equipment, some of which it exports. Which of the following effects of an increase in the government budget deficit would likely reduce the quantity of equipment it sells?

If the U.S. imposed an import quota on corn, then in the U.S.

Capital flight refers to

A country produces two goods, soda and chips. It currently exports soda and imports chips. If it were to impose a tariff on chips,

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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