Question 1

Other things the same, as the real interest rate falls

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) A) and B)

Question 2

According to the open-economy macroeconomic model, import quotas increase which of the following

Accepted Answer

A)   net exports and net capital outflow
B)   net exports but not net capital outflow.
C)   net capital outflow but not net exports.
D)   neither net exports nor net capital outflow.E) B) and C)
F) All of the above

Question 3

Other things the same, which curve in the market for foreign-currency exchange shifts and which direction does it shift if net capital outflow rises?

Accepted Answer

The supply...

Question 4

If a tariff on beef were implemented, which of the following would rise?

Accepted Answer

A)   exports and net exports
B)   exports but not net exports
C)   net exports but not exports
D)   neither exports nor net exportsE) A) and D)
F) B) and C)

Question 5

When a country experiences capital flight its interest rate

Accepted Answer

A)   and net capital outflow rise.
B)   rises and net capital outflow falls.
C)   falls and net capital outflow rises.
D)   interest rate and net capital outflow fall.E) All of the above
F) A) and B)

Question 6

An economy recently had 800 billion euros of saving and 600 billion euros of net capital outflow. What was its investment? What was its quantity of loanable funds supplied?

Accepted Answer

200 billio...

Question 7

An increase in the U.S. government budget deficit shifts the

Accepted Answer

A)   demand for loanable funds right and decreases investment spending.
B)   supply of loanable funds right and increases investment spending.
C)   supply of loanable funds left and decreases investment spending.
D)   None of the above is correct.E) None of the above
F) All of the above

Question 8

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

Question 9

Which of the following would not be a consequence of an increase in the U.S. government budget deficit?

Accepted Answer

A)   the U.S. trade balance rises
B)   the U.S. interest rate rises
C)   domestic investment in the U.S. falls
D)   the real exchange rate of the U.S. dollar appreciatesE) B) and D)
F) B) and C)

Question 10

Refer to Budget in Recession. In the market for loanable funds which curves) does this change in the deficit shift? Which direction does it shift?

Accepted Answer

Since the budget def...

Question 11

Other things the same, a lower real interest rate decreases the quantity of

Accepted Answer

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

Question 12

Other things the same, when a Canadian company imports bicycles from the U.S., the open-economy macroeconomic model treats this transaction as part of the demand for dollars in the U.S. foreign-currency exchange market.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following can explain a decrease in the U.S. real exchange rate?

Accepted Answer

A)   the U.S. government budget deficit falls
B)   the U.S. impose import quotas
C)   the default risk of U.S. assets falls
D)   All of the above are correct.E) All of the above
F) None of the above

Question 14

If the supply of dollars in the market for foreign-currency exchange shifts left, then the exchange rate

Accepted Answer

A)   rises and the quantity of dollars exchanged falls.
B)   rises and the quantity of dollars exchanged does not change.
C)   rises and the quantity of dollars exchanged rises.
D)   falls and the quantity of dollars exchanged does not change.E) A) and C)
F) None of the above

Question 15

Explain how the relation between the real exchange rate and net exports explains the downward slope of the demand for foreign-currency exchange curve.

Accepted Answer

When the domestic real exchange rate app...

Question 16

During the financial crisis it was proposed that firms be provided with a tax credit for investment projects. Such a tax credit would

Accepted Answer

A)   shift both the demand for loanable funds and the supply of dollars in the market for foreign-currency exchange right.
B)   shift the demand for loanable funds right and shift the supply of dollars in the market for foreign-currency exchange left.
C)   shift the demand for loanable funds left and shift the supply of dollars in the market for foreign-currency exchange right.
D)   shift both the demand for loanable funds and the supply of dollars in the market for foreign-currency exchange left.E) C) and D)
F) B) and C)

Question 17

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) None of the above

Question 18

Which of the following results if the U.S. removes an import quota on computer components?

Accepted Answer

A)   U.S. exports and U.S. imports both increase
B)   U.S. exports increase but U.S. imports are unchanged
C)   U.S. imports increase but U.S. exports are unchanged
D)   None of the above are correctE) B) and D)
F) All of the above

Question 19

Trade policies

Accepted Answer

A)   affect a country's overall trade balance, but affect all firms and industries the same.
B)   affect a country's overall trade balance, but affect some firms or industries differently than others.
C)   do not affect a country's overall trade balance, but affect some firms or industries differently than others.
D)   do not affect either a country's overall trade balance or specific firms or industries.E) A) and B)
F) B) and D)

Question 20

An increase in the budget deficit causes domestic interest rates

Accepted Answer

A)   and net capital outflow to rise.
B)   to rise and net capital outflow to fall.
C)   to fall and net capital outflow to rise.
D)   and net capital outflow to fall.E) A) and B)
F) C) and D)

Exam 19: A Macroeconomic Theory of the Open Economy

Trade policies

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Which of the following is most likely to increase exports?

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Which of the following can explain a decrease in the U.S. real exchange rate?

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Which of the following results if the U.S. removes an import quota on computer components?

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Other things the same, when a Canadian company imports bicycles from the U.S., the open-economy macroeconomic model treats this transaction as part of the demand for dollars in the U.S. foreign-currency exchange market.

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Other things the same, a lower real interest rate decreases the quantity of

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An increase in the U.S. government budget deficit shifts the

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Which of the following would not be a consequence of an increase in the U.S. government budget deficit?

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If the supply of dollars in the market for foreign-currency exchange shifts left, then the exchange rate

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Other things the same, which curve in the market for foreign-currency exchange shifts and which direction does it shift if net capital outflow rises?

Correct AnswerverifiedThe supply...View AnswerShow Answer

Refer to Budget in Recession. In the market for loanable funds which curves) does this change in the deficit shift? Which direction does it shift?

Correct AnswerverifiedSince the budget def...View AnswerShow Answer

During the financial crisis it was proposed that firms be provided with a tax credit for investment projects. Such a tax credit would

Correct AnswerverifiedShow Answer

According to the open-economy macroeconomic model, import quotas increase which of the following

Correct AnswerverifiedShow Answer

An economy recently had 800 billion euros of saving and 600 billion euros of net capital outflow. What was its investment? What was its quantity of loanable funds supplied?

Correct Answerverified200 billio...View AnswerShow Answer

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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Other things the same, as the real interest rate falls

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When a country experiences capital flight its interest rate

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If a tariff on beef were implemented, which of the following would rise?

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Explain how the relation between the real exchange rate and net exports explains the downward slope of the demand for foreign-currency exchange curve.

Correct AnswerverifiedWhen the domestic real exchange rate app...View AnswerShow Answer

An increase in the budget deficit causes domestic interest rates

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The supply...
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Since the budget def...
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200 billio...
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When the domestic real exchange rate app...
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