Question 1

China's high net exports must be balanced by:

Accepted Answer

A)   low net capital outflows.
B)   high net capital outflows.
C)   low net imports.
D)   high net capital inflows.E) A) and D)
F) C) and D)

Question 2

When interest rates in the United States increase:

Accepted Answer

A)   more foreigners will invest in U.S. assets.
B)   fewer foreigners will invest in U.S. assets.
C)   more U.S. citizens will invest abroad.
D)   fewer U.S. citizens will invest in U.S. assets.E) B) and D)
F) A) and B)

Question 3

When a country suffers from a speculative attack:

Accepted Answer

A)   the supply of available currency increases.
B)   the equilibrium exchange rate falls.
C)   the government must spend its reserves to defend the fixed exchange rate.
D)   All of these are true.E) B) and D)
F) A) and D)

Question 4

When the U.S. government runs a deficit, the resulting higher interest rate:

Accepted Answer

A)   "crowds out" domestic investment.
B)   increases net capital outflow.
C)   reduces domestic saving.
D)   None of these are true.E) B) and D)
F) A) and B)

Question 5

The investment that occurs when a firm runs part of its operation abroad or invests in a foreign company is called:

Accepted Answer

A)   portfolio investment.
B)   import investment.
C)   export investment.
D)   foreign direct investment.E) All of the above
F) C) and D)

Question 6

Investment is _______ related to the interest rate and net capital outflow is _______ related to the interest rate.

Accepted Answer

A)   negatively; negatively
B)   negatively; positively
C)   positively; positively
D)   positively; negativelyE) A) and C)
F) A) and B)

Question 7

When Soyeon, who lives in Korea, buys stock in General Electric, an American company, U.S. net capital outflow:

Accepted Answer

A)   decreases.
B)   is unaffected.
C)   increases.
D)   becomes zero.E) All of the above
F) A) and B)

Question 8

Which of the following countries is a major trading partner with the United States?

Accepted Answer

A)   South Africa
B)   China
C)   Norway
D)   Saudi ArabiaE) All of the above
F) A) and D)

Question 9

If the U.S. dollar was worth 0.8 euros, and the dollar appreciated, it might now be worth:

Accepted Answer

A)   0.7 euros.
B)   0.9 euros.
C)   0.8 euros.
D)   None of these is possible.E) A) and B)
F) B) and C)

Question 10

The amount of money that people can invest is equal to:

Accepted Answer

A)   their income.
B)   the value of their output.
C)   the value of consumption after gains from trade have been made.
D)   their savings.E) A) and B)
F) B) and D)

Question 11

In the market for loanable funds in an open economy, which of the following is not a form of international investment?

Accepted Answer

A)   Net capital outflow
B)   Capital inflow
C)   Domestic money invested internationally
D)   Domestic money invested domesticallyE) C) and D)
F) None of the above

Question 12

If a country allows the value of its currency to be determined in the foreign-exchange market, it has a _______ exchange rate.

Accepted Answer

A)   fixed
B)   floating
C)   prime
D)   keyE) A) and B)
F) A) and C)

Question 13

Which of the following countries fell victim to contagion during the 1997 Asian financial crisis? I. Indonesia
II. South Korea
III. Malaysia
IV. Taiwan
V. The Philippines

Accepted Answer

A)   I, III, and V only
B)   II, III, and IV only
C)   I and IV only
D)   I, II, II, IV, and IVE) None of the above
F) B) and D)

Question 14

When the Fed decides to enact expansionary monetary policy, the supply of loanable funds _______ and the demand for loanable funds _______.

Accepted Answer

A)   increases; decreases
B)   decreases; increases
C)   decreases; decreases
D)   increases; increasesE) B) and C)
F) None of the above

Question 15

The value of exports minus the value of imports equals the:

Accepted Answer

A)   trade value.
B)   net budget balance.
C)   balance of trade.
D)   net trade value.E) All of the above
F) A) and B)

Question 16

The United States is able to maintain a large trade deficit because:

Accepted Answer

A)   it turns into a trade surplus during times of economic expansion.
B)   it is balanced by a large capital surplus.
C)   it is balanced by a large capital deficit.
D)   None of these are true.E) A) and B)
F) A) and D)

Question 17

A country with a net capital inflow has:

Accepted Answer

A)   a trade surplus.
B)   a trade deficit.
C)   more exports than imports.
D)   more capital goods flowing into the country than out of it.E) All of the above
F) None of the above

Question 18

Erika, who lives in Hungary, buys Hershey's chocolate for $20. At the same time, Matt buys Turkish delights from Turkey for $20. Which of the following statements describes the effect these transactions have on the U.S. balance of trade and payments?

Accepted Answer

A)   Net exports and net capital outflow are both zero.
B)   Net exports and net capital outflow both equal $20.
C)   Net exports are zero and net capital outflow equals $20.
D)   Net exports equal $20 and net capital outflow is zero.E) A) and B)
F) B) and D)

Question 19

Which of the following would cause the supply of U.S. dollars in the forex market to decrease?

Accepted Answer

A)   Foreign interest rates are low relative to U.S. interest rates.
B)   Investors' confidence in foreign economies increases.
C)   U.S. consumers prefer foreign goods to U.S. goods.
D)   All of these would increase the supply of U.S. dollars in the forex market.E) B) and C)
F) A) and D)

Question 20

When investors doubt a country's ability to maintain its fixed exchange rate:

Accepted Answer

A)   the country's currency may experience a speculative attack.
B)   the exchange rate is likely to spiral upward and out of control.
C)   the country must lower interest rates to spur investment.
D)   All of these are true.E) A) and C)
F) A) and D)

Exam 18: Open-Marketmacroeconomics

A country with a net capital inflow has:

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When the U.S. government runs a deficit, the resulting higher interest rate:

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Which of the following countries is a major trading partner with the United States?

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When Soyeon, who lives in Korea, buys stock in General Electric, an American company, U.S. net capital outflow:

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In the market for loanable funds in an open economy, which of the following is not a form of international investment?

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If the U.S. dollar was worth 0.8 euros, and the dollar appreciated, it might now be worth:

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Investment is _______ related to the interest rate and net capital outflow is _______ related to the interest rate.

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Which of the following countries fell victim to contagion during the 1997 Asian financial crisis? I. Indonesia II. South Korea III. Malaysia IV. Taiwan V. The Philippines

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The amount of money that people can invest is equal to:

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If a country allows the value of its currency to be determined in the foreign-exchange market, it has a _______ exchange rate.

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Which of the following would cause the supply of U.S. dollars in the forex market to decrease?

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When the Fed decides to enact expansionary monetary policy, the supply of loanable funds _______ and the demand for loanable funds _______.

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When interest rates in the United States increase:

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Erika, who lives in Hungary, buys Hershey's chocolate for $20. At the same time, Matt buys Turkish delights from Turkey for $20. Which of the following statements describes the effect these transactions have on the U.S. balance of trade and payments?

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The United States is able to maintain a large trade deficit because:

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When investors doubt a country's ability to maintain its fixed exchange rate:

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China's high net exports must be balanced by:

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The investment that occurs when a firm runs part of its operation abroad or invests in a foreign company is called:

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When a country suffers from a speculative attack:

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The value of exports minus the value of imports equals the:

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Investment is _ related to the interest rate and net capital outflow is _ related to the interest rate.

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When the Fed decides to enact expansionary monetary policy, the supply of loanable funds _ and the demand for loanable funds _.

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