Question 1

If a country's budget deficit rises, then its exchange rate

Accepted Answer

A)  rises, so its imports rise. 
B)  rises, so its imports fall. 
C)  falls, so its imports rise. 
D)  falls so its imports fall. 
A)  rises, so its imports rise. 
B)  rises, so its imports fall. 
C)  falls, so its imports rise. 
D)  falls so its imports fall.

Question 2

When a country experiences capital flight its

Accepted Answer

A)  net capital outflow increases and its real exchange rate rises. 
B)  net capital outflow increases and its real exchange rate falls. 
C)  net capital outflow decreases and its real exchange rate rises. 
D)  net capital outflow decreases and its real exchange rate falls. 
A)  net capital outflow increases and its real exchange rate rises. 
B)  net capital outflow increases and its real exchange rate falls. 
C)  net capital outflow decreases and its real exchange rate rises. 
D)  net capital outflow decreases and its real exchange rate falls.

Question 3

Other things the same, a decrease in the real interest rate raises the quantity of

Accepted Answer

A)  domestic investment and net capital outflow. 
B)  domestic investment but not net capital outflow. 
C)  net capital outflow but not domestic investment. 
D)  neither domestic investment nor net capital outflow. 
A)  domestic investment and net capital outflow. 
B)  domestic investment but not net capital outflow. 
C)  net capital outflow but not domestic investment. 
D)  neither domestic investment nor net capital outflow.

Question 4

If the government of a country with a zero trade balance started with a budget deficit and moved to a budget surplus, domestic investment would

Accepted Answer

A)  rise and there would be a trade surplus. 
B)  rise and there would be a trade deficit. 
C)  fall and there would be a trade surplus. 
D)  fall and there would be a trade deficit. 
A)  rise and there would be a trade surplus. 
B)  rise and there would be a trade deficit. 
C)  fall and there would be a trade surplus. 
D)  fall and there would be a trade deficit.

Question 5

In 2002, the United States imposed restrictions on the importation of steel into the United States. The open- economy macroeconomic model shows that such a policy would

Accepted Answer

A)  lower the real exchange rate and increase net exports. 
B)  lower the real exchange rate and have no effect on net exports. 
C)  raise the real exchange rate and decrease net exports. 
D)  raise the real exchange rate and have no effect on net exports. 
A)  lower the real exchange rate and increase net exports. 
B)  lower the real exchange rate and have no effect on net exports. 
C)  raise the real exchange rate and decrease net exports. 
D)  raise the real exchange rate and have no effect on net exports.

Question 6

Many U.S. business leaders argue that the current state of U.S. net exports is the result of

Accepted Answer

A)  U.S. export subsidies. 
B)  free trade policies of foreign governments. 
C)  unproductive U.S. workers. 
D)  unfair foreign competition. 
A)  U.S. export subsidies. 
B)  free trade policies of foreign governments. 
C)  unproductive U.S. workers. 
D)  unfair foreign competition.

Question 7

In the open-economy macroeconomic model, if for some reason foreign citizens want to purchase more U.S. goods and services at each exchange rate, then

Accepted Answer

A)  the demand for dollars in the market for foreign-currency exchange shifts right. 
B)  the demand for dollars in the market for foreign-currency exchange shifts left. 
C)  the supply of dollars in the market for foreign-currency exchange shifts right. 
D)  the supply of dollars in the market for foreign-currency exchange shifts left. 
A)  the demand for dollars in the market for foreign-currency exchange shifts right. 
B)  the demand for dollars in the market for foreign-currency exchange shifts left. 
C)  the supply of dollars in the market for foreign-currency exchange shifts right. 
D)  the supply of dollars in the market for foreign-currency exchange shifts left.

Question 8

In the market for foreign-currency exchange, the source of the supply of dollars is _________. The supply curve is _________ because _____________.

Accepted Answer

net capital outflow,

Question 9

If the real exchange rate for the dollar is below the equilibrium level, the quantity of dollars supplied in the market for foreign-currency exchange is

Accepted Answer

A)  less than the quantity demanded and the dollar will appreciate. 
B)  less than the quantity demanded and the dollar will depreciate. 
C)  greater than the quantity demanded and the dollar will appreciate. 
D)  greater than the quantity demanded and the dollar will depreciate. 
A)  less than the quantity demanded and the dollar will appreciate. 
B)  less than the quantity demanded and the dollar will depreciate. 
C)  greater than the quantity demanded and the dollar will appreciate. 
D)  greater than the quantity demanded and the dollar will depreciate.

Question 10

In the open-economy macroeconomic model, net exports equal the quantity of dollars demanded in the market for foreign currency exchange.

Accepted Answer

A) True 
 B)False

Question 11

If a country's government moves from a budget deficit to a budget surplus, which curve in the market for loanable funds shifts and which direction does it shift? What happens to the interest rate?

Accepted Answer

The supply of loanab

Question 12

Which of the following is most likely to increase the exports of a country?

Accepted Answer

A)  The government gives subsidies to firms that export goods or services. 
B)  The government reduces the size of the budget surplus. 
C)  Political instability within the country increases modestly. 
D)  None of the above will increase exports. 
A)  The government gives subsidies to firms that export goods or services. 
B)  The government reduces the size of the budget surplus. 
C)  Political instability within the country increases modestly. 
D)  None of the above will increase exports.

Question 13

If interest rates rose more in the U.S. than in France, then other things the same

Accepted Answer

A)  U.S. citizens would buy more French bonds and French citizens would buy more U.S. bonds. 
B)  U.S. citizens would buy more French bonds and French citizens would buy fewer U.S. bonds. 
C)  U.S. citizens would buy fewer French bonds and French citizens would buy more U.S. bonds. 
D)  U.S. citizens would buy fewer French bonds and French citizens would buy fewer U.S. bonds. 
A)  U.S. citizens would buy more French bonds and French citizens would buy more U.S. bonds. 
B)  U.S. citizens would buy more French bonds and French citizens would buy fewer U.S. bonds. 
C)  U.S. citizens would buy fewer French bonds and French citizens would buy more U.S. bonds. 
D)  U.S. citizens would buy fewer French bonds and French citizens would buy fewer U.S. bonds.

Question 14

A country has output of $900 billion, consumption of $600 billion, government expenditures of $150 billion and investment of $120 billion. What is its supply of loanable funds?

Accepted Answer

A)  $30 billion 
B)  $90 billion 
C)  $120 billion 
D)  $150 billion 
A)  $30 billion 
B)  $90 billion 
C)  $120 billion 
D)  $150 billion

Question 15

Which of the following is included in the demand for dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

Accepted Answer

A)  a company in Canada wants to buy oranges from the U.S 
B)  a Japanese banks want to buy bonds from the U.S. government 
C)  a U.S. citizen wants to buy stock a German company is selling 
D)  None of the above is correct. 
A)  a company in Canada wants to buy oranges from the U.S 
B)  a Japanese banks want to buy bonds from the U.S. government 
C)  a U.S. citizen wants to buy stock a German company is selling 
D)  None of the above is correct.

Question 16

If a government started with a budget deficit and moved to a surplus, domestic investment

Accepted Answer

A)  and the real exchange rate would rise. 
B)  and the real exchange rate would fall. 
C)  would rise and the real exchange rate would fall. 
D)  would fall and the real exchange rate would rise. 
A)  and the real exchange rate would rise. 
B)  and the real exchange rate would fall. 
C)  would rise and the real exchange rate would fall. 
D)  would fall and the real exchange rate would rise.

Question 17

Which of the following results if the U.S. removes an import quota on computer components?

Accepted Answer

A)  U.S. exports and U.S. imports both increase 
B)  U.S. exports increase but U.S. imports are unchanged 
C)  U.S. imports increase but U.S. exports are unchanged 
D)  None of the above are correct 
A)  U.S. exports and U.S. imports both increase 
B)  U.S. exports increase but U.S. imports are unchanged 
C)  U.S. imports increase but U.S. exports are unchanged 
D)  None of the above are correct

Question 18

Refer to Budget Reform. What does this policy change do to net capital outflows? Defend your answer.

Accepted Answer

Net capital outflows rise because a lowe

Question 19

If the supply of loanable funds shifts right, then the equilibrium

Accepted Answer

A)  interest rate falls, so domestic residents will want to purchase more foreign assets. 
B)  interest rate falls, so domestic residents will want to purchase fewer foreign assets. 
C)  interest rate rises, so domestic residents will want to purchase more foreign assets. 
D)  interest rate rises, so domestic residents will want to purchase fewer foreign assets. 
A)  interest rate falls, so domestic residents will want to purchase more foreign assets. 
B)  interest rate falls, so domestic residents will want to purchase fewer foreign assets. 
C)  interest rate rises, so domestic residents will want to purchase more foreign assets. 
D)  interest rate rises, so domestic residents will want to purchase fewer foreign assets.

Question 20

In the open economy model, the supply of loanable funds comes from national saving and net capital outflow.

Accepted Answer

A) True 
 B)False

Exam 32: A Macroeconomic Theory of the Open Economy

If a country's budget deficit rises, then its exchange rate

When a country experiences capital flight its

Other things the same, a decrease in the real interest rate raises the quantity of

If the government of a country with a zero trade balance started with a budget deficit and moved to a budget surplus, domestic investment would

In 2002, the United States imposed restrictions on the importation of steel into the United States. The open- economy macroeconomic model shows that such a policy would

Many U.S. business leaders argue that the current state of U.S. net exports is the result of

In the open-economy macroeconomic model, if for some reason foreign citizens want to purchase more U.S. goods and services at each exchange rate, then

In the market for foreign-currency exchange, the source of the supply of dollars is _________. The supply curve is _________ because _____________.

If the real exchange rate for the dollar is below the equilibrium level, the quantity of dollars supplied in the market for foreign-currency exchange is

In the open-economy macroeconomic model, net exports equal the quantity of dollars demanded in the market for foreign currency exchange.

If a country's government moves from a budget deficit to a budget surplus, which curve in the market for loanable funds shifts and which direction does it shift? What happens to the interest rate?

Which of the following is most likely to increase the exports of a country?

If interest rates rose more in the U.S. than in France, then other things the same

A country has output of $900 billion, consumption of $600 billion, government expenditures of $150 billion and investment of $120 billion. What is its supply of loanable funds?

Which of the following is included in the demand for dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

If a government started with a budget deficit and moved to a surplus, domestic investment

Which of the following results if the U.S. removes an import quota on computer components?

Refer to Budget Reform. What does this policy change do to net capital outflows? Defend your answer.

If the supply of loanable funds shifts right, then the equilibrium

In the open economy model, the supply of loanable funds comes from national saving and net capital outflow.

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

In the market for foreign-currency exchange, the source of the supply of dollars is _____. The supply curve is _ because _________.