Question 1

If the exchange rate rises,which of the following falls in the open-economy macroeconomic model?

Accepted Answer

A)   desired net exports and desired net capital outflow
B)   desired net exports but not desired net capital outflow
C)   desired net capital outflow but not desired net exports
D)   neither desired net exports nor desired net capital outflowE) A) and D)
F) A) and C)

Question 2

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

Question 3

In the open-economy macroeconomic model,if a country's interest rate falls,then its

Accepted Answer

A)   net capital outflow and its net exports rise.
B)   net capital outflow rises and its net exports fall.
C)   net capital outflow falls and its net exports rise.
D)   net capital outflow and its net exports fall.E) None of the above
F) A) and B)

Question 4

In which case(s) does(do) a country's supply of loanable funds shift right?

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 D)
F) B) and C)

Question 5

The value of net exports equals the value of

Accepted Answer

A)   national saving.
B)   public saving.
C)   national saving - net capital outflow.
D)   national saving - domestic investment.E) All of the above
F) A) and B)

Question 6

If the exchange rate falls,domestic goods become relatively ______ expensive.This change in the affordability of domestic goods makes domestic goods _____ attractive to domestic residents.So,_______ ______.

Accepted Answer

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Question 7

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

Question 8

Other things the same,a decrease in the real interest rate

Accepted Answer

A)   decreases the quantity of loanable funds demanded.
B)   increases the quantity of loanable funds demand
C)   shifts the demand for loanable funds to the right.
D)   shifts the demand for loanable funds to the left.E) All of the above
F) None of the above

Question 9

In the open-economy macroeconomic model,if for some reason foreign citizens want to purchase more U.S.goods and services at each exchange rate,then

Accepted Answer

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

Question 10

According to the open-economy macroeconomic model,if the U.S.government budget deficit decreases,then both U.S.domestic investment and net capital outflow increase.

Accepted Answer

A) True 
 B)False

Question 11

If the U.S.government imposed a quota on toy imports,then

Accepted Answer

A)   imports and exports would both fall.
B)   imports would fall and exports would rise.
C)   imports would rise and exports would fall.
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 12

If the government of Peru increased its budget deficit,then domestic investment

Accepted Answer

A)   and net exports would rise.
B)   would rise and net exports would fall.
C)   would fall and net exports would rise.
D)   and net exports would fall.E) B) and D)
F) B) and C)

Question 13

According to the open-economy macroeconomic model,if the United States moved from a government budget deficit to a government budget surplus,U.S.real interest rates would increase and the real exchange rate of the U.S.dollar would appreciate.

Accepted Answer

A) True 
 B)False

Question 14

If the U.S.government went from a budget deficit to a budget surplus then

Accepted Answer

A)   the interest rate and the real exchange rate would increase.
B)   the interest rate and the real exchange rate would decrease.
C)   the interest rate would increase and the real exchange rate would decrease.
D)   the interest rate would decrease and the real exchange rate would increase.E) A) and B)
F) A) and C)

Question 15

Capital flight reduces a country's real exchange rate.

Accepted Answer

A) True 
 B)False

Question 16

In the open economy model,the supply of loanable funds comes from national saving and net capital outflow.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A)   national saving.Demand comes from only domestic investment.
B)   national saving.Demand comes from domestic investment and net capital outflow.
C)   Only net capital outflow.Demand for loanable funds comes from national saving.
D)   domestic investment and net capital outflow.Demand for loanable funds comes from national saving.E) B) and D)
F) A) and D)

Question 18

If a tariff on lumber were implemented,for the country as a whole 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) C) and D)
F) B) and D)

Question 19

If the U.S.imposed an import quota on apples,then which of the following would rise?

Accepted Answer

A)   the U.S.real exchange rate and U.S.net exports
B)   the U.S.real exchange rate but not U.S.net exports
C)   U.S.net exports but not the U.S.real exchange rate
D)   neither the U.S.real exchange rate nor U.S.net exportsE) A) and B)
F) B) and C)

Question 20

If interest rates rose more in the U.S.than in Canada,then other things the same

Accepted Answer

A)   U.S.citizens would buy more Canadian bonds and Canadian citizens would buy more U.S.bonds.
B)   U.S.citizens would buy more Canadian bonds and Canadian citizens would buy fewer U.S.bonds.
C)   U.S.citizens would buy fewer Canadian bonds and Canadian citizens would buy more U.S.bonds.
D)   U.S.citizens would buy fewer Canadian bonds and Canadian citizens would buy fewer U.S.bonds.E) None of the above
F) A) and B)

Exam 32: A Macroeconomic Theory of the Open Economy

Capital flight reduces a country's real exchange rate.

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In the open-economy macroeconomic model,if a country's interest rate falls,then its

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If the U.S.imposed an import quota on apples,then which of the following would rise?

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An increase in the budget deficit causes domestic interest rates

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If the exchange rate rises,which of the following falls in the open-economy macroeconomic model?

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If the U.S.government imposed a quota on toy imports,then

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In the open economy model,the supply of loanable funds comes from national saving and net capital outflow.

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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?

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In which case(s) does(do) a country's supply of loanable funds shift right?

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If a tariff on lumber were implemented,for the country as a whole which of the following would rise?

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If interest rates rose more in the U.S.than in Canada,then other things the same

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The value of net exports equals the value of

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According to the open-economy macroeconomic model,if the United States moved from a government budget deficit to a government budget surplus,U.S.real interest rates would increase and the real exchange rate of the U.S.dollar would appreciate.

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According to the open-economy macroeconomic model,if the U.S.government budget deficit decreases,then both U.S.domestic investment and net capital outflow increase.

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If the U.S.government went from a budget deficit to a budget surplus then

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Other things the same,a decrease in the real interest rate

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

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If the exchange rate falls,domestic goods become relatively ______ expensive.This change in the affordability of domestic goods makes domestic goods _____ attractive to domestic residents.So,_______ ______.

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If the government of Peru increased its budget deficit,then domestic investment

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In the open-economy macroeconomic model,if for some reason foreign citizens want to purchase more U.S.goods and services at each exchange rate,then

Correct AnswerverifiedShow Answer

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If the exchange rate falls,domestic goods become relatively ____ expensive.This change in the affordability of domestic goods makes domestic goods _ attractive to domestic residents.So,_ __.

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