Question 1

When a government reduces 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) A) and D)
F) All of the above

Question 2

An increase in the budget surplus

Accepted Answer

A)  raises net exports and domestic investment.
B)  raises net exports and reduces domestic investment.
C)  reduces net exports and raises domestic investment.
D)  reduces net exports and domestic investment.E) All of the above
F) None of the above

Question 3

In equilibrium which of the following happens if the U.S.imposes tariffs on power tools?

Accepted Answer

A)  U.S.net exports rise
B)  the exchange rate falls
C)  U.S.production of power tools rises
D)  All of the above are correct.E) A) and B)
F) A) and C)

Question 4

When a country's government budget deficit decreases,

Accepted Answer

A)  the real exchange rate of its currency and its net exports increase.
B)  the real exchange rate of its currency and its net exports decrease.
C)  the real exchange rate of its currency increases and its net exports decrease.
D)  the real exchange rate of its currency decreases and its net exports increase.E) All of the above
F) C) and D)

Question 5

When a country suffers from capital flight,the exchange rate

Accepted Answer

A)  depreciates,because demand in the market for foreign-currency exchange shifts left.
B)  depreciates,because supply in the market for foreign-currency exchange shifts right.
C)  appreciates,because demand in the market for foreign-currency exchange shifts right.
D)  appreciates,because supply in the market for foreign-currency exchange shifts left.E) C) and D)
F) B) and C)

Question 6

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

Question 7

Which of the following is most likely to increase U.S.exports?

Accepted Answer

A)  The government gives subsidies to U.S.firms that export goods or services.
B)  The government reduces the size of the budget surplus.
C)  The United States unilaterally reduces its restrictions on foreign imports.
D)  Taxes on domestic saving rise.E) A) and B)
F) B) and C)

Question 8

If the government of a country with a zero trade balance started with a budget deficit and moved to a budget surplus,domestic investment would

Accepted Answer

A)  rise and there would be a trade surplus.
B)  rise and there would be a trade deficit.
C)  fall and there would be a trade surplus.
D)  fall and there would be a trade deficit.E) C) and D)
F) B) and C)

Question 9

In 2002,the United States placed higher tariffs on imports of steel.According to the open-economy macroeconomic model this policy should have

Accepted Answer

A)  reduced imports into the United States and made U.S.net exports rise.
B)  reduced imports into the United States and made the net supply of dollars in the foreign exchange market shift right.
C)  reduced imports of steel into the United States,but reduced U.S.exports of other goods by an equal amount.
D)  reduced imports of steel into the United States and increased U.S.exports of other goods by an equal amount.E) A) and B)
F) A) and C)

Question 10

In the United States in the early 1980s,there was a government budget

Accepted Answer

A)  surplus and a trade surplus.
B)  deficit and a trade deficit.
C)  surplus and a trade deficit.
D)  deficit and a trade surplus.E) A) and D)
F) B) and C)

Question 11

If the budget deficit increases,then

Accepted Answer

A)  U.S.residents will want to purchase more foreign assets and foreign residents will want to purchase more U.S.assets
B)  U.S.residents will want to purchase more foreign assets and foreign residents will want to purchase fewer U.S.assets
C)  U.S.residents will want to purchase fewer foreign assets and foreign residents will want to purchase more U.S.assets
D)  U.S.residents will want to purchase fewer foreign assets and foreign residents will want to purchase fewer U.S.assetsE) B) and C)
F) C) and D)

Question 12

If a country's budget deficit rises,then its exchange rate

Accepted Answer

A)  rises,so its imports rise.
B)  rises,so its imports fall.
C)  falls,so its imports rise.
D)  falls so its imports fall.E) B) and C)
F) None of the above

Question 13

If after a country experiences capital flight,people become more confident about the safety of its assets,then in that country

Accepted Answer

A)  the real exchange rate and the real interest rate will rise.
B)  the real exchange rate will rise and the real interest rate will fall.
C)  the real exchange rate will fall and the real interest rate will rise.
D)  the real exchange rate and the real interest rate will fall.E) A) and D)
F) A) and C)

Question 14

Figure 32-5
Refer to this diagram of the open-economy macroeconomic model to answer the questions below.

-Refer to Figure 32-5.Starting from 3% and .75,an increase in the government budget surplus can be illustrated as a move to

Accepted Answer

A)  4% and 1
B)  4% and .5
C)  2% and 1
D)  2% and .5E) A) and D)
F) C) and D)

Question 15

If the French government increases its expenditures and reduces taxes,then France's interest rate

Accepted Answer

A)  and its exchange rate rise.
B)  rises and its exchange rate falls.
C)  falls and its exchange rate rises.
D)  and its exchange rate fall.E) B) and C)
F) A) and B)

Question 16

In which case(s) does(do) a country's demand for loanable funds shift right?

Accepted Answer

A)  both an increase in the budget deficit and capital flight
B)  an increase in the budget deficit,but not capital flight
C)  capital flight,but not an increase in the budget deficit
D)  neither an increase in the budget deficit nor capital flightE) A) and B)
F) All of the above

Question 17

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

Question 18

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) B) and D)
F) None of the above

Question 19

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 D)
F) B) and C)

Question 20

In 2002 it looked like the Argentinean government might default on its debt (which eventually it did) .The open-economy macroeconomic model predicts that this should have

Accepted Answer

A)  raised Argentinean interest rates and caused the Argentinean currency to appreciate.
B)  raised Argentinean interest rates and caused the Argentinean currency to depreciate.
C)  lowered Argentinean interest rates and caused the Argentinean currency to appreciate.
D)  lowered Argentinean interest rates and caused the Argentinean currency to depreciate.E) All of the above
F) A) and D)

Exam 19: A Macroeconomic Theory of the Open Economy: How Policies and Events Affect an Open Economy

If a country's budget deficit rises,then its exchange rate

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

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In 2002,the United States placed higher tariffs on imports of steel.According to the open-economy macroeconomic model this policy should have

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If the government of a country with a zero trade balance started with a budget deficit and moved to a budget surplus,domestic investment would

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Figure 32-5 Refer to this diagram of the open-economy macroeconomic model to answer the questions below. -Refer to Figure 32-5.Starting from 3% and .75,an increase in the government budget surplus can be illustrated as a move to

Correct AnswerverifiedShow Answer

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

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If after a country experiences capital flight,people become more confident about the safety of its assets,then in that country

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If the French government increases its expenditures and reduces taxes,then France's interest rate

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

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

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An increase in the budget surplus

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

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In the United States in the early 1980s,there was a government budget

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Which of the following is most likely to increase U.S.exports?

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In equilibrium which of the following happens if the U.S.imposes tariffs on power tools?

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In which case(s) does(do) a country's demand for loanable funds shift right?

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In 2002 it looked like the Argentinean government might default on its debt (which eventually it did) .The open-economy macroeconomic model predicts that this should have

Correct AnswerverifiedShow Answer

When a country suffers from capital flight,the exchange rate

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When a country's government budget deficit decreases,

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If the budget deficit increases,then

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