Question 1

Which of the following will not change the U.S. real interest rate?

Accepted Answer

A)  capital flight from the United States
B)  the government budget deficit increases
C)  the U.S. imposes import quotas
D)  None of the above is correct.E) A) and B)
F) B) and D)

Question 2

Which of the following decreases if the U.S. imposes 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) B) and C)
F) A) and D)

Question 3

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

Accepted Answer

A)  greater than the quantity demanded and the dollar will appreciate.
B)  greater than the quantity demanded and the dollar will depreciate.
C)  less than the quantity demanded and the dollar will appreciate.
D)  less than the quantity demanded and the dollar will depreciate.E) None of the above
F) A) and C) B

Question 4

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 B)

Question 5

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  True

Question 6

Capital flight shifts the NCO curve to the left.

Accepted Answer

A) True 
 B)False

Question 7

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

Question 8

When Mexico suffered from capital flight in 1994, U.S. demand for loanable funds

Accepted Answer

A)  and U.S. net capital outflow rose.
B)  and U.S. net capital outflow fell.
C)  fell and U.S. net capital outflow rose.
D)  rose and U.S. net capital outflow fell.E) B) and C)
F) C) and D)

Question 9

If the U.S. government imposes a quota on toy imports, then

Accepted Answer

A)  net capital outflow rises.
B)  net exports rise.
C)  the exchange rate rises.
D)  All of the above are correct.E) A) and B)
F) A) and C)

Question 10

An increase in real interest rates 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 fewer foreign assets.
C)  U.S. firms will want to purchase fewer U.S. capital goods.
D)  All of the above are correct.E) B) and D)
F) A) and D)

Question 11

Net capital outflow represents the quantity of dollars supplied in the foreign-currency exchange market.

Accepted Answer

A) True 
 B)False

Question 12

In the open-economy macroeconomic model, if net capital outflow increases then

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

Question 13

If the world thought that many banks in a certain country were at or near the point of bankruptcy, then that country's real exchange rate

Accepted Answer

A)  and net exports would rise.
B)  would rise and net exports would fall.
C)  would fall and net exports would rise.
D)  and net exports would fall.E) C) and D)
F) None of the above

Question 14

Suppose that the U.S. imposes an import quota on lumber. The quota makes the real exchange rate of the U.S. dollar

Accepted Answer

A)  appreciate but does not change the real interest rate in the United States.
B)  appreciate and the real interest rate in the United States increase.
C)  depreciate and the real interest rate in the United States decrease.
D)  depreciate but does not change the real interest rate in the United States.E) B) and C)
F) A) and D)

Question 15

When a country imposes a trade restriction, the real exchange rate of that country's currency appreciates.

Accepted Answer

A) True 
 B)False  True

Question 16

Figure 19-1 
-Refer to Figure 19-1. In the Figure shown, if the real interest rate is 6 percent, there will be pressure for

Accepted Answer

A)  the real interest rate to fall.
B)  the demand for loanable funds curve to shift left.
C)  the supply for loanable funds curve to shift right.
D)  All of the above are correct.E) A) and B)
F) A) and C)

Question 17

Suppose that Chile has a government budget surplus, and then goes into deficit. This change would

Accepted Answer

A)  increase national saving and shift Chile's supply of loanable funds left.
B)  increase national saving and shift Chile's demand for loanable funds right.
C)  decrease national saving and shift Chile's supply of loanable funds left.
D)  decrease national saving and shift Chile's demand for loanable funds right.E) A) and C)
F) B) and C)

Question 18

In the long run import quotas do not affect the size of net exports.

Accepted Answer

A) True 
 B)False

Question 19

When Mexico suffered from capital flight in 1994, Mexico's net exports

Accepted Answer

A)  decreased.
B)  did not change.
C)  increased.
D)  decreased until the peso appreciated, then increased.E) A) and B)
F) B) and C)

Question 20

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 D)

Exam 19: A Macroeconomic Theory of the Open Economy

Which of the following will not change the U.S. real interest rate?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedB

An increase in the budget deficit causes domestic interest rates

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 AnswerverifiedTrue

Capital flight shifts the NCO curve to the left.

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

When Mexico suffered from capital flight in 1994, U.S. demand for loanable funds

Correct AnswerverifiedShow Answer

If the U.S. government imposes a quota on toy imports, then

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Net capital outflow represents the quantity of dollars supplied in the foreign-currency exchange market.

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, if net capital outflow increases then

Correct AnswerverifiedShow Answer

If the world thought that many banks in a certain country were at or near the point of bankruptcy, then that country's real exchange rate

Correct AnswerverifiedShow Answer

Suppose that the U.S. imposes an import quota on lumber. The quota makes the real exchange rate of the U.S. dollar

Correct AnswerverifiedShow Answer

When a country imposes a trade restriction, the real exchange rate of that country's currency appreciates.

Correct AnswerverifiedTrue

Figure 19-1 -Refer to Figure 19-1. In the Figure shown, if the real interest rate is 6 percent, there will be pressure for

Correct AnswerverifiedShow Answer

Suppose that Chile has a government budget surplus, and then goes into deficit. This change would

Correct AnswerverifiedShow Answer

In the long run import quotas do not affect the size of net exports.

Correct AnswerverifiedShow Answer

When Mexico suffered from capital flight in 1994, Mexico's net exports

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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B

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True

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True

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