Question 1

From 2001 to 2004, the U.S. government went from a budget surplus to a budget deficit. According to the open- economy macroeconomic model, this should have decreased

Accepted Answer

A)   both the supply of loanable funds and the supply of dollars in the market for foreign-currency exchange.
B)   neither the supply of loanable funds nor the supply of dollars in the market for foreign-currency exchange.
C)   the supply of loanable funds but not the supply of dollars in the market for foreign-currency exchange.
D)   the supply of dollars in the market for foreign-currency exchange, but not the supply of loanable funds.E) A) and B)
F) A) and C)

Question 2

Other things the same, in the open-economy macroeconomic model, if the exchange rate rises,

Accepted Answer

A)   the demand for dollars shifts left.
B)   the demand for dollars shifts right.
C)   the quantity of dollars demanded falls.
D)   the quantity of dollars demanded rises.E) B) and C)
F) A) and D)

Question 3

Other things the same, a higher real exchange rate raises net exports.

Accepted Answer

A) True 
 B)False

Question 4

When a country suffers from capital flight, the demand for loanable funds in that country shifts

Accepted Answer

A)   right, which increases interest rates in that country.
B)   right, which decreases interest rates in that country.
C)   left, which increases interest rates in that country.
D)   left, which decreases interest rates in that country.E) A) and B)
F) A) and C)

Question 5

Figure 32-2 
-Refer to Figure 32-2. At what real exchange rate is the quantity of dollars demanded equal to 500?

Accepted Answer

A)   1
B)   .8
C)   .6
D)   None of the above are correct.E) A) and D)
F) A) and C)

Question 6

Refer to U.S. Investment Tax Credit. What happens to the exchange rate, U.S. net exports, and the net exports of foreign countries?

Accepted Answer

The exchange rate ri...

Question 7

In an open economy, the source for the demand for loanable funds is

Accepted Answer

A)   national saving.
B)   national saving + net capital outflow.
C)   investment
D)   investment + net capital outflowE) A) and D)
F) A) and C)

Question 8

Other things the same, as the real interest rate rises

Accepted Answer

A)   domestic investment and net capital outflow both rise.
B)   domestic investment and net capital outflow both fall.
C)   domestic investment rises and net capital outflow falls.
D)   domestic investment falls and net capital outflow rises.E) None of the above
F) B) and C)

Question 9

Suppose a presidential candidate promises to increase the government budget surplus and claims that doing so will stop U.S. citizens from investing in foreign companies and increase the value of the dollar. Evaluate this candidate's promise.

Accepted Answer

An increase in the government budget sur...

Question 10

If the U.S. imposes an import quota on clothing, then the

Accepted Answer

A)   supply of dollars in the market for foreign-currency exchange shifts right.
B)   supply of dollars in the market for foreign-currency exchange shifts left.
C)   demand for dollars in the market for foreign-currency exchange shifts right.
D)   demand for dollars in the market for foreign-currency exchange shifts left.E) C) and D)
F) None of the above

Question 11

In the open economy macroeconomic model, the price that balances supply and demand in the market for foreign- currency exchange model is the

Accepted Answer

A)   nominal exchange rate.
B)   nominal interest rate.
C)   real exchange rate.
D)   real interest rate.E) A) and B)
F) A) and D)

Question 12

If the exchange rate falls, domestic goods become relatively expensive. This change in the affordability of domestic goods makes domestic goods attractive to domestic residents. So, _______ ______.

Accepted Answer

less, more...

Question 13

Figure 32-4
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) All of the above
F) B) and C)

Question 14

If the U.S. government imposes a quota on imports of jet planes, 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 D)
F) B) and D)

Question 15

Which of the following would cause the real exchange rate of the U.S. dollar to depreciate?

Accepted Answer

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

Question 16

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

Question 17

If a country raises its budget deficit, then its

Accepted Answer

A)   net capital outflow and net exports rise.
B)   net capital outflow rises and net exports fall.
C)   net capital outflow falls and net exports rise.
D)   net capital outflow and net exports fall.E) C) and D)
F) B) and C)

Question 18

Refer to Budget in Recession. This change in the deficit causes the exchange rate to change. What does the change in the exchange rate do to net exports?

Accepted Answer

Because the exchange...

Question 19

Imposing an import quota causes the domestic real exchange rate to

Accepted Answer

A)   appreciate, which increases foreign demand for domestic goods.
B)   appreciate, which decreases foreign demand for domestic goods.
C)   depreciate, which increases foreign demand for domestic goods.
D)   depreciate, which decreases foreign demand for domestic goods.E) A) and B)
F) C) and D)

Question 20

A government budget deficit

Accepted Answer

A)   increases both net capital outflow and net exports.
B)   decreases both net capital outflow and net exports.
C)   increases net capital outflow and decreases net exports.
D)   decreases net capital outflow and increases net exports.E) None of the above
F) A) and C)

Exam 19: A Macroeconomic Theory of the Open Economy

From 2001 to 2004, the U.S. government went from a budget surplus to a budget deficit. According to the open- economy macroeconomic model, this should have decreased

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A government budget deficit

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If the U.S. imposes an import quota on clothing, then the

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

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Other things the same, in the open-economy macroeconomic model, if the exchange rate rises,

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Which of the following would cause the real exchange rate of the U.S. dollar to depreciate?

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If the U.S. government imposes a quota on imports of jet planes, then

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Figure 32-4 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

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If a country raises its budget deficit, then its

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Figure 32-2 -Refer to Figure 32-2. At what real exchange rate is the quantity of dollars demanded equal to 500?

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Other things the same, as the real interest rate rises

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Other things the same, a higher real exchange rate raises net exports.

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Imposing an import quota causes the domestic real exchange rate to

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Suppose a presidential candidate promises to increase the government budget surplus and claims that doing so will stop U.S. citizens from investing in foreign companies and increase the value of the dollar. Evaluate this candidate's promise.

Correct AnswerverifiedAn increase in the government budget sur...View AnswerShow Answer

When a country suffers from capital flight, the demand for loanable funds in that country shifts

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Refer to Budget in Recession. This change in the deficit causes the exchange rate to change. What does the change in the exchange rate do to net exports?

Correct AnswerverifiedBecause the exchange...View AnswerShow Answer

In an open economy, the source for the demand for loanable funds is

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Refer to U.S. Investment Tax Credit. What happens to the exchange rate, U.S. net exports, and the net exports of foreign countries?

Correct AnswerverifiedThe exchange rate ri...View AnswerShow Answer

If the exchange rate falls, domestic goods become relatively expensive. This change in the affordability of domestic goods makes domestic goods attractive to domestic residents. So, _______ ______.

Correct Answerverifiedless, more...View AnswerShow Answer

In the open economy macroeconomic model, the price that balances supply and demand in the market for foreign- currency exchange model is the

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An increase in the government budget sur...
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Because the exchange...
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The exchange rate ri...
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If the exchange rate falls, domestic goods become relatively expensive. This change in the affordability of domestic goods makes domestic goods attractive to domestic residents. So, _ .

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