Question 1

If U.S. net exports are positive, then net capital outflow is

Accepted Answer

A)   positive, so foreign assets bought by Americans are greater than American assets bought by foreigners.
B)   positive, so American assets bought by foreigners are greater than foreign assets bought by Americans.
C)   negative, so foreign assets bought by Americans are greater than American assets bought by foreigners.
D)   negative, so American assets bought by foreigners are greater than foreign assets bought by Americans.E) None of the above
F) B) and D)

Question 2

In the open-economy macroeconomic model, if the supply of loanable funds shifts left

Accepted Answer

A)   the interest rate rises and the supply of dollars in the market for foreign currency exchange shifts right.
B)   the interest rate rises and the supply of dollars in the market for foreign currency exchange shifts left.
C)   the interest rate falls and the demand for dollars in the market for foreign currency exchange shifts right.
D)   the interest rate falls and the demand for dollars in the market for foreign currency exchange shifts left.E) A) and B)
F) C) and D)

Question 3

Which of the following results if the U.S. imposes 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 is correct.E) B) and D)
F) B) and C)

Question 4

When fear of default on bonds issued by U.S. corporations decline, then

Accepted Answer

A)   net capital outflow and the exchange rate both rise.
B)   net capital outflow rises and the exchange rate falls.
C)   net capital outflow falls and the exchange rate rises.
D)   net capital outflow and the exchange rate both fall.E) C) and D)
F) None of the above

Question 5

State what, if anything, each of the following does to the supply or demand of loanable funds.
a. net capital outflow increases at each interest rate
b. domestic investment increases at each interest rate
c. the government deficit increases
d. private saving increases

Accepted Answer

a. the demand for loanable fun...

Question 6

In the open-economy macroeconomic model, the supply curve of currency is vertical because the quantity of currency supplied does not depend on the real exchange rate.

Accepted Answer

A) True 
 B)False

Question 7

In the open economy macroeconomic model, the amount of dollars demanded in the market for foreign-currency exchange at a given real exchange rate increases if

Accepted Answer

A)   either U.S. imports or exports increase.
B)   either U.S. imports or exports decrease.
C)   either U.S. imports increase or U.S. exports decrease.
D)   either U.S. imports decrease or U.S. exports increase.E) B) and C)
F) A) and B)

Question 8

Which of the following is correct?

Accepted Answer

A)   capital flight from the United States decreases net capital outflow
B)   an increase in the government budget deficit creates no change in net capital outflow
C)   if the U.S. imposes a restriction on imports, net capital outflow increases
D)   None of the above is correct.E) All of the above
F) A) and D)

Question 9

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) C) and D)
F) A) and C)

Question 10

Which of the following is the most likely response to a decrease in the U.S. real interest rate?

Accepted Answer

A)   a U.S. company decides to expand its factory
B)   a U.S. citizen decides to purchase fewer foreign bonds
C)   a German mutual fund decides to increase its deposits at a U.S. bank
D)   All of the above are consistent.E) A) and B)
F) A) and C)

Question 11

If the exchange rate rises, which of the following falls in the open-economy macroeconomic model?

Accepted Answer

A)   desired net exports and desired net capital outflow
B)   desired net exports but not desired net capital outflow
C)   desired net capital outflow but not desired net exports
D)   neither desired net exports nor desired net capital outflowE) None of the above
F) B) and C)

Question 12

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 13

An increase in the real interest rate in the United States changes the quantity of loanable funds demanded because

Accepted Answer

A)   U.S. residents will want to buy more foreign assets.
B)   Foreign residents will want to buy more U.S. goods and services.
C)   U.S. firms will want to purchase fewer U.S. capital goods.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 14

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 15

Refer to Budget Reform. This policy change causes the exchange rate to change. What does the change in the exchange rate to do to net exports?

Accepted Answer

Because the exchange...

Question 16

Which of the following leads to an increase in net exports in the long run?

Accepted Answer

A)   either a decrease in the budget deficit or imposing an import quota
B)   a decrease in the budget deficit but not imposing an import quota
C)   imposing an import quota but not a decrease in the budget deficit
D)   neither a decrease in the budget deficit nor imposing an import quotaE) C) and D)
F) A) and B)

Question 17

Because a government budget deficit represents

Accepted Answer

A)   negative public saving, it increases national saving.
B)   negative public saving, it decreases national saving.
C)   positive public saving, it increases national saving.
D)   positive public saving, it decreases national saving.E) A) and C)
F) All of the above

Question 18

In the open-economy macroeconomic model, if there is a surplus in the market for foreign-currency exchange, which of the following will move the market to equilibrium?

Accepted Answer

A)   the real exchange rate depreciates and net exports fall.
B)   the real exchange rate depreciates and net exports rise.
C)   the real exchange rate appreciates and net exports fall.
D)   the real exchange rate appreciates and net exports rise.E) All of the above
F) A) and D)

Question 19

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 C)
F) B) and D)

Question 20

A country has national saving of $50 billion, government expenditures of $30 billion, domestic investment of $10 billion, and net capital outflow of $40 billion. What is its supply of loanable funds?

Accepted Answer

A)   $20 billion
B)   $30 billion
C)   $50 billion
D)   $60 billionE) All of the above
F) A) and C)

Exam 19: A Macroeconomic Theory of the Open Economy

An increase in the real interest rate in the United States changes the quantity of loanable funds demanded because

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If U.S. net exports are positive, then net capital outflow is

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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

Which of the following is the most likely response to a decrease in the U.S. real interest rate?

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Which of the following is correct?

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

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Because a government budget deficit represents

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Which of the following leads to an increase in net exports in the long run?

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Refer to Budget Reform. This policy change causes the exchange rate to change. What does the change in the exchange rate to do to net exports?

Correct AnswerverifiedBecause the exchange...View AnswerShow Answer

In the open economy macroeconomic model, the amount of dollars demanded in the market for foreign-currency exchange at a given real exchange rate increases if

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When a country imposes an import quota, its

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If the exchange rate rises, which of the following falls in the open-economy macroeconomic model?

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In the open-economy macroeconomic model, the supply curve of currency is vertical because the quantity of currency supplied does not depend on the real exchange rate.

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

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State what, if anything, each of the following does to the supply or demand of loanable funds. a. net capital outflow increases at each interest rate b. domestic investment increases at each interest rate c. the government deficit increases d. private saving increases

Correct Answerverifieda. the demand for loanable fun...View AnswerShow Answer

When fear of default on bonds issued by U.S. corporations decline, then

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

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In the open-economy macroeconomic model, if the supply of loanable funds shifts left

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In the open-economy macroeconomic model, if there is a surplus in the market for foreign-currency exchange, which of the following will move the market to equilibrium?

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A country has national saving of $50 billion, government expenditures of $30 billion, domestic investment of $10 billion, and net capital outflow of $40 billion. What is its supply of loanable funds?

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The demand...
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Because the exchange...
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a. the demand for loanable fun...
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