Question 1

If for some reason Americans desired to increase their purchases of foreign assets,then other things the same

Accepted Answer

A)   both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency exchange would fall.
B)   both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency would rise.
C)   the real exchange rate would rise and the quantity of dollars exchanged in the market for foreign-currency would fall.
D)   the real exchange rate would fall and the quantity of dollars exchanged in the market for foreign-currency would rise.E) A) and C)
F) All of the above

Question 2

As the interest rate rises,it is possible that net capital outflow could move from a positive to a negative value.

Accepted Answer

A) True 
 B)False

Question 3

An increase in the budget deficit causes domestic interest rates

Accepted Answer

A)   and investment to rise.
B)   to rise and investment to fall.
C)   to fall and investment to rise.
D)   and investment to fall.E) None of the above
F) A) and D)

Question 4

In equilibrium a country has a net capital outflow of $200 billion and domestic investment of $150 billion.What is the quantity of loanable funds demanded?

Accepted Answer

A)   $50 billion
B)   $150 billion
C)   $200 billion
D)   $350 billionE) B) and C)
F) None of the above

Question 5

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

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) A) and C)
F) None of the above

Question 6

When the U.S.real interest rate falls

Accepted Answer

A)   U.S.purchases of foreign assets and foreign purchases of U.S.assets rise
B)   U.S.purchases of foreign assets rise and foreign purchases of U.S.assets fall
C)   U.S.purchases of foreign assets fall and foreign purchases of U.S.assets rise
D)   U.S.purchases of foreign assets and foreign purchases of U.S.assets fallE) B) and D)
F) A) and D)

Question 7

An increase in the budget deficit makes domestic interest rates

Accepted Answer

A)   rise because the supply of loanable funds shifts left.
B)   fall because the supply of loanable funds shifts left.
C)   rise because the demand for loanable funds shifts right.
D)   fall because the demand for loanable funds shifts right.E) All of the above
F) B) and C)

Question 8

Fill in the table below with the direction of the variables that change in response to the events in the first column.

Accepted Answer

The answer of Fill in the table below with the...

Question 9

In the market for foreign-currency exchange,the source of the supply of dollars is _________.The supply curve is _________ because _____________.

Accepted Answer

net capital outflow,...

Question 10

A country has national saving of $70 billion,government expenditures of $20 billion,domestic investment of $30 billion,and net capital outflow of $40 billion.What is its supply of loanable funds?

Accepted Answer

A)   $30 billion
B)   $40 billion
C)   $50 billion
D)   $70 billionE) A) and D)
F) A) and C)

Question 11

If policymakers impose import restrictions on clothing,the U.S.trade deficit will shrink.

Accepted Answer

A) True 
 B)False

Question 12

Other things the same,as the real interest rate rises

Accepted Answer

A)   domestic investment and net capital outflow both rise.
B)   domestic investment and net capital outflow both fall.
C)   domestic investment rises and net capital outflow falls.
D)   domestic investment falls and net capital outflow rises.E) A) and B)
F) B) and C)

Question 13

If a country has a positive net capital outflow,then

Accepted Answer

A)   on net it is purchasing assets from abroad.This adds to its demand for domestically generated loanable funds.
B)   on net it is purchasing assets from abroad.This subtracts from its demand for domestically generated loanable funds.
C)   on net other countries are purchasing assets from it.This adds to its demand for domestically generated loanable funds.
D)   on net other countries are purchasing assets from it.This subtracts from its demand for domestically generated loanable funds.E) B) and D)
F) None of the above

Question 14

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

Question 15

When the real exchange rate for the dollar depreciates,U.S.goods become

Accepted Answer

A)   less expensive relative to foreign goods,which makes exports rise and imports fall.
B)   less expensive relative to foreign goods,which makes exports fall and imports rise.
C)   more expensive relative to foreign goods,which makes exports rise and imports fall.
D)   more expensive relative to foreign goods,which makes exports fall and imports rise.E) B) and C)
F) C) and D)

Question 16

An increase in the budget deficit causes net capital outflow to

Accepted Answer

A)   rise,because the supply of loanable funds shifts right.
B)   rise,because the demand for loanable funds shifts right.
C)   fall,because the supply of loanable funds shifts left.
D)   fall,because the demand for loanable funds shifts right.E) B) and C)
F) C) and D)

Question 17

If the government of a country with a zero trade balances increases its budget deficit,then interest rates

Accepted Answer

A)   rise and the trade balance moves to a surplus.
B)   rise and the trade balance moves to a deficit.
C)   fall and the trade balance moves to a surplus.
D)   fall and the trade balance moves to a deficit.E) None of the above
F) A) and B)

Question 18

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

Question 19

Figure 19-7 0 and E1.Which of the following new equilibrium is consistent with capital flight? A)  ro and E0 B)  r1 and E0 C)  r1 and E1 D)  None of the above is correct." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 19-7.Suppose the Mexican economy starts at r0 and E1.Which of the following new equilibrium is consistent with capital flight?

Accepted Answer

A)   ro and E0
B)   r1 and E0
C)   r1 and E1
D)   None of the above is correct.E) A) and C)
F) All of the above

Question 20

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

Exam 32: A Macroeconomic Theory of the Open Economy

Fill in the table below with the direction of the variables that change in response to the events in the first column.

Correct AnswerverifiedShow Answer

If a country has a positive net capital outflow,then

Correct AnswerverifiedShow Answer

When the real exchange rate for the dollar depreciates,U.S.goods become

Correct AnswerverifiedShow Answer

Other things the same,as the real interest rate rises

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

As the interest rate rises,it is possible that net capital outflow could move from a positive to a negative value.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When the U.S.real interest rate falls

Correct AnswerverifiedShow Answer

Figure 19-7 -Refer to Figure 19-7.Suppose the Mexican economy starts at r0 and E1.Which of the following new equilibrium is consistent with capital flight?

Correct AnswerverifiedShow Answer

In equilibrium a country has a net capital outflow of $200 billion and domestic investment of $150 billion.What is the quantity of loanable funds demanded?

Correct AnswerverifiedShow Answer

If policymakers impose import restrictions on clothing,the U.S.trade deficit will shrink.

Correct AnswerverifiedShow Answer

In the market for foreign-currency exchange,the source of the supply of dollars is _________.The supply curve is _________ because _____________.

Correct Answerverifiednet capital outflow,...View AnswerShow Answer

An increase in the budget deficit makes domestic interest rates

Correct AnswerverifiedShow Answer

An increase in the budget deficit causes domestic interest rates

Correct AnswerverifiedShow Answer

If for some reason Americans desired to increase their purchases of foreign assets,then other things the same

Correct AnswerverifiedShow Answer

A country has national saving of $70 billion,government expenditures of $20 billion,domestic investment of $30 billion,and net capital outflow of $40 billion.What is its supply of loanable funds?

Correct AnswerverifiedShow Answer

If the government of a country with a zero trade balances increases its budget deficit,then interest rates

Correct AnswerverifiedShow Answer

An increase in the budget deficit causes net capital outflow to

Correct AnswerverifiedShow 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

Correct AnswerverifiedShow Answer

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Figure 19-7 -Refer to Figure 19-7.Suppose the Mexican economy starts at r₀ and E₁.Which of the following new equilibrium is consistent with capital flight?

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In the market for foreign-currency exchange,the source of the supply of dollars is _____.The supply curve is _ because _________.

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net capital outflow,...
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