Exam 32: A Macroeconomic Theory of the Open Economy

If a country's budget deficit increases, then in the market for foreign­currency exchange,

Capital flight raises a country's interest rate.

The country of Solidia is politically very stable and has a long tradition of respecting property rights. If several other countries suddenly became politically unstable, we would expect Solidia's

When a country imposes an import quota, its exchange rate

Which of the following would both raise the U.S. exchange rate?

If the quantity of loanable funds supplied is greater than the quantity demanded, then there is a

If the supply of dollars in the market for foreign-currency exchange shifts left, then the exchange rate

If C+I+G>Y, then net exports and net capital outflow are both greater than zero.

Which of the following would do the most to reduce a trade deficit?

If a country has a positive net capital outflow, then

If the U.S. government imposes a quota on imports of jet planes, then

Figure 32-4 Refer to this diagram of the open-economy macroeconomic model to answer the questions below. -Refer to Figure 32-4. Suppose that the government goes from a budget surplus to a budget deficit. The effects of the change could be illustrated by

A rise in the budget deficit

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

If the U.S. government imposes an import quota on beef, U.S. net exports will

If the French government increases its expenditures and reduces taxes, then France's interest rate

Although trade policies do not affect a country's overall trade balance, they do affect specific firms and industries.

If Argentina suffers from capital flight, Argentinean domestic investment and Argentinean net exports will both decline.

When a country suffers from capital flight, the exchange rate

If for some reason Americans desired to decrease their purchases of foreign assets, then other things the same