Question 1

The open-economy macroeconomic model includes

Accepted Answer

A)  only the market for loanable funds.
B)  only the market for foreign-currency exchange.
C)  both the market for loanable funds and the market for foreign-currency exchange.
D)  neither the market for loanable funds or the market for foreign-currency exchange.E) A) and B)
F) C) and D)

Question 2

Suppose the U.S.imposes 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 C)

Question 3

Figure 32-1
 
-Refer to Figure 32-1.In the Figure shown,if the real interest rate is 1 percent,there will be a

Accepted Answer

A)  surplus of $10 billion.
B)  surplus of $20 billion.
C)  shortage of $10 billion.
D)  shortage of $20 billion.E) A) and B)
F) A) and C)

Question 4

If a country went from a government budget deficit to a surplus,

Accepted Answer

A)  national saving would increase, shifting the supply of loanable funds right.
B)  national saving would increase, shifting the supply of loanable funds left.
C)  national saving would decrease, shifting the demand for loanable funds right.
D)  national saving would decrease, shifting the demand for loanable funds left.E) None of the above
F) B) and D)

Question 5

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

Question 6

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 U.S.real exchange rate apprecia...

Question 7

From 2001 to 2004,the U.S.government went from a budget surplus to a budget deficit.Other things the same,this would have decreased

Accepted Answer

A)  both the supply of loanable funds and the supply of dollars in the market for foreign-currency exchange.
B)  neither the supply of loanable funds nor the supply of dollars in the market for foreign-currency exchange.
C)  the supply of loanable funds but not the supply of dollars in the market for foreign-currency exchange.
D)  the supply of dollars in the market for foreign-currency exchange, but not the supply of loanable funds.E) A) and C)
F) A) and B)

Question 8

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) None of the above
F) A) and B)

Question 9

In the open-economy macroeconomic model,if the supply of loanable funds increases,net capital outflow

Accepted Answer

A)  and the real exchange rate increase.
B)  and the real exchange rate decrease.
C)  increases and the real exchange rate decreases.
D)  decreases and the real exchange rate increases.E) A) and D)
F) A) and C)

Question 10

In the open-economy macroeconomic model,other things the same,when a U.S.resident imports a foreign good,our model treats this as a decrease in the demand for dollars in the foreign-currency exchange market.

Accepted Answer

A) True 
 B)False

Question 11

When a country suffers from capital flight,the demand for loanable funds in that country shifts

Accepted Answer

A)  right, which increases interest rates in that country.
B)  right, which decreases interest rates in that country.
C)  left, which increases interest rates in that country.
D)  left, which decreases interest rates in that country.E) A) and B)
F) B) and D)

Question 12

At a given real exchange rate,which of the following,by itself,would increase the supply of dollars in the market for foreign-currency exchange?

Accepted Answer

A)  foreign citizens buy more U.S.bonds
B)  U.S.citizens buy more foreign bonds
C)  foreign citizens buy more U.S.goods
D)  U.S.citizens buy more foreign goodsE) A) and C)
F) B) and C)

Question 13

-Refer to Figure 32-5.If the economy were originally in equilibrium at a and g and the government removed import quotas on toys and textiles the economy would move to

Accepted Answer

A)  	b and e.
B)  	c and h.
C)  	d and i.
D)  	None of the above is correct.E) A) and B)
F) A) and C)

Question 14

If the government of a country with a zero trade balances increases its budget deficit,then interest rates

Accepted Answer

A)  rise and the trade balance moves to a surplus.
B)  rise and the trade balance moves to a deficit.
C)  fall and the trade balance moves to a surplus.
D)  fall and the trade balance moves to a deficit.E) C) and D)
F) None of the above

Question 15

Which of the following would tend to shift the supply of dollars in the market for foreign-currency exchange in the open-economy macroeconomic model to the right?

Accepted Answer

A)  The exchange rate rises.
B)  The exchange rate falls.
C)  The expected rate of return on U.S.assets rises.
D)  The expected rate of return on U.S.assets falls.E) None of the above
F) C) and D)

Question 16

Figure 32-1
 
-Refer to Figure 32-1.In the Figure shown,if the real interest rate is 1 percent,there will be pressure for

Accepted Answer

A)  the real interest rate to rise.
B)  the demand for loanable funds curve to shift right.
C)  the supply for loanable funds curve to shift left.
D)  All of the above are correct.E) C) and D)
F) None of the above

Question 17

In 2002 it looked like the Argentinean government might default on its debt (which eventually it did) .The open-economy macroeconomic model predicts that this should have

Accepted Answer

A)  raised Argentinean interest rates and caused the Argentinean currency to appreciate.
B)  raised Argentinean interest rates and caused the Argentinean currency to depreciate.
C)  lowered Argentinean interest rates and caused the Argentinean currency to appreciate.
D)  lowered Argentinean interest rates and caused the Argentinean currency to depreciate.E) B) and C)
F) A) and D)

Question 18

The variable that links the market for loanable funds and the market for foreign-currency exchange is

Accepted Answer

A)  net capital outflow.
B)  national saving.
C)  exports.
D)  domestic investment.E) A) and C)
F) A) and D)

Question 19

In the open-economy macroeconomic model,at the equilibrium real interest rate,the amount that people (including government)want to save exactly balances desired domestic investment.

Accepted Answer

A) True 
 B)False

Question 20

If a U.S.resident wants to buy a foreign bond,his actions are included

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 supply of dollars in the market for foreign-currency exchangeE) A) and B)
F) B) and C)

Exam 32: A Macroeconomic Theory of the Open Economy

-Refer to Figure 32-5.If the economy were originally in equilibrium at a and g and the government removed import quotas on toys and textiles the economy would move to

Correct AnswerverifiedShow Answer

Figure 32-1 -Refer to Figure 32-1.In the Figure shown,if the real interest rate is 1 percent,there will be pressure for

Correct AnswerverifiedShow Answer

The variable that links the market for loanable funds and the market for foreign-currency exchange is

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In the open-economy macroeconomic model,if the supply of loanable funds increases,net capital outflow

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In the open-economy macroeconomic model,at the equilibrium real interest rate,the amount that people (including government)want to save exactly balances desired domestic investment.

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When a country suffers from capital flight,the demand for loanable funds in that country shifts

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

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

Figure 32-1 -Refer to Figure 32-1.In the Figure shown,if the real interest rate is 1 percent,there will be a

Correct AnswerverifiedShow Answer

Which of the following would tend to shift the supply of dollars in the market for foreign-currency exchange in the open-economy macroeconomic model to the right?

Correct AnswerverifiedShow Answer

From 2001 to 2004,the U.S.government went from a budget surplus to a budget deficit.Other things the same,this would have decreased

Correct AnswerverifiedShow Answer

If a U.S.resident wants to buy a foreign bond,his actions are included

Correct AnswerverifiedShow Answer

If a country went from a government budget deficit to a surplus,

Correct AnswerverifiedShow Answer

The open-economy macroeconomic model includes

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In 2002 it looked like the Argentinean government might default on its debt (which eventually it did) .The open-economy macroeconomic model predicts that this should have

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model,other things the same,when a U.S.resident imports a foreign good,our model treats this as a decrease in the demand for dollars in the foreign-currency exchange market.

Correct AnswerverifiedShow Answer

If the government of a country with a zero trade balances increases its budget deficit,then interest rates

Correct AnswerverifiedShow Answer

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 U.S.real exchange rate apprecia...View AnswerShow Answer

At a given real exchange rate,which of the following,by itself,would increase the supply of dollars in the market for foreign-currency exchange?

Correct AnswerverifiedShow Answer

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

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When the U.S.real exchange rate apprecia...
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