Question 1

Other things the same, if the U.S. interest rate rises, what happens to the net capital outflow of other countries?

Accepted Answer

As the U.S. real interest rate rises, U....

Question 2

In which case(s)  does(do)  a country's supply of loanable funds shift left?

Accepted Answer

A)  both an increase in the budget deficit and capital flight
B)  an increase in the budget deficit, but not capital flight
C)  capital flight, but not an increase in the budget deficit
D)  neither an increase in the budget deficit nor capital flightE) A) and C)
F) B) and C)

Question 3

In the open-economy macroeconomic model, if the U.S. interest rate rises, 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) None of the above
F) A) and C)

Question 4

If at a given real interest rate desired national saving is $140 billion, domestic investment is $90 billion, and net capital outflow is $60 billion, then at that real interest rate in the loanable funds market there is a

Accepted Answer

A)  surplus. The real interest rate will rise.
B)  surplus. The real interest rate will fall.
C)  shortage. The real interest rate will rise.
D)  shortage. The real interest rate will fall.E) All of the above
F) B) and C)

Question 5

In which case(s)  does(do)  a country's demand for loanable funds shift left?

Accepted Answer

A)  both an increase in the budget deficit and capital flight
B)  an increase in the budget deficit, but not capital flight
C)  capital flight, but not an increase in the budget deficit
D)  neither an increase in the budget deficit nor capital flightE) A) and D)
F) B) and C)

Question 6

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

Question 7

When a country experiences capital flight, which of the following rise?

Accepted Answer

A)  its real interest rate and its real exchange rate
B)  its real interest rate but not its real exchange rate
C)  its real exchange rate but not its real interest rate
D)  neither its real interest rate nor its foreign exchange rateE) B) and C)
F) A) and D)

Question 8

If the U.S. imposed an import quota on farm machinery, then sales of U.S. farm machinery equipment producers would

Accepted Answer

A)  rise and the exports of other U.S. industries would rise.
B)  rise and the exports of other U.S. industries would fall.
C)  fall and the exports of other U.S. industries would rise.
D)  fall and the exports of other U.S. industries would fall.E) A) and C)
F) None of the above

Question 9

If a county becomes less likely to default on its bonds, what happens to that country's interest rate and exchange rate? Explain.

Accepted Answer

A lower probability of default has the o...

Question 10

In the open-economy macroeconomic model, as the exchange rate rises,

Accepted Answer

A)  desired net exports fall, so the quantity of dollars supplied rise.
B)  desired net exports fall, so the quantity of dollars demanded falls.
C)  desired net exports rise ,so the quantity of dollars supplied falls.
D)  desired net exports rise, so the quantity of dollars demanded rises.E) B) and C)
F) None of the above

Question 11

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 decreases
B)  capital flight from foreign countries
C)  the U.S. imposes import quotas
D)  None of the above is correct.E) A) and B)
F) All of the above

Question 12

Trade policies

Accepted Answer

A)  affect a country's overall trade balance, but affect all firms and industries the same.
B)  affect a country's overall trade balance, but affect some firms or industries differently than others.
C)  do not affect a country's overall trade balance, but affect some firms or industries differently than others.
D)  do not affect either a country's overall trade balance or specific firms or industries.E) C) and D)
F) None of the above

Question 13

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

Accepted Answer

A)  personal saving
B)  public saving
C)  public saving + personal saving
D)  public saving + personal saving + net capital outflowsE) None of the above
F) A) and B)

Question 14

If the supply of dollars in the market for foreign-currency exchange shifts right, then the exchange rate

Accepted Answer

A)  rises and the quantity of dollars exchanged falls.
B)  rises and the quantity of dollars exchanged does not change.
C)  falls and the quantity of dollars exchanged rises.
D)  falls and the quantity of dollars exchanged does not change.E) A) and B)
F) A) and C)

Question 15

What is the source of the demand for loanable funds in the open-economy macroeconomic model ?

Accepted Answer

investment...

Question 16

Other things the same, when a Canadian company imports bicycles from the U.S., the open-economy macroeconomic model treats this transaction as part of the demand for dollars in the U.S. foreign-currency exchange market.

Accepted Answer

A) True 
 B)False

Question 17

A firm produces construction equipment, some of which it sells to domestic businesses and some of which it exports. Which of the following effects of capital flight in the country where it produces would likely increase the quantity of equipment it sells?

Accepted Answer

A)  both what happens to the interest rate and what happens to the exchange rate
B)  what happens to the interest rate but not what happens to the exchange rate
C)  what happens to the exchange rate but not what happens to the interest rate
D)  neither what happens to the interest rate nor what happens to the interest rate.E) C) and D)
F) B) and D)

Question 18

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) A) and B)
F) A) and C)

Question 19

Other things the same, which of the following would cause the exchange rate to rise?

Accepted Answer

A)  both an increase in the interest rate and an increase in foreign demand for U.S. goods and services.
B)  an increase in the interest rate, but not an increase in foreign demand for U.S. goods and services.
C)  an increase in foreign demand for U.S. goods and service, but not an increase in the U.S. interest rate.
D)  neither an increase in the U.S. interest rate nor an increase in the demand for U.S. goods and services.E) A) and B)
F) None of the above

Question 20

Which of the following happens in the market for loanable funds when there is capital flight?

Accepted Answer

A)  the demand curve shifts right.
B)  the demand curve shifts left.
C)  the supply curve shifts right.
D)  the supply curve shifts left.E) C) and D)
F) A) and C)

Exam 32: A Macroeconomic Theory of the Open Economy

If the supply of dollars in the market for foreign-currency exchange shifts right, then the exchange rate

Correct AnswerverifiedShow Answer

When a country experiences capital flight, which of the following rise?

Correct AnswerverifiedShow Answer

Which of the following happens in the market for loanable funds when there is capital flight?

Correct AnswerverifiedShow Answer

In which case(s) does(do) a country's supply of loanable funds shift left?

Correct AnswerverifiedShow Answer

Other things the same, when a Canadian company imports bicycles from the U.S., the open-economy macroeconomic model treats this transaction as part of the demand for dollars in the U.S. foreign-currency exchange market.

Correct AnswerverifiedShow Answer

Trade policies

Correct AnswerverifiedShow Answer

In which case(s) does(do) a country's demand for loanable funds shift left?

Correct AnswerverifiedShow Answer

If a county becomes less likely to default on its bonds, what happens to that country's interest rate and exchange rate? Explain.

Correct AnswerverifiedA lower probability of default has the o...View AnswerShow Answer

Other things the same, if the U.S. interest rate rises, what happens to the net capital outflow of other countries?

Correct AnswerverifiedAs the U.S. real interest rate rises, U....View AnswerShow Answer

If at a given real interest rate desired national saving is $140 billion, domestic investment is $90 billion, and net capital outflow is $60 billion, then at that real interest rate in the loanable funds market there is a

Correct AnswerverifiedShow Answer

Other things the same, which of the following would cause the exchange rate to rise?

Correct AnswerverifiedShow Answer

If the U.S. imposed an import quota on farm machinery, then sales of U.S. farm machinery equipment producers would

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, as the exchange rate rises,

Correct AnswerverifiedShow Answer

What is the source of the demand for loanable funds in the open-economy macroeconomic model ?

Correct Answerverifiedinvestment...View AnswerShow Answer

In the open-economy macroeconomic model, if the U.S. interest rate rises, then U.S.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A firm produces construction equipment, some of which it sells to domestic businesses and some of which it exports. Which of the following effects of capital flight in the country where it produces would likely increase the quantity of equipment it sells?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A lower probability of default has the o...
View Answer

Correct Answer
verified
As the U.S. real interest rate rises, U....
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
investment...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified