Question 1

At the equilibrium real interest rate in the open-economy macroeconomic model, the equilibrium quantity of loanable funds equals

Accepted Answer

A)   net capital outflow.
B)   domestic investment.
C)   foreign currency supplied.
D)   national saving.E) A) and D)
F) A) and C)

Question 2

If the United States imposes an import quota on clothing, then U.S. exports

Accepted Answer

A)   increase, U.S. imports increase, and U.S. net exports will not change.
B)   increase, U.S. imports decrease, and U.S. net exports increase.
C)   decrease, U.S. imports increase, and U.S. net exports decrease.
D)   decrease, U.S. imports decrease, and U.S. net exports will not change.E) A) and C)
F) B) and C)

Question 3

What happens to domestic investment as the real interest rate rises? Explain your answer.

Accepted Answer

As the real interest rate rise...

Question 4

A country recently had 500 billion euros of national saving and -200 billion euros of net capital outflow. What was its domestic investment? What was its quantity of loanable funds supplied?

Accepted Answer

700 billio...

Question 5

Suppose a country experiences capital flight. Of the demand for loanable funds and the supply of currency in the market for foreign-currency exchange, which shifts right?

Accepted Answer

A)   only the demand for loanable funds
B)   only the supply of its currency in the market for foreign-currency exchange
C)   both curves shift right
D)   neither curve shifts rightE) A) and C)
F) A) and B)

Question 6

If a country places tariffs on imported goods, then

Accepted Answer

A)   its currency appreciates which reduces exports.
B)   its currency appreciates which increases exports.
C)   its currency depreciates which reduces exports.
D)   its currency depreciates which increases exports.E) A) and B)
F) B) and C)

Question 7

An increase in the government budget deficit shifts the supply of loanable funds to the left.

Accepted Answer

A) True 
 B)False

Question 8

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. This policy change causes net capital outflow to change. How is this change in net capital outflow shown in the market for foreign-currency exchange? What happens to the exchange rate?

Accepted Answer

The supply of dollars in the m...

Question 9

What happens to each of the following if the supply of loanable funds shifts right?
a. the interest rate
b. net capital outflow
c. the exchange rate

Accepted Answer

The interest rate fa...

Question 10

Other things the same, a decrease in the real interest rate

Accepted Answer

A)   increases the quantity of loanable funds demanded.
B)   shifts the demand for loanable funds curve to the right.
C)   decreases the quantity of loanable funds demanded.
D)   shifts the demand for loanable funds curve to the left.E) A) and D)
F) B) and D)

Question 11

In the open-economy macroeconomic model, the

Accepted Answer

A)   exchange rate adjusts to equate private saving with the sum of investment, net exports, and net capital outflow.
B)   exchange rate adjusts to equate national saving with the sum of investment and net capital outflow.
C)   interest rate adjusts to equate private saving with the sum of investment, net exports, and net capital outflow.
D)   interest rate adjusts to equate national saving with the sum of investment and net capital outflow.E) None of the above
F) A) and B)

Question 12

Which of the following makes)  demand for U.S. dollars in the market for foreign-currency exchange higher than otherwise?

Accepted Answer

A)   a U.S. airline wanting buy jets made in France and a Swedish hospital wanting to buy medical equipment made in the U.S.
B)   a U.S. airline wanting to buy jets made in France, but not a Swedish hospital wanting to buy medical equipment made in the U.S.
C)   a Swedish hospital wanting to buy medical equipment made in the U.S., but not a U.S. airline wanting to buy jets made in France
D)   neither a U.S. bank wanting to lend money to a Canadian company nor a U.S. firm wanting to buy computers made in South KoreaE) None of the above
F) B) and D)

Question 13

If the supply of loanable funds curve shifts right, then the equilibrium

Accepted Answer

A)   interest rate and level of net capital outflows rise.
B)   interest rate rises and the equilibrium level of net capital outflow falls.
C)   interest rate falls and the equilibrium level of net capital outflow rises.
D)   interest rate and level of net capital outflows fall.E) All of the above
F) C) and D)

Question 14

How are the identities S = NCO + I and NCO = NX related to the foreign currency exchange market and the loanable funds market?

Accepted Answer

S is national saving, which is the sourc...

Question 15

Which of the following decreases if the U.S. removes an import quota on computer components?

Accepted Answer

A)   U.S. imports and U.S. exports.
B)   U.S. imports but not U.S. exports.
C)   U.S. exports but not U.S. imports.
D)   Neither U.S. exports nor U.S. imports.E) A) and B)
F) All of the above

Question 16

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. 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 17

If U.S. residents chose to travel overseas less due to concerns about the safety of foreign travel, then in the open- economy macroeconomic model

Accepted Answer

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

Question 18

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) C) and D)
F) All of the above

Question 19

An increase in a country's budget deficit

Accepted Answer

A)   increases net capital outflow, so the demand for its currency in the market for foreign-currency exchange shifts right.
B)   increases net capital outflow, so the supply of its currency in the market for foreign-currency exchange shifts right.
C)   decreases net capital outflow, so the demand for its currency in the market for foreign-currency exchange shifts left.
D)   decreases net capital outflow, so the supply of its currency in the market for foreign-currency exchange shifts left.E) C) and D)
F) None of the above

Question 20

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

Accepted Answer

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

Exam 14: A Macroeconomic Theory of the Open Economy

Which of the following makes) demand for U.S. dollars in the market for foreign-currency exchange higher than otherwise?

Correct Answer
verified

In the open-economy macroeconomic model, the

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

Correct Answer
verified
Because the exchange...
View Answer

If U.S. residents chose to travel overseas less due to concerns about the safety of foreign travel, then in the open- economy macroeconomic model

Correct Answer
verified

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

Correct Answer
verified

Suppose a country experiences capital flight. Of the demand for loanable funds and the supply of currency in the market for foreign-currency exchange, which shifts right?

Correct Answer
verified

A country recently had 500 billion euros of national saving and -200 billion euros of net capital outflow. What was its domestic investment? What was its quantity of loanable funds supplied?

Correct Answer
verified
700 billio...
View Answer

At the equilibrium real interest rate in the open-economy macroeconomic model, the equilibrium quantity of loanable funds equals

Correct Answer
verified

What happens to domestic investment as the real interest rate rises? Explain your answer.

Correct Answer
verified
As the real interest rate rise...
View Answer

Other things the same, a decrease in the real interest rate

Correct Answer
verified

An increase in the government budget deficit shifts the supply of loanable funds to the left.

Correct Answer
verified

Which of the following decreases if the U.S. removes an import quota on computer components?

Correct Answer
verified

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

Correct Answer
verified

If the supply of loanable funds curve shifts right, then the equilibrium

Correct Answer
verified

Correct Answer
verified
The supply of dollars in the m...
View Answer

How are the identities S = NCO + I and NCO = NX related to the foreign currency exchange market and the loanable funds market?

Correct Answer
verified
S is national saving, which is the sourc...
View Answer

If the United States imposes an import quota on clothing, then U.S. exports

Correct Answer
verified

An increase in a country's budget deficit

Correct Answer
verified

What happens to each of the following if the supply of loanable funds shifts right? a. the interest rate b. net capital outflow c. the exchange rate

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

If a country places tariffs on imported goods, then

Correct Answer
verified

Exam 14: A Macroeconomic Theory of the Open Economy

Which of the following makes) demand for U.S. dollars in the market for foreign-currency exchange higher than otherwise?

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, the

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. 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

If U.S. residents chose to travel overseas less due to concerns about the safety of foreign travel, then in the open- economy macroeconomic model

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose a country experiences capital flight. Of the demand for loanable funds and the supply of currency in the market for foreign-currency exchange, which shifts right?

Correct AnswerverifiedShow Answer

A country recently had 500 billion euros of national saving and -200 billion euros of net capital outflow. What was its domestic investment? What was its quantity of loanable funds supplied?

Correct Answerverified700 billio...View AnswerShow Answer

At the equilibrium real interest rate in the open-economy macroeconomic model, the equilibrium quantity of loanable funds equals

Correct AnswerverifiedShow Answer

What happens to domestic investment as the real interest rate rises? Explain your answer.

Correct AnswerverifiedAs the real interest rate rise...View AnswerShow Answer

Other things the same, a decrease in the real interest rate

Correct AnswerverifiedShow Answer

An increase in the government budget deficit shifts the supply of loanable funds to the left.

Correct AnswerverifiedShow Answer

Which of the following decreases if the U.S. removes an import quota on computer components?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the supply of loanable funds curve shifts right, then the equilibrium

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe supply of dollars in the m...View AnswerShow Answer

How are the identities S = NCO + I and NCO = NX related to the foreign currency exchange market and the loanable funds market?

Correct AnswerverifiedS is national saving, which is the sourc...View AnswerShow Answer

If the United States imposes an import quota on clothing, then U.S. exports

Correct AnswerverifiedShow Answer

An increase in a country's budget deficit

Correct AnswerverifiedShow Answer

What happens to each of the following if the supply of loanable funds shifts right? a. the interest rate b. net capital outflow c. the exchange rate

Correct AnswerverifiedThe interest rate fa...View AnswerShow Answer

If a country places tariffs on imported goods, then

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
verified
Because the exchange...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified
700 billio...
View Answer

Correct Answer
verified

Correct Answer
verified
As the real interest rate rise...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The supply of dollars in the m...
View Answer

Correct Answer
verified
S is national saving, which is the sourc...
View Answer

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
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