Question 1

In the open-economy macroeconomic model, equilibrium in the market for foreign-currency exchange is determined by the equality between the supply of dollars which comes from

Accepted Answer

A)  U.S. national saving and the demand for dollars for U.S. net exports.
B)  U.S. net capital outflow and the demand for dollars for U.S. net exports.
C)  domestic investment and the demand for U.S. net exports.
D)  foreign demand for U.S. goods and services and U.S. demand for foreign goods and services.E) B) and C)
F) All of the above

Question 2

The open-economy macroeconomic model includes

Accepted Answer

A)  only the market for loanable funds.
B)  only the market for foreign-currency exchange.
C)  both the market for loanable funds and the market for foreign-currency exchange.
D)  neither the market for loanable funds nor the market for foreign-currency exchange.E) B) and D)
F) All of the above

Question 3

Other things the same, if the interest rate falls, then

Accepted Answer

A)  firms will want to borrow more, which increases the quantity of loanable funds demanded.
B)  firms will want to borrow less, which decreases the quantity of loanable funds demanded.
C)  firms will want to borrow more, which increase the quantity of loanable funds supplied.
D)  firms will want to borrow less, which decreases the quantity of loanable funds supplied.E) B) and D)
F) C) and D)

Question 4

According to the open-economy macroeconomic model, if the U.S. government budget deficit increases, then both U.S. domestic investment and U.S. net capital outflow decrease.

Accepted Answer

A) True 
 B)False

Question 5

If the U.S. raised its tariff on tires, then at the original exchange rate there would be a

Accepted Answer

A)  surplus in the market for foreign-currency exchange, so the real exchange rate would appreciate.
B)  surplus in the market for foreign-currency exchange, so the real exchange rate would depreciate.
C)  shortage in the market for foreign-currency exchange, so the real exchange rate would appreciate.
D)  shortage in the market for foreign-currency exchange, so the real exchange rate would depreciate.E) A) and D)
F) B) and C)

Question 6

A country produces two goods, soda and chips. It currently exports soda and imports chips. If it were to impose a tariff on chips,

Accepted Answer

A)  both imports of chips and exports of sodas would rise.
B)  imports of chips would rise, but exports of sodas would fall.
C)  imports of chips would fall, but exports of sodas would rise.
D)  both imports of chips and exports of sodas would fall.E) A) and B)
F) A) and C)

Question 7

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

Accepted Answer

A)  U.S. supply of loanable funds, U.S. net capital outflow, U.S. domestic investment
B)  U.S. supply of loanable funds, U.S. exports, the real exchange rate of the dollar
C)  U.S. interest rates, the real exchange rate of the dollar, U.S. domestic investment
D)  the real exchange rate of the dollar, U.S. net capital outflow, U.S. net exportsE) C) and D)
F) B) and D)

Question 8

When a country suffers from capital flight, the demand for loanable funds in that country shifts

Accepted Answer

A)  right, which increases interest rates in that country.
B)  right, which decreases interest rates in that country.
C)  left, which increases interest rates in that country.
D)  left, which decreases interest rates in that country.E) A) and D)
F) All of the above

Question 9

A U.S.-imposed quota on automobiles 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) None of the above
F) B) and D)

Question 10

If U.S. citizens decide to purchase more foreign assets at each interest rate, the U.S. real interest rate

Accepted Answer

A)  increases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases.
B)  increases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases.
C)  decreases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow decreases.
D)  decreases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow increases.E) B) and C)
F) None of the above

Question 11

Figure 32-2 
-Refer to Figure 32-2. At what real exchange rate is the quantity of dollars demanded equal to 500?

Accepted Answer

A)  1
B)  .8
C)  .6
D)  None of the above are correct.E) A) and C)
F) All of the above

Question 12

When the U.S. real exchange rate appreciates, U.S. goods become

Accepted Answer

A)  more attractive to consumers in the U.S. and abroad.
B)  more attractive to consumers in the U.S. and less attractive to consumers abroad.
C)  less attractive to consumers in the U.S. and abroad.
D)  less attractive to consumers in the U.S. and more attractive to consumers abroad.E) All of the above
F) C) and D)

Question 13

Which of the following would do the most to reduce a trade deficit?

Accepted Answer

A)  increase domestic saving
B)  increase domestic political stability and respect of property rights
C)  other countries reduce their trade restrictions
D)  raise tariffsE) All of the above
F) B) and C)

Question 14

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

Accepted Answer

A)  U.S. exports and U.S. imports
B)  U.S. exports but not U.S. imports
C)  U.S. imports but not U.S. exports
D)  neither U.S. exports nor U.S. importsE) B) and C)
F) A) and D)

Question 15

If the U.S. government increased its deficit, then

Accepted Answer

A)  U.S. bonds would pay higher interest but a dollar would purchase fewer foreign goods.
B)  U.S. bonds would pay higher interest and a dollar would purchase more foreign goods.
C)  U.S. bonds would pay lower interest and a dollar would purchase fewer foreign goods.
D)  U.S. bonds would pay lower interest but a dollar would purchase more foreign goods.E) A) and C)
F) B) and C)

Question 16

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

Accepted Answer

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

Question 17

Figure 32-2 
-Refer to Figure 32-2. If the real exchange rate is 1, then there is a

Accepted Answer

A)  surplus of 100 so the real exchange rate will fall.
B)  surplus of 100 so the real exchange rate will rise.
C)  shortage of 100 so the real exchange rate will fall.
D)  shortage of 100 so the real exchange rate will rise.E) B) and C)
F) A) and B)

Question 18

Figure 32-1 
-Refer to Figure 32-1. If the real interest rate is 6 percent, the quantity of loanable funds demanded is

Accepted Answer

A)  $20 billion, and the quantity supplied is $40 billion.
B)  $20 billion, and the quantity supplied is $60 billion.
C)  $60 billion, and the quantity supplied is $20 billion.
D)  $60 billion, and the quantity supplied is $40 billion.E) A) and D)
F) C) and D)

Question 19

What do trade policies do to the standard of living?

Accepted Answer

Trade policies reduce both imports and e...

Question 20

What happens to each of the following if the supply of loanable funds shifts left?
A. the interest rate
B. net capital outflow
C. the exchange rate

Accepted Answer

The interest rate ri...

Exam 32: A Macroeconomic Theory of the Open Economy

In the open-economy macroeconomic model, equilibrium in the market for foreign-currency exchange is determined by the equality between the supply of dollars which comes from

Correct AnswerverifiedShow Answer

Figure 32-2 -Refer to Figure 32-2. If the real exchange rate is 1, then there is a

Correct AnswerverifiedShow Answer

Figure 32-1 -Refer to Figure 32-1. If the real interest rate is 6 percent, the quantity of loanable funds demanded is

Correct AnswerverifiedShow Answer

A country produces two goods, soda and chips. It currently exports soda and imports chips. If it were to impose a tariff on chips,

Correct AnswerverifiedShow Answer

According to the open-economy macroeconomic model, if the U.S. government budget deficit increases, then both U.S. domestic investment and U.S. net capital outflow decrease.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The open-economy macroeconomic model includes

Correct AnswerverifiedShow Answer

If the U.S. government increased its deficit, then

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the U.S. raised its tariff on tires, then at the original exchange rate there would be a

Correct AnswerverifiedShow Answer

What do trade policies do to the standard of living?

Correct AnswerverifiedTrade policies reduce both imports and e...View AnswerShow Answer

Other things the same, if the interest rate falls, then

Correct AnswerverifiedShow Answer

When the U.S. real exchange rate appreciates, U.S. goods become

Correct AnswerverifiedShow Answer

Which of the following would do the most to reduce a trade deficit?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If U.S. citizens decide to purchase more foreign assets at each interest rate, the U.S. real interest rate

Correct AnswerverifiedShow Answer

Figure 32-2 -Refer to Figure 32-2. At what real exchange rate is the quantity of dollars demanded equal to 500?

Correct AnswerverifiedShow Answer

What happens to each of the following if the supply of loanable funds shifts left? A. the interest rate B. net capital outflow C. the exchange rate

Correct AnswerverifiedThe interest rate ri...View AnswerShow Answer

When a country suffers from capital flight, the demand for loanable funds in that country shifts

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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Trade policies reduce both imports and e...
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The interest rate ri...
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