Question 1

In the open-economy macroeconomic model, other things the same, an increase in the exchange rate raises the quantity of dollars supplied in the market for foreign-currency exchange.

Accepted Answer

A) True 
 B)False

Question 2

If government policy encouraged households to save more at each interest rate, then

Accepted Answer

A)   the real exchange rate and net exports would rise.
B)   the real exchange rate and net exports would fall.
C)   the real exchange rate would rise and net exports would fall.
D)   the real exchange rate would fall and net exports would rise.E) C) and D)
F) A) and D)

Question 3

Budget in Recession
During a recession government revenues from the income tax fall and government transfers rise as the reduction in income and the rise in unemployment raise the number of people who qualify for benefits.
-Refer to Budget in Recession. In the market for loanable funds which curves) does this change in the deficit shift? Which direction does it shift?

Accepted Answer

Since the budget def...

Question 4

An economy recently had 800 billion euros of saving and 600 billion euros of net capital outflow. What was its investment? What was its quantity of loanable funds supplied?

Accepted Answer

200 billio...

Question 5

Which of the following would shift the supply of dollars in the market for foreign-currency exchange of the open- economy macroeconomic model to the left?

Accepted Answer

A)   the exchange rate rises
B)   the exchange rate falls
C)   the expected rate of return on U.S. assets rises
D)   the expected rate of return on U.S. assets fallsE) A) and C)
F) All of the above

Question 6

When the U.S. real interest rate falls, purchasing U.S. assets becomes

Accepted Answer

A)   more attractive to both U.S. and foreign residents.
B)   more attractive to U.S. residents and less attractive to foreign residents.
C)   less attractive to U.S. residents and more attractive to foreign residents.
D)   less attractive to both U.S. residents and foreign residents.E) None of the above
F) A) and D)

Question 7

In the open-economy macroeconomic model, the market for loanable funds identity can be written as

Accepted Answer

A)   S = I
B)   S = NCO
C)   S = I + NCO
D)   S + I = NCOE) All of the above
F) B) and C)

Question 8

If a country experiences capital flight, which curves shift right?

Accepted Answer

A)   the demand for loanable funds and the demand for its currency in the market for foreign-currency exchange
B)   the demand for loanable funds and the supply of its currency in the market for foreign-currency exchange
C)   the supply of loanable funds and the demand for its currency in the market for foreign-currency exchange
D)   the supply of loanable funds and the supply of its currency in the market for foreign-currency exchangeE) A) and B)
F) C) and D)

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

A government budget deficit

Accepted Answer

A)   increases both net capital outflow and net exports.
B)   decreases both net capital outflow and net exports.
C)   increases net capital outflow and decreases net exports.
D)   decreases net capital outflow and increases net exports.E) A) and B)
F) A) and C)

Question 11

The key determinant of net capital outflow is the real interest rate.

Accepted Answer

A) True 
 B)False

Question 12

Budget Reform
Due to concerns about a rising level of debt relative to GDP, Congress and the President cut expenditures and raise taxes.
-Refer to Budget Reform. What does this policy change do to the equilibrium values of the interest rate and the quantity of loanable funds?

Accepted Answer

The interest rate fa...

Question 13

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.E) A) and B)
F) All of the above

Question 14

In the open-economy macroeconomic model, if foreign interest rates rise and the U.S interest rate stays the same then, U.S.

Accepted Answer

A)   net capital outflow rises, so the supply of dollars in the market for foreign exchange shifts right.
B)   net capital outflow rises, so the demand for dollars in the market for foreign exchange shifts right.
C)   net capital outflow falls, so the supply of dollars in the market for foreign exchange shifts left.
D)   net capital outflow falls, so the demand for dollars in the market for foreign exchange shifts left.E) C) and D)
F) B) and D)

Question 15

Which of the following would tend to shift the supply of dollars in the market for foreign-currency exchange in the open-economy macroeconomic model to the right?

Accepted Answer

A)   the exchange rate rises
B)   the exchange rate falls
C)   the expected rate of return on U.S. assets rises
D)   the expected rate of return on U.S. assets fallsE) B) and D)
F) B) and C)

Question 16

When a country imposes an import quota, its

Accepted Answer

A)   net exports rise and its real exchange rate appreciates.
B)   net exports rise and its real exchange rate depreciates.
C)   net exports fall and its real exchange rate depreciates
D)   None of the above is correct.E) A) and B)
F) C) and D)

Question 17

If the government of Venezuela made policy changes that increased national saving, the real exchange rate of the peso would

Accepted Answer

A)   depreciate and Venezuelan net exports would rise.
B)   depreciate and Venezuelan net exports would fall.
C)   appreciate and Venezuelan net exports would rise.
D)   appreciate and Venezuelan net exports would fall.E) A) and B)
F) All of the above

Question 18

If the U.S. imposed import quotas on cotton, then which of the following would rise?

Accepted Answer

A)   the U.S. real exchange rate and U.S. net exports
B)   the U.S. real exchange rate but not U.S. net exports
C)   U.S. net exports but not the U.S. real exchange rate
D)   neither the U.S. real exchange rate nor U.S. net exportsE) A) and D)
F) None of the above

Question 19

When Mexico suffered from capital flight in 1994, Mexico's real interest rate

Accepted Answer

A)   fell and the peso appreciated.
B)   fell and the peso depreciated.
C)   rose and the peso appreciated.
D)   rose and the peso depreciated.E) B) and D)
F) B) and C)

Question 20

Define net capital outflow.

Accepted Answer

Net capital outflow equals the...

Exam 14: A Macroeconomic Theory of the Open Economy

An economy recently had 800 billion euros of saving and 600 billion euros of net capital outflow. What was its investment? What was its quantity of loanable funds supplied?

Correct Answer
verified
200 billio...
View Answer

The key determinant of net capital outflow is the real interest rate.

Correct Answer
verified

Correct Answer
verified
Since the budget def...
View Answer

Which of the following would shift the supply of dollars in the market for foreign-currency exchange of the open- economy macroeconomic model to the left?

Correct Answer
verified

In the open-economy macroeconomic model, if foreign interest rates rise and the U.S interest rate stays the same then, U.S.

Correct Answer
verified

When the U.S. real interest rate falls, purchasing U.S. assets becomes

Correct Answer
verified

If the U.S. imposed import quotas on cotton, then which of the following would rise?

Correct Answer
verified

Define net capital outflow.

Correct Answer
verified
Net capital outflow equals the...
View Answer

If government policy encouraged households to save more at each interest rate, then

Correct Answer
verified

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

Correct Answer
verified

When a country imposes an import quota, its

Correct Answer
verified

When Mexico suffered from capital flight in 1994, Mexico's real interest rate

Correct Answer
verified

Budget Reform Due to concerns about a rising level of debt relative to GDP, Congress and the President cut expenditures and raise taxes. -Refer to Budget Reform. What does this policy change do to the equilibrium values of the interest rate and the quantity of loanable funds?

Correct Answer
verified
The interest rate fa...
View Answer

A government budget deficit

Correct Answer
verified

In the open-economy macroeconomic model, other things the same, an increase in the exchange rate raises the quantity of dollars supplied in the market for foreign-currency exchange.

Correct Answer
verified

In the open-economy macroeconomic model, the market for loanable funds identity can be written as

Correct Answer
verified

If a country experiences capital flight, which curves shift right?

Correct Answer
verified

Which of the following would tend to shift the supply of dollars in the market for foreign-currency exchange in the open-economy macroeconomic model to the right?

Correct Answer
verified

If the government of Venezuela made policy changes that increased national saving, the real exchange rate of the peso would

Correct Answer
verified

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

Correct Answer
verified

Exam 14: A Macroeconomic Theory of the Open Economy

An economy recently had 800 billion euros of saving and 600 billion euros of net capital outflow. What was its investment? What was its quantity of loanable funds supplied?

Correct Answerverified200 billio...View AnswerShow Answer

The key determinant of net capital outflow is the real interest rate.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedSince the budget def...View AnswerShow Answer

Which of the following would shift the supply of dollars in the market for foreign-currency exchange of the open- economy macroeconomic model to the left?

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, if foreign interest rates rise and the U.S interest rate stays the same then, U.S.

Correct AnswerverifiedShow Answer

When the U.S. real interest rate falls, purchasing U.S. assets becomes

Correct AnswerverifiedShow Answer

If the U.S. imposed import quotas on cotton, then which of the following would rise?

Correct AnswerverifiedShow Answer

Define net capital outflow.

Correct AnswerverifiedNet capital outflow equals the...View AnswerShow Answer

If government policy encouraged households to save more at each interest rate, then

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When a country imposes an import quota, its

Correct AnswerverifiedShow Answer

When Mexico suffered from capital flight in 1994, Mexico's real interest rate

Correct AnswerverifiedShow Answer

Budget Reform Due to concerns about a rising level of debt relative to GDP, Congress and the President cut expenditures and raise taxes. -Refer to Budget Reform. What does this policy change do to the equilibrium values of the interest rate and the quantity of loanable funds?

Correct AnswerverifiedThe interest rate fa...View AnswerShow Answer

A government budget deficit

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, other things the same, an increase in the exchange rate raises the quantity of dollars supplied in the market for foreign-currency exchange.

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, the market for loanable funds identity can be written as

Correct AnswerverifiedShow Answer

If a country experiences capital flight, which curves shift right?

Correct AnswerverifiedShow Answer

Which of the following would tend to shift the supply of dollars in the market for foreign-currency exchange in the open-economy macroeconomic model to the right?

Correct AnswerverifiedShow Answer

If the government of Venezuela made policy changes that increased national saving, the real exchange rate of the peso would

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified
200 billio...
View Answer

Correct Answer
verified

Correct Answer
verified
Since the budget def...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Net capital outflow equals the...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The interest rate fa...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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