Question 1

Capital flight raises a country's real exchange rate.

Accepted Answer

A) True 
 B)False

Question 2

Other things the same, a higher real exchange rate raises net exports.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A)  U.S. interest rates rise 
B)  U.S. net capital outflow falls 
C)  the real exchange rate of the U.S. dollar depreciates 
D)  the U.S. supply of loanable funds shifts left 
A)  U.S. interest rates rise 
B)  U.S. net capital outflow falls 
C)  the real exchange rate of the U.S. dollar depreciates 
D)  the U.S. supply of loanable funds shifts left

Question 4

If a government increases its budget deficit, then the real exchange rate

Accepted Answer

A)  and domestic investment rise. 
B)  and domestic investment fall. 
C)  rises and domestic investment falls. 
D)  falls and domestic investment rises. 
A)  and domestic investment rise. 
B)  and domestic investment fall. 
C)  rises and domestic investment falls. 
D)  falls and domestic investment rises.

Question 5

An increase in the government budget deficit shifts the demand for loanable funds to the right.

Accepted Answer

A) True 
 B)False

Question 6

What are the sources of the demand for loanable funds? What happens to the quantity of loanable funds demanded when the interest rate rises?

Accepted Answer

The sources of the demand for

Question 7

Suppose a country experiences capital flight. Of the demand for loanable funds and the supply of currency in the market for foreign-currency exchange, which shifts right?

Accepted Answer

A)  only the demand for loanable funds 
B)  only the supply of its currency in the market for foreign-currency exchange 
C)  both curves shift right 
D)  neither curve shifts right 
A)  only the demand for loanable funds 
B)  only the supply of its currency in the market for foreign-currency exchange 
C)  both curves shift right 
D)  neither curve shifts right

Question 8

In the United States in the early 1980s, there was a government budget

Accepted Answer

A)  surplus and a trade surplus. 
B)  deficit and a trade deficit. 
C)  surplus and a trade deficit. 
D)  deficit and a trade surplus. 
A)  surplus and a trade surplus. 
B)  deficit and a trade deficit. 
C)  surplus and a trade deficit. 
D)  deficit and a trade surplus.

Question 9

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)  the sum of national saving and net capital outflow. 
C)  national saving. 
D)  net exports 
A)  the sum of domestic investment and net capital outflow. 
B)  the sum of national saving and net capital outflow. 
C)  national saving. 
D)  net exports

Question 10

Refer to U.S. Investment Tax Credit. What happens to the interest rate, U.S. net capital outflow, and the net capital outflow of foreign countries?

Accepted Answer

The interest rate ri

Question 11

Which of the following contains a list only of things that increase when the budget deficit of the U.S. increases?

Accepted Answer

A)  U.S. supply of loanable funds, U.S. interest rates, U.S. domestic investment 
B)  U.S. imports, U.S. interest rates, the real exchange rate of the dollar 
C)  U.S. interest rates, the real exchange rate of the dollar, U.S. domestic investment 
D)  the real exchange rate of the dollar, U.S. net capital outflow, U.S. net exports 
A)  U.S. supply of loanable funds, U.S. interest rates, U.S. domestic investment 
B)  U.S. imports, U.S. interest rates, the real exchange rate of the dollar 
C)  U.S. interest rates, the real exchange rate of the dollar, U.S. domestic investment 
D)  the real exchange rate of the dollar, U.S. net capital outflow, U.S. net exports

Question 12

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

Accepted Answer

A)  national saving. 
B)  private saving. 
C)  domestic investment. 
D)  the sum of domestic investment and net capital outflow. 
A)  national saving. 
B)  private saving. 
C)  domestic investment. 
D)  the sum of domestic investment and net capital outflow.

Question 13

Which curve in the market for foreign-currency exchange shifts and which direction does it shift if the government budget deficit increases? Explain why an increase in the budget deficit shifts this curve.

Accepted Answer

The supply curve in the market for forei

Question 14

When the real exchange rate for the dollar appreciates, 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 15

If the supply of 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 16

What happens to the quantity of loanable funds supplied when the interest rate rises? Explain why this change happens.

Accepted Answer

The quantity of loanable funds

Question 17

Other things the same, as the real interest rate falls

Accepted Answer

A)  domestic investment and net capital outflow both rise. 
B)  domestic investment and net capital outflow both fall. 
C)  domestic investment rises and net capital outflow falls. 
D)  domestic investment falls and net capital outflow rises. 
A)  domestic investment and net capital outflow both rise. 
B)  domestic investment and net capital outflow both fall. 
C)  domestic investment rises and net capital outflow falls. 
D)  domestic investment falls and net capital outflow rises.

Question 18

In the open-economy macroeconomic model, the key determinant of net capital outflow is

Accepted Answer

A)  the real exchange rate. When the real exchange rate rises, net capital outflow rises. 
B)  the real exchange rate. When the real exchange rate rises, net capital outflow falls. 
C)  the real interest rate. When the real interest rate rises, net capital outflow rises. 
D)  the real interest rate. When the real interest rate rises, net capital outflow falls. 
A)  the real exchange rate. When the real exchange rate rises, net capital outflow rises. 
B)  the real exchange rate. When the real exchange rate rises, net capital outflow falls. 
C)  the real interest rate. When the real interest rate rises, net capital outflow rises. 
D)  the real interest rate. When the real interest rate rises, net capital outflow falls.

Question 19

If the people thought that many banks in a certain country were at or near the point of bankruptcy, then that country's real exchange rate

Accepted Answer

A)  and net exports would rise. 
B)  would rise and its net exports would fall. 
C)  would fall and its net exports would rise. 
D)  and its net exports would fall. 
A)  and net exports would rise. 
B)  would rise and its net exports would fall. 
C)  would fall and its net exports would rise. 
D)  and its net exports would fall.

Question 20

Which of the following is most likely to increase U.S. exports?

Accepted Answer

A)  The government gives subsidies to U.S. firms that export goods or services. 
B)  The government reduces the size of the budget surplus. 
C)  The United States unilaterally reduces its restrictions on foreign imports. 
D)  Taxes on domestic saving rise. 
A)  The government gives subsidies to U.S. firms that export goods or services. 
B)  The government reduces the size of the budget surplus. 
C)  The United States unilaterally reduces its restrictions on foreign imports. 
D)  Taxes on domestic saving rise.

Exam 32: A Macroeconomic Theory of the Open Economy

Capital flight raises a country's real exchange rate.

Other things the same, a higher real exchange rate raises net exports.

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

If a government increases its budget deficit, then the real exchange rate

An increase in the government budget deficit shifts the demand for loanable funds to the right.

What are the sources of the demand for loanable funds? What happens to the quantity of loanable funds demanded when the interest rate rises?

Suppose a country experiences capital flight. Of the demand for loanable funds and the supply of currency in the market for foreign-currency exchange, which shifts right?

In the United States in the early 1980s, there was a government budget

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

Refer to U.S. Investment Tax Credit. What happens to the interest rate, U.S. net capital outflow, and the net capital outflow of foreign countries?

Which of the following contains a list only of things that increase when the budget deficit of the U.S. increases?

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

Which curve in the market for foreign-currency exchange shifts and which direction does it shift if the government budget deficit increases? Explain why an increase in the budget deficit shifts this curve.

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

If the supply of loanable funds shifts left, then

What happens to the quantity of loanable funds supplied when the interest rate rises? Explain why this change happens.

Other things the same, as the real interest rate falls

In the open-economy macroeconomic model, the key determinant of net capital outflow is

If the people thought that many banks in a certain country were at or near the point of bankruptcy, then that country's real exchange rate

Which of the following is most likely to increase U.S. exports?

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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