Question 1

An increase in real interest rates in the United States

Accepted Answer

A)  discourages both U.S.and foreign residents from buying U.S.assets.
B)  encourages both U.S.and foreign residents to buy U.S.assets.
C)  encourages U.S.residents to buy U.S.assets,but discourages foreign residents from buying U.S.assets.
D)  encourages foreign residents to buy U.S.assets,but discourages U.S.residents from buying U.S.assets.E) None of the above
F) B) and C)

Question 2

Figure 32-1 
-Refer to Figure 32-1.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) B) and C)
F) A) and B)

Question 3

Which of the following would make the equilibrium real interest rate increase and the equilibrium quantity of 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) B) and C)
F) A) and D)

Question 4

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) All of the above

Question 5

At the equilibrium real interest rate in the open-economy macroeconomic model,the equilibrium quantity of loanable funds equals

Accepted Answer

A)  net capital outflow.
B)  domestic investment.
C)  foreign currency supplied.
D)  national saving.E) A) and D)
F) A) and C)

Question 6

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

Accepted Answer

A)  less than the quantity demanded and the dollar will appreciate.
B)  less than the quantity demanded and the dollar will depreciate.
C)  greater than the quantity demanded and the dollar will appreciate.
D)  greater than the quantity demanded and the dollar will depreciate.E) A) and B)
F) A) and C)

Question 7

Figure 32-2 
-Refer to Figure 32-2.What are the equilibrium values of the real exchange rate and net exports?

Accepted Answer

A)  1,300
B)  8,400
C)  6,500
D)  None of the above are correct.E) All of the above
F) A) and C)

Question 8

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

Accepted Answer

A)  national saving.The demand for loanable funds comes from domestic investment + net capital outflow.
B)  national saving.The demand for loanable funds comes only from domestic investment.
C)  private saving.The demand for loanable funds comes from domestic investment + net capital outflow.
D)  private saving.The demand for loanable funds comes only from domestic investment.E) B) and D)
F) All of the above

Question 9

In an open economy,national saving equals

Accepted Answer

A)  domestic investment plus net capital outflow.
B)  domestic investment minus net capital outflow.
C)  domestic investment.
D)  net capital outflow.E) C) and D)
F) None of the above A

Question 10

The slope of the supply of loanable funds is based on an increase in

Accepted Answer

A)  only national saving when the interest rate rises.
B)  both national saving and net capital outflow when the interest rate rises.
C)  only national saving when the interest rate falls.
D)  both national saving and net capital outflow when the interest rate falls.E) None of the above
F) All of the above

Question 11

If the supply of loanable funds shifts right,then the equilibrium

Accepted Answer

A)  interest rate falls,so domestic residents will want to purchase more foreign assets.
B)  interest rate falls,so domestic residents will want to purchase fewer foreign assets.
C)  interest rate rises,so domestic residents will want to purchase more foreign assets.
D)  interest rate rises,so domestic residents will want to purchase fewer foreign assets.E) A) and B)
F) A) and C)

Question 12

A country has I = $200 billion,S = $400 billion,and purchased $600 billion of foreign assets,how many of its assets did foreigners purchase?

Accepted Answer

A)  $0
B)  $200 billion
C)  $400 billion
D)  $800 billionE) A) and C)
F) None of the above

Question 13

Other things the same,a higher real interest rate raises the quantity of

Accepted Answer

A)  domestic investment.
B)  net capital outflow.
C)  loanable funds demanded.
D)  loanable funds supplied.E) A) and D)
F) A) and C)

Question 14

A country has private saving of $100 billion,public saving of -$30 billion,domestic investment of $50 billion,and net capital outflow of $20 billion.What is its supply of loanable funds?

Accepted Answer

A)  $50 billion
B)  $70 billion
C)  $90 billion
D)  $120 billionE) B) and C)
F) A) and D)

Question 15

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 B)
F) B) and C)

Question 16

A country has output of $600 billion,consumption of $350 billion,government expenditures of $90 billion and investment of $60 billion.What is its supply of loanable funds?

Accepted Answer

A)  $160 billion
B)  $150 billion
C)  $60 billion
D)  $30 billionE) C) and D)
F) B) and D)

Question 17

In the open-economy macroeconomic model,if for some reason foreign citizens want to purchase more U.S.goods and services at each exchange rate,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) B) and C) A

Question 18

Other things the same,an increase 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) B) and C)
F) All of the above

Question 19

A U.S.grocery chain borrows money to buy a warehouse in Ohio and another in Italy.Borrowing for which warehouse(s) is included in the demand for loanable funds in the U.S.?

Accepted Answer

A)  both the one in Ohio and the one in Italy
B)  only the one in Ohio
C)  only the one in Italy
D)  neither the one in Ohio nor the one in ItalyE) C) and D)
F) B) and D) A

Question 20

If there is a surplus of loanable funds,the quantity demanded is

Accepted Answer

A)  greater than the quantity supplied and the interest rate will rise.
B)  greater than the quantity supplied and the interest rate will fall.
C)  less than the quantity supplied and the interest rate will rise.
D)  less than the quantity supplied and the interest rate will fall.E) B) and D)
F) A) and B)

Exam 19: A Macroeconomic Theory of the Open Economy: Supply and Demand for Loanable Funds and for Foreign-Currency Exchange

An increase in real interest rates in the United States

Correct AnswerverifiedShow Answer

Figure 32-1 -Refer to Figure 32-1.If the real interest rate is 6 percent,there will be pressure for

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

At the equilibrium real interest rate in the open-economy macroeconomic model,the equilibrium quantity of loanable funds equals

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

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Figure 32-2 -Refer to Figure 32-2.What are the equilibrium values of the real exchange rate and net exports?

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

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In an open economy,national saving equals

Correct AnswerverifiedA

The slope of the supply of loanable funds is based on an increase in

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If the supply of loanable funds shifts right,then the equilibrium

Correct AnswerverifiedShow Answer

A country has I = $200 billion,S = $400 billion,and purchased $600 billion of foreign assets,how many of its assets did foreigners purchase?

Correct AnswerverifiedShow Answer

Other things the same,a higher real interest rate raises the quantity of

Correct AnswerverifiedShow Answer

A country has private saving of $100 billion,public saving of -$30 billion,domestic investment of $50 billion,and net capital outflow of $20 billion.What is its supply of loanable funds?

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

Correct AnswerverifiedShow Answer

A country has output of $600 billion,consumption of $350 billion,government expenditures of $90 billion and investment of $60 billion.What is its supply of loanable funds?

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model,if for some reason foreign citizens want to purchase more U.S.goods and services at each exchange rate,then

Correct AnswerverifiedA

Other things the same,an increase in the U.S.real interest rate induces

Correct AnswerverifiedShow Answer

A U.S.grocery chain borrows money to buy a warehouse in Ohio and another in Italy.Borrowing for which warehouse(s) is included in the demand for loanable funds in the U.S.?

Correct AnswerverifiedA

If there is a surplus of loanable funds,the quantity demanded is

Correct AnswerverifiedShow Answer

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