Question 1

Explain how a decrease in the demand for capital goods in the U.S. can lead to a change in the U.S. exchange rate.

Accepted Answer

A decrease in demand for capital goods i...

Question 2

A tax on imported goods is called an)

Accepted Answer

A)   excise tax.
B)   tariff.
C)   import quota.
D)   None of the above is correct.E) A) and C)
F) None of the above

Question 3

In the 1980s, both the U.S. government budget and U.S. trade deficits increased.

Accepted Answer

A) True 
 B)False

Question 4

In which cases 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) B) and C)
F) A) and B)

Question 5

When the U.S. real interest rate falls, purchasing U.S. assets becomes

Accepted Answer

A)   less attractive and so U.S. net capital outflow rises.
B)   less attractive and so U.S. net capital outflow falls.
C)   more attractive and so U.S. net capital outflow rises.
D)   more attractive and so U.S. net capital outflow falls.E) B) and C)
F) A) and C)

Question 6

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

Question 7

When a country experiences capital flight its currency

Accepted Answer

A)   appreciates and net exports rise.
B)   appreciates and net exports fall.
C)   depreciates and net exports rise.
D)   depreciates and net exports fall.E) B) and D)
F) All of the above

Question 8

If there is a surplus in the market for loanable funds, then the interest rate

Accepted Answer

A)   rises, so national saving rises.
B)   rises, so national saving falls.
C)   falls, so national saving rises.
D)   falls, so national saving falls.E) A) and B)
F) None of the above

Question 9

If interest rates rise in the U.S., then other things the same

Accepted Answer

A)   foreigners would buy more U.S. bonds which increases the quantity of loanable funds demanded in the U.S.
B)   foreigners would buy more U.S. bonds which reduces the quantity of loanable funds demanded in the U.S.
C)   foreigners would buy fewer U.S. bonds which increases the quantity of loanable funds demanded in the U.S.
D)   foreigners would buy fewer U.S. bonds which reduces the quantity of loanable funds demanded in the U.S.E) B) and C)
F) A) and B)

Question 10

If the exchange rate rises, foreign residents want to purchase ______ domestic goods and domestic residents want to purchase _____ foreign goods. In the market for foreign-currency exchange, these changes are shown as a _______ in the quantity of dollars ______.

Accepted Answer

fewer, mor...

Question 11

Suppose that U.S. citizens start saving more. What does this imply about the supply of loanable funds and the equilibrium real interest rate? What happens to the real exchange rate?

Accepted Answer

The supply of loanable funds increases, ...

Question 12

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 13

If for some reason Americans desired to decrease their purchases of foreign assets, then other things the same

Accepted Answer

A)   both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency exchange would fall.
B)   both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency would rise.
C)   the real exchange rate would rise and the quantity of dollars exchanged in the market for foreign-currency would fall.
D)   the real exchange rate would fall and the quantity of dollars exchanged in the market for foreign-currency would rise.E) B) and C)
F) A) and C)

Question 14

If the U.S. government imposed quotas on imports of clothing, then U.S.

Accepted Answer

A)   imports and exports would both fall.
B)   imports would fall and exports would rise.
C)   imports would rise and exports would fall.
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 15

What is the source of the demand for dollars in the market for foreign-currency exchange?

Accepted Answer

The answer of What is the source of the demand...

Question 16

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 D)
F) C) and D)

Question 17

Budget in Recession
During a recession government revenues from the income tax fall and government transfers rise as the reduction in income and the rise in unemployment raise the number of people who qualify for benefits.
-Refer to Budget in Recession. What does this change in the deficit do to net capital outflows? Defend your answer.

Accepted Answer

Net capital outflow falls because the do...

Question 18

If a country removes an import quota, what happens to its exchange rate, its exports, and its net exports?

Accepted Answer

Its exchange rate fa...

Question 19

If the quantity of loanable funds supplied is greater than the quantity demanded, then there is a

Accepted Answer

A)   shortage of loanable funds and the interest rate will fall.
B)   shortage of loanable funds and the interest rate will rise.
C)   surplus of loanable funds and the interest rate will fall.
D)   surplus of loanable funds and the interest rate will rise.E) A) and C)
F) None of the above

Question 20

In the open-economy macroeconomic model, the market for loanable funds equates national saving with

Accepted Answer

A)   domestic investment.
B)   net capital outflow.
C)   the sum of national consumption and government spending.
D)   the sum of domestic investment and net capital outflow.E) A) and B)
F) All of the above

Exam 14: A Macroeconomic Theory of the Open Economy

Suppose that U.S. citizens start saving more. What does this imply about the supply of loanable funds and the equilibrium real interest rate? What happens to the real exchange rate?

Correct Answer
verified
The supply of loanable funds increases, ...
View Answer

If for some reason Americans desired to decrease their purchases of foreign assets, then other things the same

Correct Answer
verified

In the 1980s, both the U.S. government budget and U.S. trade deficits increased.

Correct Answer
verified

If interest rates rise in the U.S., then other things the same

Correct Answer
verified

If there is a surplus in the market for loanable funds, then the interest rate

Correct Answer
verified

If a country removes an import quota, what happens to its exchange rate, its exports, and its net exports?

Correct Answer
verified
Its exchange rate fa...
View Answer

If the quantity of loanable funds supplied is greater than the quantity demanded, then there is a

Correct Answer
verified

In the open-economy macroeconomic model, the market for loanable funds equates national saving with

Correct Answer
verified

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 Answer
verified

Correct Answer
verified
Net capital outflow falls because the do...
View Answer

When the U.S. real interest rate falls, purchasing U.S. assets becomes

Correct Answer
verified

When a country experiences capital flight its currency

Correct Answer
verified

If the exchange rate rises, foreign residents want to purchase ____ domestic goods and domestic residents want to purchase _ foreign goods. In the market for foreign-currency exchange, these changes are shown as a _ in the quantity of dollars __.

Correct Answer
verified
fewer, mor...
View Answer

In which cases does/do a country's demand for loanable funds shift right?

Correct Answer
verified

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 Answer
verified

If the U.S. government imposed quotas on imports of clothing, then U.S.

Correct Answer
verified

What is the source of the demand for dollars in the market for foreign-currency exchange?

Correct Answer
verified

When a country's government budget deficit decreases,

Correct Answer
verified

Explain how a decrease in the demand for capital goods in the U.S. can lead to a change in the U.S. exchange rate.

Correct Answer
verified
A decrease in demand for capital goods i...
View Answer

A tax on imported goods is called an)

Correct Answer
verified

Exam 14: A Macroeconomic Theory of the Open Economy

Suppose that U.S. citizens start saving more. What does this imply about the supply of loanable funds and the equilibrium real interest rate? What happens to the real exchange rate?

Correct AnswerverifiedThe supply of loanable funds increases, ...View AnswerShow Answer

If for some reason Americans desired to decrease their purchases of foreign assets, then other things the same

Correct AnswerverifiedShow Answer

In the 1980s, both the U.S. government budget and U.S. trade deficits increased.

Correct AnswerverifiedShow Answer

If interest rates rise in the U.S., then other things the same

Correct AnswerverifiedShow Answer

If there is a surplus in the market for loanable funds, then the interest rate

Correct AnswerverifiedShow Answer

If a country removes an import quota, what happens to its exchange rate, its exports, and its net exports?

Correct AnswerverifiedIts exchange rate fa...View AnswerShow Answer

If the quantity of loanable funds supplied is greater than the quantity demanded, then there is a

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, the market for loanable funds equates national saving with

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

Correct AnswerverifiedNet capital outflow falls because the do...View AnswerShow Answer

When the U.S. real interest rate falls, purchasing U.S. assets becomes

Correct AnswerverifiedShow Answer

When a country experiences capital flight its currency

Correct AnswerverifiedShow Answer

If the exchange rate rises, foreign residents want to purchase ______ domestic goods and domestic residents want to purchase _____ foreign goods. In the market for foreign-currency exchange, these changes are shown as a _______ in the quantity of dollars ______.

Correct Answerverifiedfewer, mor...View AnswerShow Answer

In which cases does/do a country's demand for loanable funds shift right?

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

If the U.S. government imposed quotas on imports of clothing, then U.S.

Correct AnswerverifiedShow Answer

What is the source of the demand for dollars in the market for foreign-currency exchange?

Correct AnswerverifiedShow Answer

When a country's government budget deficit decreases,

Correct AnswerverifiedShow Answer

Explain how a decrease in the demand for capital goods in the U.S. can lead to a change in the U.S. exchange rate.

Correct AnswerverifiedA decrease in demand for capital goods i...View AnswerShow Answer

A tax on imported goods is called an)

Correct AnswerverifiedShow Answer

Correct Answer
verified
The supply of loanable funds increases, ...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Its exchange rate fa...
View Answer

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
verified
Net capital outflow falls because the do...
View Answer

Correct Answer
verified

Correct Answer
verified

If the exchange rate rises, foreign residents want to purchase ____ domestic goods and domestic residents want to purchase _ foreign goods. In the market for foreign-currency exchange, these changes are shown as a _ in the quantity of dollars __.

Correct Answer
verified
fewer, mor...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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A decrease in demand for capital goods i...
View Answer

Correct Answer
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