Question 1

In the open-economy macroeconomic model, the supply of loanable funds comes from

Accepted Answer

A)  the sum of domestic investment and net capital outflow.
B)  net capital outflow alone.
C)  domestic investment alone.
D)  None of the above is correct.E) All of the above
F) A) and D)

Question 2

A firm produces manufacturing equipment, some of which it exports. Which of the following effects of capital flight in the country it produces in would likely reduce 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) A) and B)
F) None of the above

Question 3

Which of the following is a consistent response to an increase in the U.S. real interest rate?

Accepted Answer

A)  a London bank purchases a U.S. bond instead of a Japanese bond it had considered purchasing.
B)  U.S. firms decide to buy more capital goods
C)  a U.S. citizen decides to put less money in his savings account than he had planned.
D)  All of the above are consistent.E) B) and C)
F) All of the above

Question 4

Which of the following is correct?

Accepted Answer

A)  capital flight from the United States decreases net capital outflow
B)  an increase in the government budget deficit creates no change in net capital outflow
C)  if the U.S. imposes a restriction on imports, net capital outflow increases
D)  None of the above is correct.E) All of the above
F) B) and D)

Question 5

In the 1980s, the U.S. government budget deficit rose. At the same time the U.S. trade deficit grew larger, the real exchange rate of the dollar appreciated, and U.S. net capital outflow decreased. Which of these events is contrary to what the open-economy macroeconomic model predicts concerning the effects of an increase in the budget deficit?

Accepted Answer

A)  The U.S. trade deficit grew.
B)  The real exchange rate of the dollar appreciated.
C)  U.S. net capital outflow fell.
D)  None of the above is contrary to the predictions of the model.E) C) and D)
F) A) and B)

Question 6

Other things the same, an increase in the U.S. interest rate causes the quantity of loanable funds supplied to

Accepted Answer

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

Question 7

Suppose the U.S. government institutes a "Buy American" campaign, in order to encourage spending on domestic goods. What effect will this have on the U.S. trade balance?

Accepted Answer

Such a campaign will increase the demand...

Question 8

Over the past two decades, the United States has persistently exported more goods and services than it has imported.

Accepted Answer

A) True 
 B)False

Question 9

An import quota imposed by the U.S. would reduce U.S. imports, but have no impact on U.S. exports.

Accepted Answer

A) True 
 B)False

Question 10

If net exports are positive, then

Accepted Answer

A)  exports are greater than imports.
B)  net capital outflow is negative.
C)  Both of the above are correct.
D)  Neither of the above is correct.E) All of the above
F) C) and D)

Question 11

A country has output of $900 billion, consumption of $600 billion, government expenditures of $150 billion and investment of $120 billion. What is its supply of loanable funds?

Accepted Answer

A)  $30 billion
B)  $90 billion
C)  $120 billion
D)  $150 billionE) A) and D)
F) A) and C)

Question 12

The diagram below represents the market for loanable funds and the market for foreign-currency exchange in Mexico. Use the diagram to answer the following questions.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) B) and D)
F) A) and D)

Question 13

In the open-economy macroeconomic model, the supply of loanable funds comes from

Accepted Answer

A)  the sum of domestic investment and net capital outflow.
B)  the sum of national saving and net capital outflow.
C)  national saving.
D)  net exportsE) B) and C)
F) A) and B)

Question 14

In an open economy, the demand for loanable funds comes from

Accepted Answer

A)  only those who want to borrow funds to buy domestic capital goods.
B)  only those who want to borrow funds to buy foreign assets.
C)  those who want to borrow funds to buy either domestic capital goods or foreign assets.
D)  neither those who want to borrow funds to buy domestic capital goods nor those who want to borrow funds to buy foreign assets.E) B) and C)
F) All of the above

Question 15

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

Question 16

In the open-economy macroeconomic model, if investment demand increases, 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) None of the above

Question 17

Fill in the table below with the direction of the variables that change in response to the events in the first column. $$\begin{array} { | l | l | l | l | l | l | } 
\hline & \begin{array} { l } 
\text { U.S. real } \
\text { interett rate }
\end{array} & \begin{array} { l } 
\text { U.S. dometic } \
\text { invertment }
\end{array} & \begin{array} { l } 
\text { U.S. net } \
\text { capital } \
\text { dutflow }
\end{array} & \begin{array} { l } 
\text { U.S. real } \
\text { exchangerate } \
\text { af domestic } \
\text { currency }
\end{array} & \begin{array} { l } 
\text { U.S. trade } \
\text { balance }
\end{array} \
\hline \begin{array} { l } 
\text { U.S. govenment } \
\text { budget deficit } \
\text { increases }
\end{array} & & & & & \
\hline \begin{array} { l } 
\text { U.S. imposes } \
\text { impart quates }
\end{array} & & & & & \
\hline \begin{array} { l } 
\text { capital fleht } \
\text { from the United } \
\text { States }
\end{array} & & & & & \
\hline
\end{array}$$

Accepted Answer

None...

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

Question 19

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

Question 20

If net exports are positive, then

Accepted Answer

A)  net capital outflow is positive, so foreign assets bought by Americans are greater than American assets bought by foreigners.
B)  net capital outflow is positive, so American assets bought by foreigners are greater than foreign assets bought by Americans.
C)  net capital outflow is negative, so foreign assets bought by Americans are greater than American assets bought by foreigners.
D)  net capital outflow is negative, so American assets bought by foreigners are greater than foreign assets bought by Americans.E) B) and C)
F) C) and D)

Exam 19: A Macroeconomic Theory of the Open Economy

Which of the following is correct?

Correct Answer
verified

Suppose the U.S. government institutes a "Buy American" campaign, in order to encourage spending on domestic goods. What effect will this have on the U.S. trade balance?

Correct Answer
verified
Such a campaign will increase the demand...
View Answer

Which of the following is a consistent response to an increase in the U.S. real interest rate?

Correct Answer
verified

If net exports are positive, then

Correct Answer
verified

Correct Answer
verified
None...
View Answer

In the open-economy macroeconomic model, if investment demand increases, then

Correct Answer
verified

In the open-economy macroeconomic model, the supply of loanable funds comes from

Correct Answer
verified

In an open economy, the demand for loanable funds comes from

Correct Answer
verified

Other things the same, an increase in the U.S. interest rate causes the quantity of loanable funds supplied to

Correct Answer
verified

In the open-economy macroeconomic model, the supply of loanable funds comes from

Correct Answer
verified

A country has output of $900 billion, consumption of $600 billion, government expenditures of $150 billion and investment of $120 billion. What is its supply of loanable funds?

Correct Answer
verified

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

Correct Answer
verified

A firm produces manufacturing equipment, some of which it exports. Which of the following effects of capital flight in the country it produces in would likely reduce the quantity of equipment it sells?

Correct Answer
verified

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 Answer
verified

An import quota imposed by the U.S. would reduce U.S. imports, but have no impact on U.S. exports.

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

If net exports are positive, then

Correct Answer
verified

Over the past two decades, the United States has persistently exported more goods and services than it has imported.

Correct Answer
verified

Exam 19: A Macroeconomic Theory of the Open Economy

Which of the following is correct?

Correct AnswerverifiedShow Answer

Suppose the U.S. government institutes a "Buy American" campaign, in order to encourage spending on domestic goods. What effect will this have on the U.S. trade balance?

Correct AnswerverifiedSuch a campaign will increase the demand...View AnswerShow Answer

Which of the following is a consistent response to an increase in the U.S. real interest rate?

Correct AnswerverifiedShow Answer

If net exports are positive, then

Correct AnswerverifiedShow Answer

Correct AnswerverifiedNone...View AnswerShow Answer

In the open-economy macroeconomic model, if investment demand increases, then

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, the supply of loanable funds comes from

Correct AnswerverifiedShow Answer

In an open economy, the demand for loanable funds comes from

Correct AnswerverifiedShow Answer

Other things the same, an increase in the U.S. interest rate causes the quantity of loanable funds supplied to

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, the supply of loanable funds comes from

Correct AnswerverifiedShow Answer

A country has output of $900 billion, consumption of $600 billion, government expenditures of $150 billion and investment of $120 billion. What is its supply of loanable funds?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A firm produces manufacturing equipment, some of which it exports. Which of the following effects of capital flight in the country it produces in would likely reduce the quantity of equipment it sells?

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

An import quota imposed by the U.S. would reduce U.S. imports, but have no impact on U.S. exports.

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If net exports are positive, then

Correct AnswerverifiedShow Answer

Over the past two decades, the United States has persistently exported more goods and services than it has imported.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
Such a campaign will increase the demand...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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None...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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