Question 1

Which of the following is most likely to increase exports?

Accepted Answer

A)   a reduction in domestic political instability
B)   ending investment tax credits
C)   a reduction in the size of the government's budget surplus
D)   None of the above will increase exports.E) C) and D)
F) All of the above

Question 2

As the interest rate rises, it is possible that net capital outflow could move from a positive to a negative value.

Accepted Answer

A) True 
 B)False

Question 3

If the risk of holding assets in foreign countries rises relative to the risk of holding U.S assets, then

Accepted Answer

A)   U.S. net capital outflow rises which increases the U.S. exchange rate.
B)   U.S. net capital outflow rises which decreases the U.S. exchange rate.
C)   U.S. net capital outflow falls which increases the U.S. exchange rate.
D)   U.S. net capital outflow falls which decreases the U.S. exchange rate.E) All of the above
F) B) and C)

Question 4

If the risk of buying U.S. assets rises because it is discovered that lending institutions had not carefully evaluated borrowers prior to lending them funds, then

Accepted Answer

A)   the real exchange rate and the interest rate will rise.
B)   the real exchange rate will rise and the interest rate will fall.
C)   the real exchange rate will fall and the interest rate will rise.
D)   the real exchange rate and the interest rate will fall.E) B) and D)
F) None of the above

Question 5

In which cases does/do a country's supply of loanable funds shift left?

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 C)
F) All of the above

Question 6

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 7

The real exchange rate measures the

Accepted Answer

A)   price of domestic currency relative to foreign currency.
B)   price of domestic goods relative to the price of foreign goods.
C)   rate of domestic and foreign interest.
D)   None of the above is correct.E) None of the above
F) A) and C)

Question 8

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

Question 9

If there is a surplus in the market for loanable funds, the resulting change in the real interest rate

Accepted Answer

A)   reduces both the quantity of loanable funds supplied and the quantity of loanable funds demanded.
B)   reduces the quantity of loanable funds supplied and raises the quantity of loanable funds demanded
C)   raises both the quantity of loanable funds supplied and the quantity of loanable funds demanded.
D)   raises the quantity of loanable funds supplied and reduces the quantity of loanable funds demanded.E) A) and B)
F) A) and C)

Question 10

If U.S. citizens decide to purchase more foreign assets at each interest rate, the U.S. real interest rate

Accepted Answer

A)   increases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases.
B)   increases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases.
C)   decreases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow decreases.
D)   decreases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow increases.E) B) and C)
F) A) and C)

Question 11

In the open-economy macroeconomic model, net capital outflow links the markets for loanable funds and foreign- currency exchange.

Accepted Answer

A) True 
 B)False

Question 12

From 1980 to 1987, U.S. net capital outflows decreased. According to the open-economy macroeconomic model, which of the following could have caused this?

Accepted Answer

A)   an increase in the demand for U.S. currency in the market for foreign-currency exchange
B)   a decrease in the demand for U.S. currency in the market for foreign-currency exchange
C)   an increase in the supply of loanable funds
D)   a decrease in the supply of loanable fundsE) C) and D)
F) All of the above

Question 13

In the open-economy macroeconomic model, if the supply of loanable funds shifts left

Accepted Answer

A)   the interest rate rises and the supply of dollars in the market for foreign currency exchange shifts right.
B)   the interest rate rises and the supply of dollars in the market for foreign currency exchange shifts left.
C)   the interest rate falls and the demand for dollars in the market for foreign currency exchange shifts right.
D)   the interest rate falls and the demand for dollars in the market for foreign currency exchange shifts left.E) A) and B)
F) A) and C)

Question 14

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

Accepted Answer

A)   the sum of domestic investment and net capital outflow.
B)   the sum of national saving and net capital outflow.
C)   national saving.
D)   net exportsE) B) and D)
F) B) and C)

Question 15

If the supply of loanable funds shifts right, then

Accepted Answer

A)   the real interest rate and the equilibrium quantity of loanable funds both fall.
B)   the real interest rate falls and the equilibrium quantity of loanable funds rises.
C)   the real interest rate and the equilibrium quantity of loanable funds both rise.
D)   the real interest rate rises and the equilibrium quantity of loanable funds falls.E) A) and B)
F) A) and C)

Question 16

Other things the same, in the open-economy macroeconomic model, which of the following would make China's net capital outflow increase?

Accepted Answer

A)   an increase in U.S. interest rates
B)   an increase in Chinese interest rates
C)   an appreciation of the Chinese yuan
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 17

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 C)
F) A) and B)

Question 18

Depositors Move Funds out of Greek Banks.
In 2011 Greek citizens were concerned about the size of government debt. Fearful that the government might be unable to fulfill its promise to insure depositors in Greek banks against losses created by bank failures, depositors moved funds out of Greek banks.
-Refer to Depositors Move Funds Out of Greek Banks. What happened to domestic investment? Why?

Accepted Answer

Domestic investment ...

Question 19

Suppose the U.S. removes an import quota on steel. U.S. exports

Accepted Answer

A)   increase, the real exchange rate of the U.S. dollar appreciates, and U.S. net capital outflow increases.
B)   increase, the real exchange rate of the U.S. dollar depreciates, and U.S. net capital outflow is unchanged.
C)   decrease, the real exchange rate of the U.S. dollar appreciates, and U.S. net capital outflow is unchanged.
D)   decrease, the real exchange rate of the U.S. dollar depreciates, and U.S. net capital outflow decreases.E) None of the above
F) A) and D)

Question 20

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

Exam 14: A Macroeconomic Theory of the Open Economy

If U.S. citizens decide to purchase more foreign assets at each interest rate, the U.S. real interest rate

Correct Answer
verified

If the risk of buying U.S. assets rises because it is discovered that lending institutions had not carefully evaluated borrowers prior to lending them funds, then

Correct Answer
verified

If there is a surplus in the market for loanable funds, the resulting change in the real interest rate

Correct Answer
verified

If the supply of loanable funds shifts right, then

Correct Answer
verified

From 1980 to 1987, U.S. net capital outflows decreased. According to the open-economy macroeconomic model, which of the following could have caused this?

Correct Answer
verified

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

Correct Answer
verified

If the risk of holding assets in foreign countries rises relative to the risk of holding U.S assets, then

Correct Answer
verified

In which cases does/do a country's supply of loanable funds shift left?

Correct Answer
verified

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

Correct Answer
verified

An increase in real interest rates in the United States

Correct Answer
verified

Which of the following is most likely to increase exports?

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified
Domestic investment ...
View Answer

The real exchange rate measures the

Correct Answer
verified

Suppose the U.S. removes an import quota on steel. U.S. exports

Correct Answer
verified

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

Correct Answer
verified

Other things the same, in the open-economy macroeconomic model, which of the following would make China's net capital outflow increase?

Correct Answer
verified

In the open-economy macroeconomic model, if the supply of loanable funds shifts left

Correct Answer
verified

In the open-economy macroeconomic model, net capital outflow links the markets for loanable funds and foreign- currency exchange.

Correct Answer
verified

As the interest rate rises, it is possible that net capital outflow could move from a positive to a negative value.

Correct Answer
verified

Exam 14: A Macroeconomic Theory of the Open Economy

If U.S. citizens decide to purchase more foreign assets at each interest rate, the U.S. real interest rate

Correct AnswerverifiedShow Answer

If the risk of buying U.S. assets rises because it is discovered that lending institutions had not carefully evaluated borrowers prior to lending them funds, then

Correct AnswerverifiedShow Answer

If there is a surplus in the market for loanable funds, the resulting change in the real interest rate

Correct AnswerverifiedShow Answer

If the supply of loanable funds shifts right, then

Correct AnswerverifiedShow Answer

From 1980 to 1987, U.S. net capital outflows decreased. According to the open-economy macroeconomic model, which of the following could have caused this?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the risk of holding assets in foreign countries rises relative to the risk of holding U.S assets, then

Correct AnswerverifiedShow Answer

In which cases does/do a country's supply of loanable funds shift left?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An increase in real interest rates in the United States

Correct AnswerverifiedShow Answer

Which of the following is most likely to increase exports?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedDomestic investment ...View AnswerShow Answer

The real exchange rate measures the

Correct AnswerverifiedShow Answer

Suppose the U.S. removes an import quota on steel. U.S. exports

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Other things the same, in the open-economy macroeconomic model, which of the following would make China's net capital outflow increase?

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, if the supply of loanable funds shifts left

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, net capital outflow links the markets for loanable funds and foreign- currency exchange.

Correct AnswerverifiedShow Answer

As the interest rate rises, it is possible that net capital outflow could move from a positive to a negative value.

Correct AnswerverifiedShow Answer

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Domestic investment ...
View Answer

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