Question 1

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

Accepted Answer

A)   national saving.The demand for loanable funds comes from domestic investment + net capital outflow.
B)   national saving.The demand for loanable funds comes only from domestic investment.
C)   private saving.The demand for loanable funds comes from domestic investment + net capital outflow.
D)   private saving.The demand for loanable funds comes only from domestic investment.E) B) and C)
F) B) and D)

Question 2

If a country removed an import quota on cotton,then overall that country's

Accepted Answer

A)   exports and imports would rise.
B)   exports would rise and imports would fall.
C)   exports would fall and imports would rise.
D)   exports and imports would fall.E) A) and D)
F) A) and C)

Question 3

In the open-economy macroeconomic model,if a country's interest rate rises,then its

Accepted Answer

A)   net capital outflow and net exports rise.
B)   net capital outflow rises and its net exports fall.
C)   net capital outflow falls and its net exports rise.
D)   net capital outflow and net exports fall.E) B) and D)
F) A) and C)

Question 4

The purchase of a capital asset adds to the demand for loanable funds only if that asset is a domestic one.

Accepted Answer

A) True 
 B)False

Question 5

If the world 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 net exports would fall.
C)   would fall and net exports would rise.
D)   and net exports would fall.E) A) and B)
F) C) and D)

Question 6

In the open-economy macroeconomic model,the amount of net capital outflow represents the quantity of dollars

Accepted Answer

A)   supplied for the purpose of selling assets domestically.
B)   supplied for the purpose of buying foreign assets.
C)   demanded for the purpose of buying U.S.net exports of goods and services.
D)   demanded for the purpose of importing foreign goods and services.E) None of the above
F) A) and C)

Question 7

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

Accepted Answer

A)   U.S.net exports,U.S.domestic investment,U.S.net capital outflow
B)   U.S.supply of loanable funds,U.S.interest rates,U.S.domestic investment
C)   U.S.imports,U.S.interest rates,the real exchange rate of the dollar
D)   None of the above is correct.E) A) and D)
F) All of the above

Question 8

Refer to Figure 32-6.If the economy were initially in equilibrium at r2 and E3 and the government removed import quotas,the exchange rate would

Accepted Answer

A)   appreciate to E4.
B)   appreciate to E2.
C)   depreciate to E1.
D)   depreciate to E2.E) A) and D)
F) A) and C)

Question 9

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) All of the above

Question 10

Trade policies

Accepted Answer

A)   alter the trade balance because they alter imports of the country that implemented them.
B)   alter the trade balance because they alter net capital outflow of the country that implemented them.
C)   do not alter the trade balance because they cannot alter the national saving or domestic investment of the country that implements them.
D)   do not alter the trade balance because they cannot alter the real exchange rate of the currency of the country that implements them.E) A) and D)
F) None of the above

Question 11

If a country went from a government budget deficit to a surplus,national saving would

Accepted Answer

A)   increase,shifting the supply of loanable funds right.
B)   increase,shifting the supply of loanable funds left.
C)   decrease,shifting the demand for loanable funds right.
D)   decrease,shifting the demand for loanable funds left.E) A) and B)
F) A) and C)

Question 12

A U.S.-imposed quota on appliances would shift

Accepted Answer

A)   both the demand and supply curves in the market for foreign-currency exchange right.
B)   both the demand and supply curves in the market for foreign-currency exchange right
C)   only the demand curve in the market for foreign-currency exchange right
D)   only the supply curve in the market for foreign-currency exchange right.E) A) and B)
F) C) and D)

Question 13

Net capital outflow represents the quantity of dollars supplied in the foreign-currency exchange market.

Accepted Answer

A) True 
 B)False

Question 14

In the open economy macroeconomic model,the price that balances supply and demand in the market for foreign-currency exchange model is the

Accepted Answer

A)   nominal exchange rate.
B)   nominal interest rate.
C)   real exchange rate.
D)   real interest rate.E) B) and C)
F) A) and B)

Question 15

If at a given real interest rate desired national saving would be $50 billion,domestic investment would be $40 billion,and net capital outflow would be $20 billion,then at that real interest rate in the loanable funds market there would be a

Accepted Answer

A)   surplus.The real interest rate would rise.
B)   surplus.The real interest rate would fall.
C)   shortage.The real interest rate would rise.
D)   shortage.The interest rate would fall.E) B) and D)
F) A) and C)

Question 16

Figure 32-4 
-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

Accepted Answer

A)   shifting the demand curve in panel a to the right and the demand curve in panel c to the left.
B)   shifting the demand curve in panel a to the left and the supply curve in panel c to the left.
C)   shifting the supply curve in panel a to the right and the demand curve in panel c to the right.
D)   shifting the supply curve in panel a to the left and the supply curve in panel c to the left.E) B) and C)
F) None of the above

Question 17

Figure 32-7 0 to E1. B)  The real exchange rate of the peso depreciates from E0 to E1. C)  The real exchange rate of the peso appreciates from E1 to E0. D)  The real exchange rate of the peso depreciates from E1 to E0." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 32-7.Which of the following is consistent with capital flight from Mexico?

Accepted Answer

A)   The real exchange rate of the peso appreciates from E0 to E1.
B)   The real exchange rate of the peso depreciates from E0 to E1.
C)   The real exchange rate of the peso appreciates from E1 to E0.
D)   The real exchange rate of the peso depreciates from E1 to E0.E) A) and D)
F) C) and D)

Question 18

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

Accepted Answer

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

Question 19

Which of the following would cause the real exchange rate of the U.S.dollar to depreciate?

Accepted Answer

A)   the U.S.government budget deficit increases
B)   capital flight from the United States
C)   the U.S.imposes import quotas
D)   None of the above is correct.E) B) and C)
F) C) and D)

Question 20

Figure 32-2 
-Refer to Figure 32-2.What are the equilibrium values of the real exchange rate and net exports?

Accepted Answer

A)   1.4,100
B)   1,200
C)   .6,300
D)   None of the above are correct.E) None of the above
F) B) and C)

Exam 32: A Macroeconomic Theory of the Open Economy

A government budget deficit

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Figure 32-4 -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

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Which of the following would cause the real exchange rate of the U.S.dollar to depreciate?

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

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Net capital outflow represents the quantity of dollars supplied in the foreign-currency exchange market.

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

Correct AnswerverifiedShow Answer

If a country removed an import quota on cotton,then overall that country's

Correct AnswerverifiedShow Answer

A U.S.-imposed quota on appliances would shift

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model,if a country's interest rate rises,then its

Correct AnswerverifiedShow Answer

Figure 32-7 -Refer to Figure 32-7.Which of the following is consistent with capital flight from Mexico?

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If at a given real interest rate desired national saving would be $50 billion,domestic investment would be $40 billion,and net capital outflow would be $20 billion,then at that real interest rate in the loanable funds market there would be a

Correct AnswerverifiedShow Answer

In the open economy macroeconomic model,the price that balances supply and demand in the market for foreign-currency exchange model is the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model,the amount of net capital outflow represents the quantity of dollars

Correct AnswerverifiedShow Answer

If a country went from a government budget deficit to a surplus,national saving would

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Refer to Figure 32-6.If the economy were initially in equilibrium at r2 and E3 and the government removed import quotas,the exchange rate would

Correct AnswerverifiedShow Answer

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

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The purchase of a capital asset adds to the demand for loanable funds only if that asset is a domestic one.

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Trade policies

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Figure 32-2 -Refer to Figure 32-2.What are the equilibrium values of the real exchange rate and net exports?

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Refer to Figure 32-6.If the economy were initially in equilibrium at r₂and E₃ and the government removed import quotas,the exchange rate would

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