Question 1

The quantity of U.S. bonds foreigners want to buy is taken into account

Accepted Answer

A)   in the U.S. supply of loanable funds and the supply of dollars in the market for foreign-currency exchange.
B)   in the U.S. supply of loanable funds and the demand for dollars in the market for foreign-currency exchange.
C)   in the U.S. demand for loanable funds and the supply of dollars in the market for foreign-currency exchange.
D)   in the U.S. demand for loanable funds and the demand for dollars in the market for foreign-currency exchange.E) B) and D)
F) B) and C)

Question 2

Suppose that the U.S. imposed an import quota on beef. Sales of U.S. beef producers would

Accepted Answer

A)   rise and exports of other industries would increase.
B)   rise and exports of other industries would decrease.
C)   not change, exports of other industries would increase.
D)   not change, exports of other industries would decrease.E) A) and B)
F) A) and C)

Question 3

In the open-economy macroeconomic model, as the exchange rate rises,

Accepted Answer

A)   desired net exports fall, so the quantity of dollars supplied rise.
B)   desired net exports fall, so the quantity of dollars demanded falls.
C)   desired net exports rise ,so the quantity of dollars supplied falls.
D)   desired net exports rise, so the quantity of dollars demanded rises.E) None of the above
F) All of the above

Question 4

If the demand for loanable funds shifts left, 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) All of the above
F) C) and D)

Question 5

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

Accepted Answer

A)   national saving
B)   national saving + net capital outflow
C)   investment + the government budget deficit
D)   investment + net capital outflowE) All of the above
F) A) and D)

Question 6

At the original exchange rate an import quota

Accepted Answer

A)   creates a surplus in the market for foreign-currency exchange, so the exchange rate rises.
B)   creates a surplus in the market for foreign-currency exchange, so the exchange rate falls.
C)   creates a shortage in the market for foreign-currency exchange, so the exchange rate rises.
D)   creates a shortage in the market for foreign-currency exchange, so the exchange rate falls.E) A) and B)
F) C) and D)

Question 7

Which of the following would make the equilibrium real interest rate increase and the equilibrium quantity of funds decrease?

Accepted Answer

A)   The demand for loanable funds shifts right.
B)   The demand for loanable funds shifts left.
C)   The supply of loanable funds shifts right.
D)   The supply of loanable funds shifts left.E) A) and B)
F) B) and C)

Question 8

If there is a surplus in the U.S. loanable funds market, then

Accepted Answer

A)   NCO > I.
B)   NCO 
C)   NCO + I > S.
D)   NCO + I < S.E) B) and C)
F) C) and D)

Question 9

Which of the following will not change the U.S. real interest rate?

Accepted Answer

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

Question 10

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

Accepted Answer

A)   increased U.S. interest rates and increased the real exchange rate of the dollar.
B)   increased U.S. interest rates and decreased the real exchange rate of the dollar.
C)   decreased U.S. interest rates and increased the real exchange rate of the dollar.
D)   decreased U.S. interest rates and decreased the real exchange rate of the dollar.E) None of the above
F) A) and B)

Question 11

If at a given real interest rate desired national saving is $200 billion, domestic investment is $100 billion, and net capital outflow is $80 billion, then at that real interest rate in the loanable funds market there is a

Accepted Answer

A)   surplus. The real interest rate will rise.
B)   surplus. The real interest rate will fall.
C)   shortage. The real interest rate will rise.
D)   shortage. The real interest rate will fall.E) A) and C)
F) B) and D)

Question 12

What is the source of the supply of loanable funds in the open-economy macroeconomic model?

Accepted Answer

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

Question 13

An increase in a country's real interest rate reduces that country's net capital outflow.

Accepted Answer

A) True 
 B)False

Question 14

What happens to each of the following if the supply of loanable funds shifts right?
a. the interest rate
b. net capital outflow
c. the exchange rate

Accepted Answer

The interest rate fa...

Question 15

If a country has a negative net capital outflow, then

Accepted Answer

A)   on net it is purchasing assets from abroad. This adds to its demand for domestically generated loanable funds.
B)   on net it is purchasing assets from abroad. This subtracts from its demand for domestically generated loanable funds.
C)   on net other countries are purchasing assets from it. This adds to its demand for domestically generated loanable funds.
D)   on net other countries are purchasing assets from it. This subtracts from its demand for domestically generated loanable funds.E) All of the above
F) A) and D)

Question 16

If a country had capital flight, then the real exchange rate would

Accepted Answer

A)   fall. To offset this fall the government could increase the budget deficit.
B)   fall. To offset this fall the government could decrease the budget deficit.
C)   rise. To offset this rise the government could increase the budget deficit.
D)   rise. To offset this rise the government could decrease the budget deficit.E) All of the above
F) A) and B)

Question 17

U.S. net capital outflow

Accepted Answer

A)   is a source of the supply of loanable funds, and the source of the supply of dollars in the foreign exchange market.
B)   is a source of the supply of loanable funds, and a source of the demand for dollars in the foreign exchange market.
C)   is a part of the demand for loanable funds, and the source of the supply of dollars in the foreign exchange market.
D)   is a part of the demand for loanable funds, and a source of the demand for dollars in the foreign exchange market.E) All of the above
F) C) and D)

Question 18

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)   raise both the interest rate and the real exchange rate.
B)   raise the interest rate and reduce the real exchange rate.
C)   reduce the interest rate and raise the real exchange rate.
D)   reduce both the interest rate and the real exchange rate.E) None of the above
F) A) and B)

Question 19

In an open economy,

Accepted Answer

A)   net capital outflow = imports.
B)   net capital outflow = net exports.
C)   net capital outflow = exports.
D)   None of the above is correct.E) All of the above
F) A) and B)

Question 20

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

Accepted Answer

Because the exchange...

Exam 32: A Macroeconomic Theory of the Open Economy

If a country has a negative net capital outflow, then

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An increase in a country's real interest rate reduces that country's net capital outflow.

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

Correct AnswerverifiedShow Answer

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

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What is the source of the supply of loanable funds in the open-economy macroeconomic model?

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If a country had capital flight, then the real exchange rate would

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

Correct AnswerverifiedBecause the exchange...View AnswerShow Answer

U.S. net capital outflow

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If the demand for loanable funds shifts left, then

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What happens to each of the following if the supply of loanable funds shifts right? a. the interest rate b. net capital outflow c. the exchange rate

Correct AnswerverifiedThe interest rate fa...View AnswerShow Answer

Which of the following will not change the U.S. real interest rate?

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If at a given real interest rate desired national saving is $200 billion, domestic investment is $100 billion, and net capital outflow is $80 billion, then at that real interest rate in the loanable funds market there is a

Correct AnswerverifiedShow Answer

Which of the following would make the equilibrium real interest rate increase and the equilibrium quantity of funds decrease?

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Suppose that the U.S. imposed an import quota on beef. Sales of U.S. beef producers would

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At the original exchange rate an import quota

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, as the exchange rate rises,

Correct AnswerverifiedShow Answer

The quantity of U.S. bonds foreigners want to buy is taken into account

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In an open economy,

Correct AnswerverifiedShow Answer

If there is a surplus in the U.S. loanable funds market, then

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Because the exchange...
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The interest rate fa...
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