Question 1

If the people thought that many banks in a certain country were at or near the point of bankruptcy, then that country's real exchange rate

Accepted Answer

A)   and net exports would rise.
B)   would rise and its net exports would fall.
C)   would fall and its net exports would rise.
D)   and its net exports would fall.E) None of the above
F) A) and D)

Question 2

Which of the following contains a list only of things that increase when the budget deficit of the U.S. increases?

Accepted Answer

A)   U.S. supply of loanable funds, U.S. interest rates, U.S. domestic investment
B)   U.S. imports, U.S. interest rates, the real exchange rate of the dollar
C)   U.S. interest rates, the real exchange rate of the dollar, U.S. domestic investment
D)   the real exchange rate of the dollar, U.S. net capital outflow, U.S. net exportsE) B) and C)
F) All of the above

Question 3

Refer to U.S. Investment Tax Credit. What happens to the interest rate, U.S. net capital outflow, and the net capital outflow of foreign countries?

Accepted Answer

The interest rate ri...

Question 4

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

Accepted Answer

A)   national saving.
B)   private saving.
C)   domestic investment.
D)   the sum of domestic investment and net capital outflow.E) All of the above
F) None of the above

Question 5

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) All of the above
F) A) and D)

Question 6

If a government increases its budget deficit, then the real exchange rate

Accepted Answer

A)   and domestic investment rise.
B)   and domestic investment fall.
C)   rises and domestic investment falls.
D)   falls and domestic investment rises.E) None of the above
F) All of the above

Question 7

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) B) and D)

Question 8

What are the sources of the demand for loanable funds? What happens to the quantity of loanable funds demanded when the interest rate rises?

Accepted Answer

The sources of the demand for ...

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

In the United States in the early 1980s, there was a government budget

Accepted Answer

A)   surplus and a trade surplus.
B)   deficit and a trade deficit.
C)   surplus and a trade deficit.
D)   deficit and a trade surplus.E) A) and B)
F) All of the above

Question 11

If the supply of 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) A) and D)
F) C) and D)

Question 12

An increase in the government budget deficit shifts the demand for loanable funds to the right.

Accepted Answer

A) True 
 B)False

Question 13

In the open-economy macroeconomic model, the key determinant of net capital outflow is

Accepted Answer

A)   the real exchange rate. When the real exchange rate rises, net capital outflow rises.
B)   the real exchange rate. When the real exchange rate rises, net capital outflow falls.
C)   the real interest rate. When the real interest rate rises, net capital outflow rises.
D)   the real interest rate. When the real interest rate rises, net capital outflow falls.E) B) and C)
F) All of the above

Question 14

What happens to the quantity of loanable funds supplied when the interest rate rises? Explain why this change happens.

Accepted Answer

The quantity of loanable funds...

Question 15

When the real exchange rate for the dollar appreciates, U.S. goods become

Accepted Answer

A)   less expensive relative to foreign goods, which makes exports rise and imports fall.
B)   less expensive relative to foreign goods, which makes exports fall and imports rise.
C)   more expensive relative to foreign goods, which makes exports rise and imports fall.
D)   more expensive relative to foreign goods, which makes exports fall and imports rise.E) A) and C)
F) C) and D)

Question 16

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) All of the above
F) C) and D)

Question 17

Which curve in the market for foreign-currency exchange shifts and which direction does it shift if the government budget deficit increases? Explain why an increase in the budget deficit shifts this curve.

Accepted Answer

The supply curve in the market for forei...

Question 18

Suppose a country experiences capital flight. Of the demand for loanable funds and the supply of currency in the market for foreign-currency exchange, which shifts right?

Accepted Answer

A)   only the demand for loanable funds
B)   only the supply of its currency in the market for foreign-currency exchange
C)   both curves shift right
D)   neither curve shifts rightE) A) and B)
F) None of the above

Question 19

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

Accepted Answer

A)   U.S. interest rates rise
B)   U.S. net capital outflow falls
C)   the real exchange rate of the U.S. dollar depreciates
D)   the U.S. supply of loanable funds shifts leftE) A) and B)
F) A) and C)

Question 20

Capital flight raises a country's real exchange rate.

Accepted Answer

A) True 
 B)False

Exam 32: A Macroeconomic Theory of the Open Economy

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

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Which curve in the market for foreign-currency exchange shifts and which direction does it shift if the government budget deficit increases? Explain why an increase in the budget deficit shifts this curve.

Correct AnswerverifiedThe supply curve in the market for forei...View AnswerShow Answer

In the United States in the early 1980s, there was a government budget

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Other things the same, as the real interest rate falls

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If the supply of loanable funds shifts left, then

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

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Suppose a country experiences capital flight. Of the demand for loanable funds and the supply of currency in the market for foreign-currency exchange, which shifts right?

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If a government increases its budget deficit, then the real exchange rate

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What happens to the quantity of loanable funds supplied when the interest rate rises? Explain why this change happens.

Correct AnswerverifiedThe quantity of loanable funds...View AnswerShow Answer

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

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Which of the following contains a list only of things that increase when the budget deficit of the U.S. increases?

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In the open-economy macroeconomic model, the key determinant of net capital outflow is

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

Correct AnswerverifiedShow Answer

When the real exchange rate for the dollar appreciates, U.S. goods become

Correct AnswerverifiedShow Answer

If the people thought that many banks in a certain country were at or near the point of bankruptcy, then that country's real exchange rate

Correct AnswerverifiedShow Answer

Capital flight raises a country's real exchange rate.

Correct AnswerverifiedShow Answer

Refer to U.S. Investment Tax Credit. What happens to the interest rate, U.S. net capital outflow, and the net capital outflow of foreign countries?

Correct AnswerverifiedThe interest rate ri...View AnswerShow Answer

What are the sources of the demand for loanable funds? What happens to the quantity of loanable funds demanded when the interest rate rises?

Correct AnswerverifiedThe sources of the demand for ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

An increase in the government budget deficit shifts the demand for loanable funds to the right.

Correct AnswerverifiedShow Answer

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The supply curve in the market for forei...
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The quantity of loanable funds...
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The interest rate ri...
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The sources of the demand for ...
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