Question 1

Which of the following can explain a decrease in the U.S. real exchange rate?

Accepted Answer

A)   the U.S. government budget deficit falls
B)   the U.S. impose import quotas
C)   the default risk of U.S. assets falls
D)   All of the above are correct.E) B) and C)
F) A) and D)

Question 2

Suppose the U.S. supply of loanable funds shifts left. This will

Accepted Answer

A)   increase U.S. net capital outflow and increase the quantity of loanable funds demanded.
B)   increase U.S. net capital outflow and decrease the quantity of loanable funds demanded.
C)   decrease U.S. net capital outflow and increase the quantity of loanable funds demanded.
D)   decrease U.S. net capital outflow and decrease the quantity of loanable funds demanded.E) A) and B)
F) None of the above

Question 3

Refer to U.S. Investment Tax Credit. In the market for loanable funds which curve shifts and which direction does it shift?

Accepted Answer

The demand...

Question 4

Which of the following would make the equilibrium real interest rate decrease and the equilibrium quantity of loanable funds increase?

Accepted Answer

A)   The demand for loanable funds shifts right.
B)   The demand for loanable funds shifts left
C)   The supply of loanable funds shifts right.
D)   The supply of loanable funds shifts left.E) B) and D)
F) B) and C)

Question 5

If the government budget deficit rises, what happens to the interest rate? What does this change in the interest rate do to net capital outflow? Provide a detailed explanation of why this change in the interest rate changes net capital outflow.

Accepted Answer

The interest rate rises. The increase in...

Question 6

A country has private saving of $500 billion, public saving of -$100 billion, domestic investment of $150 billion, and net capital outflow of $250 billion. What is its supply of loanable funds?

Accepted Answer

A)   $650 billion
B)   $600 billion
C)   $400 billion
D)   $350 billionE) A) and B)
F) B) and C)

Question 7

Define net capital outflow.

Accepted Answer

Net capital outflow equals the...

Question 8

If the exchange rate rises, domestic goods become relatively ______ expensive. This change in the affordability of domestic goods makes domestic goods _____ attractive to foreigners. So, _______ ______.

Accepted Answer

more, less...

Question 9

In the open-economy macroeconomic model, net capital outflow rises if

Accepted Answer

A)   either the exchange rate rises or the real interest rate falls.
B)   either the exchange rate falls or the real interest rate rises.
C)   the real interest rate rises. Net capital outflow does not depend on the exchange rate.
D)   the real interest rate falls. Net capital outflow does not depend on the exchange rate.E) A) and C)
F) A) and B)

Question 10

If a country removes an import quota, what happens to its exchange rate, its exports, and its net exports?

Accepted Answer

Its exchange rate fa...

Question 11

Over the past three decades, the United States has

Accepted Answer

A)   generally had, or been very near to a trade balance.
B)   had trade deficits in about as many years as it has trade surpluses.
C)   persistently had a trade deficit.
D)   persistently had a trade surplus.E) B) and D)
F) C) and D)

Question 12

An increase in a country's budget surplus shifts its

Accepted Answer

A)   demand for loanable funds right and decreases investment spending.
B)   supply of loanable funds right and increases investment spending.
C)   supply of loanable funds left and decreases investment spending.
D)   None of the above is correct.E) B) and C)
F) All of the above

Question 13

Other things the same, which of the following would shift the supply of dollars in the market for foreign exchange to the right?

Accepted Answer

A)   foreigners want to buy more U.S. bonds
B)   foreigners want to buy fewer U.S. bonds
C)   foreigners want to buy more U.S. goods and services.
D)   foreigners want to buy fewer U.S. goods and services.E) A) and D)
F) B) and C)

Question 14

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)   net capital outflow alone.
C)   domestic investment alone.
D)   None of the above is correct.E) C) and D)
F) None of the above

Question 15

If the Japanese government raised its budget deficit, then the yen would

Accepted Answer

A)   depreciate and Japanese net exports would rise.
B)   depreciate and Japanese net exports would fall.
C)   appreciate and Japanese net exports would rise.
D)   appreciate and Japanese net exports would fall.E) C) and D)
F) A) and B)

Question 16

If there is a surplus of loanable funds, the quantity demanded is

Accepted Answer

A)   greater than the quantity supplied and the interest rate will rise.
B)   greater than the quantity supplied and the interest rate will fall.
C)   less than the quantity supplied and the interest rate will rise.
D)   less than the quantity supplied and the interest rate will fall.E) B) and C)
F) A) and D)

Question 17

If the demand for net exports rises, which of the following happens in the open-economy macroeconomic model?

Accepted Answer

A)   the exchange rate rises
B)   the interest rate falls
C)   net capital outflow rises
D)   All of the above are correct.E) A) and B)
F) All of the above

Question 18

Other things the same, a decrease in the U.S. real interest rate induces

Accepted Answer

A)   Americans to buy more foreign assets, which increases U.S. net capital outflow.
B)   Americans to buy more foreign assets, which reduces U.S. net capital outflow.
C)   foreigners to buy more U.S. assets, which reduces U.S. net capital outflow.
D)   foreigners to buy more U.S. assets, which increases U.S. net capital outflow.E) B) and C)
F) A) and D)

Question 19

In the open-economy macroeconomic model, a higher U.S. real exchange rate makes

Accepted Answer

A)   U.S. goods more expensive relative to foreign goods and reduces the quantity of dollars supplied.
B)   U.S. goods more expensive relative to foreign goods and reduces the quantity of dollars demanded.
C)   foreign goods more expensive relative to U.S. goods and reduces the quantity of dollars supplied.
D)   foreign goods more expensive relative to U.S. goods and reduces the quantity of dollars demanded.E) A) and B)
F) All of the above

Question 20

When a government increases its budget deficit, then that country's

Accepted Answer

A)   supply of loanable funds shifts right.
B)   supply of loanable funds shifts left.
C)   demand for loanable funds shifts right.
D)   demand for loanable funds shifts left.E) None of the above
F) A) and D)

Exam 32: A Macroeconomic Theory of the Open Economy

In the open-economy macroeconomic model, a higher U.S. real exchange rate makes

Correct AnswerverifiedShow Answer

If the exchange rate rises, domestic goods become relatively ______ expensive. This change in the affordability of domestic goods makes domestic goods _____ attractive to foreigners. So, _______ ______.

Correct Answerverifiedmore, less...View AnswerShow Answer

Other things the same, a decrease in the U.S. real interest rate induces

Correct AnswerverifiedShow Answer

If the demand for net exports rises, which of the following happens in the open-economy macroeconomic model?

Correct AnswerverifiedShow Answer

If a country removes an import quota, what happens to its exchange rate, its exports, and its net exports?

Correct AnswerverifiedIts exchange rate fa...View AnswerShow Answer

Over the past three decades, the United States has

Correct AnswerverifiedShow Answer

Suppose the U.S. supply of loanable funds shifts left. This will

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, net capital outflow rises if

Correct AnswerverifiedShow Answer

If the government budget deficit rises, what happens to the interest rate? What does this change in the interest rate do to net capital outflow? Provide a detailed explanation of why this change in the interest rate changes net capital outflow.

Correct AnswerverifiedThe interest rate rises. The increase in...View AnswerShow Answer

Other things the same, which of the following would shift the supply of dollars in the market for foreign exchange to the right?

Correct AnswerverifiedShow Answer

Which of the following can explain a decrease in the U.S. real exchange rate?

Correct AnswerverifiedShow Answer

Which of the following would make the equilibrium real interest rate decrease and the equilibrium quantity of loanable funds increase?

Correct AnswerverifiedShow Answer

Refer to U.S. Investment Tax Credit. In the market for loanable funds which curve shifts and which direction does it shift?

Correct AnswerverifiedThe demand...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Define net capital outflow.

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

If there is a surplus of loanable funds, the quantity demanded is

Correct AnswerverifiedShow Answer

An increase in a country's budget surplus shifts its

Correct AnswerverifiedShow Answer

A country has private saving of $500 billion, public saving of -$100 billion, domestic investment of $150 billion, and net capital outflow of $250 billion. What is its supply of loanable funds?

Correct AnswerverifiedShow Answer

When a government increases its budget deficit, then that country's

Correct AnswerverifiedShow Answer

If the Japanese government raised its budget deficit, then the yen would

Correct AnswerverifiedShow Answer

Correct Answer
verified

If the exchange rate rises, domestic goods become relatively ____ expensive. This change in the affordability of domestic goods makes domestic goods _ attractive to foreigners. So, _ __.

Correct Answer
verified
more, less...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Its exchange rate fa...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The interest rate rises. The increase in...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The demand...
View Answer

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