Question 1

When Mexico suffered from capital flight in 1994,Mexico's net exports

Accepted Answer

A)   decreased.
B)   did not change.
C)   increased.
D)   decreased until the peso appreciated,then increased.E) A) and B)
F) A) and C)

Question 2

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

Accepted Answer

A)   U.S.supply of loanable funds,U.S.net capital outflow,U.S.domestic investment
B)   U.S.supply of loanable funds,U.S.exports,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) A) and B)
F) None of the above

Question 3

In the open-economy macroeconomic model,a higher domestic interest rate reduces the quantity of loanable funds demanded

Accepted Answer

A) True 
 B)False

Question 4

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) C) and D)
F) None of the above

Question 5

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

Question 6

If there is a shortage of loanable funds,then

Accepted Answer

A)   the demand for loanable funds will shift right so the real interest rate rises.
B)   the supply of loanable funds will shift left so the real interest rate falls.
C)   there will be no shifts of the curves,but the real interest rate rises.
D)   there will be no shifts of the curves,but the real interest rate falls.E) All of the above
F) A) and B)

Question 7

If the U.S.government increased its deficit,then

Accepted Answer

A)   U.S.bonds would pay higher interest but a dollar would purchase fewer foreign goods.
B)   U.S.bonds would pay higher interest and a dollar would purchase more foreign goods.
C)   U.S.bonds would pay lower interest and a dollar would purchase fewer foreign goods.
D)   U.S.bonds would pay lower interest but a dollar would purchase more foreign goods.E) B) and D)
F) None of the above

Question 8

Figure 19-1 
-Refer to Figure 19-1.The loanable funds market is in equilibrium at

Accepted Answer

A)   2 percent,$20 billion.
B)   4 percent,$40 billion.
C)   6 percent,$60 billion.
D)   None of the above is correct.E) None of the above
F) A) and B)

Question 9

If the real exchange rate for the dollar is below the equilibrium level,the quantity of dollars supplied in the market for foreign-currency exchange is

Accepted Answer

A)   less than the quantity demanded and the dollar will appreciate.
B)   less than the quantity demanded and the dollar will depreciate.
C)   greater than the quantity demanded and the dollar will appreciate.
D)   greater than the quantity demanded and the dollar will depreciate.E) A) and B)
F) B) and C)

Question 10

In the open-economy macroeconomic model,a higher U.S.real exchange rate makes

Accepted Answer

A)   U.S.goods more expensive relative to foreign goods and reduces the quantity of dollars supplied.
B)   U.S.goods more expensive relative to foreign goods and reduces the quantity of dollars demanded.
C)   foreign goods more expensive relative to U.S.goods and reduces the quantity of dollars supplied.
D)   foreign goods more expensive relative to U.S.goods and reduces the quantity of dollars demanded.E) A) and D)
F) A) and C)

Question 11

If a quota on lumber were implemented,then at the original exchange rate there would be a

Accepted Answer

A)   surplus in the market for foreign-currency exchange,so the real exchange rate appreciates.
B)   surplus in the market for foreign-currency exchange,so the real exchange rate depreciates.
C)   shortage in the market for foreign-currency exchange,so the real exchange rate appreciates.
D)   shortage in the market for foreign-currency exchange,so the real exchange rate depreciates.E) A) and C)
F) C) and D)

Question 12

If the supply of loanable funds shifts right,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) C) and D)
F) B) and D)

Question 13

From 2001 to 2004,the U.S.government went from a budget surplus to a budget deficit.According to the open-economy macroeconomic model,this should 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 B)
F) None of the above

Question 14

When a country's government budget deficit decreases,

Accepted Answer

A)   the real exchange rate of its currency and its net exports increase.
B)   the real exchange rate of its currency and its net exports decrease.
C)   the real exchange rate of its currency increases and its net exports decrease.
D)   the real exchange rate of its currency decreases and its net exports increase.E) B) and C)
F) C) and D)

Question 15

In an open economy,the demand for loanable funds comes from both domestic investment and net capital outflow.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A)   U.S.citizens would buy more German bonds and German citizens would buy more U.S.bonds.
B)   U.S.citizens would buy more German bonds and German citizens would buy fewer U.S.bonds.
C)   U.S.citizens would buy fewer German bonds and German citizens would buy more U.S.bonds.
D)   U.S.citizens would buy fewer German bonds and German citizens would buy fewer U.S.bonds.E) All of the above
F) C) and D)

Question 17

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

Question 18

If the real interest rate were above the equilibrium rate,there would be a shortage of loanable funds.

Accepted Answer

A) True 
 B)False

Question 19

In the open-economy macroeconomic model,the market for loanable funds identity can be written as

Accepted Answer

A)   S = I
B)   S = NCO
C)   S = I + NCO
D)   S + I = NCOE) A) and B)
F) All of the above

Question 20

Suppose that U.S.investors decide that investment opportunities in African countries have improved.What happens to U.S.net capital outflow? What happens to the U.S.real interest rate?

Accepted Answer

U.S.net capital outflow will i...

Exam 32: A Macroeconomic Theory of the Open Economy

In the open-economy macroeconomic model,the market for loanable funds identity can be written as

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Suppose that U.S.investors decide that investment opportunities in African countries have improved.What happens to U.S.net capital outflow? What happens to the U.S.real interest rate?

Correct AnswerverifiedU.S.net capital outflow will i...View AnswerShow Answer

If there is a shortage of loanable funds,then

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

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In the open-economy macroeconomic model,a higher domestic interest rate reduces the quantity of loanable funds demanded

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If the U.S.government increased its deficit,then

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When a country's government budget deficit decreases,

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When Mexico suffered from capital flight in 1994,Mexico's net exports

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In an open economy,the demand for loanable funds comes from both domestic investment and net capital outflow.

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model,a higher U.S.real exchange rate makes

Correct AnswerverifiedShow Answer

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

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If the real exchange rate for the dollar is below the equilibrium level,the quantity of dollars supplied in the market for foreign-currency exchange is

Correct AnswerverifiedShow Answer

If a quota on lumber were implemented,then at the original exchange rate there would be a

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If the supply of loanable funds shifts right,then

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the real interest rate were above the equilibrium rate,there would be a shortage of loanable funds.

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Figure 19-1 -Refer to Figure 19-1.The loanable funds market is in equilibrium at

Correct AnswerverifiedShow Answer

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U.S.net capital outflow will i...
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