Question 1

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

less, more...

Question 2

In an open economy, national saving equals

Accepted Answer

A)   domestic investment plus net capital outflow.
B)   domestic investment minus net capital outflow.
C)   domestic investment.
D)   net capital outflow.E) A) and C)
F) A) and B)

Question 3

Other things the same, if the U.S. interest rate rises, U.S. assets become ____ attractive. So, desired net capital outflow _____. This change in net capital outflow shifts the __________ curve in the market for foreign-currency exchange to the ______.

Accepted Answer

more, fall...

Question 4

Suppose that India has a government budget surplus, and then goes into deficit. This change would

Accepted Answer

A)   increase India's national saving and shift its supply of loanable funds left.
B)   increase India's national saving and shift its demand for loanable funds right.
C)   decrease India's national saving and shift its supply of loanable funds left.
D)   decrease India's national saving and shift its demand for loanable funds right.E) B) and C)
F) None of the above

Question 5

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) None of the above

Question 6

If the U.S. were to impose import quotas

Accepted Answer

A)   the demand for loanable funds and the demand for dollars in the market for foreign-currency exchange would both increase.
B)   nether the demand for loanable funds nor the demand for dollars in the market for foreign-currency exchange would increase.
C)   the demand for loanable funds would increase, but the demand for dollars in the market for foreign-currency exchange would not.
D)   the demand for dollars in the market for foreign-currency exchange would increase, but the demand for loanable funds would not.E) A) and B)
F) A) and C)

Question 7

If U.S. citizens decide to save a larger fraction of their incomes, the real interest rate

Accepted Answer

A)   decreases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases.
B)   decreases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases.
C)   increases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases.
D)   increases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases.E) None of the above
F) All of the above

Question 8

If at a given exchange rate foreign citizens want to buy fewer U.S bonds, then the

Accepted Answer

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

Question 9

If people decide that some country is now a more risky place to keep their saving, then at the original interest rate in that country there is a

Accepted Answer

A)   surplus of loanable funds, so the interest rate increases.
B)   surplus of loanable funds, so the interest rate decreases.
C)   shortage of loanable funds, so the interest rate increases.
D)   shortage of loanable funds, so the interest rate decreases.E) All of the above
F) A) and B)

Question 10

If a tariff on beef were implemented, 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) A) and B)
F) A) and C)

Question 11

When Mexico suffered from capital flight in 1994, the U.S. real interest rate

Accepted Answer

A)   rose and the real exchange rate of the dollar appreciated.
B)   rose and the real exchange rate of the dollar depreciated.
C)   fell and the real exchange rate of the dollar appreciated.
D)   fell and the real exchange rate of the dollar depreciated.E) B) and C)
F) None of the above

Question 12

Budget in Recession
During a recession government revenues from the income tax fall and government transfers rise as the reduction in income and the rise in unemployment raise the number of people who qualify for benefits.
-Refer to Budget in Recession. This change in the deficit causes net capital outflow to change. How is this change in net capital outflow shown in the market for foreign-currency exchange? What happens to the exchange rate?

Accepted Answer

The supply of domestic currenc...

Question 13

When a country experiences capital flight, its net capital outflow,

Accepted Answer

A)   which is part of the demand for loanable funds, increases.
B)   which is part of the supply of loanable funds, increases.
C)   which is part of the demand for loanable funds, decreases.
D)   which is part of the supply of loanable funds, decreases.E) B) and C)
F) A) and C)

Question 14

If a country's exchange rate rises, what happens to its exports and what happens to its imports?

Accepted Answer

Its export...

Question 15

At the equilibrium real interest rate in the open-economy macroeconomic model

Accepted Answer

A)   saving = domestic investment
B)   saving = net capital outflow
C)   net capital outflow = domestic investment
D)   net capital outflow + domestic investment = savingE) All of the above
F) A) and D)

Question 16

A decrease in the budget deficit causes domestic interest rates

Accepted Answer

A)   and investment to rise.
B)   to rise and investment to fall.
C)   to fall and investment to rise.
D)   and investment to fall.E) A) and D)
F) B) and C)

Question 17

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

Question 18

A country has output of $600 billion, consumption of $350 billion, government expenditures of $90 billion and investment of $60 billion. What is its supply of loanable funds?

Accepted Answer

A)   $160 billion
B)   $150 billion
C)   $60 billion
D)   $30 billionE) B) and C)
F) None of the above

Question 19

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

Question 20

Other things the same, an increase in the U.S. real interest rate induces

Accepted Answer

A)   Americans to buy more foreign assets, which increases U.S. net capital outflow.
B)   Americans to buy more foreign assets, which reduces U.S. net capital outflow.
C)   foreigners to buy more U.S. assets, which reduces U.S. net capital outflow.
D)   foreigners to buy more U.S. assets, which increases U.S. net capital outflow.E) B) and C)
F) A) and D)

Exam 14: A Macroeconomic Theory of the Open Economy

If at a given exchange rate foreign citizens want to buy fewer U.S bonds, then the

Correct Answer
verified

Other things the same, an increase in the U.S. real interest rate induces

Correct Answer
verified

Correct Answer
verified
The supply of domestic currenc...
View Answer

If a tariff on beef were implemented, which of the following would rise?

Correct Answer
verified

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

Correct Answer
verified

If a country's exchange rate rises, what happens to its exports and what happens to its imports?

Correct Answer
verified
Its export...
View Answer

A decrease in the budget deficit causes domestic interest rates

Correct Answer
verified

If the U.S. were to impose import quotas

Correct Answer
verified

If people decide that some country is now a more risky place to keep their saving, then at the original interest rate in that country there is a

Correct Answer
verified

If U.S. citizens decide to save a larger fraction of their incomes, the real interest rate

Correct Answer
verified

A country has output of $600 billion, consumption of $350 billion, government expenditures of $90 billion and investment of $60 billion. What is its supply of loanable funds?

Correct Answer
verified

When Mexico suffered from capital flight in 1994, the U.S. real interest rate

Correct Answer
verified

When a country experiences capital flight, its net capital outflow,

Correct Answer
verified

Other things the same, if the U.S. interest rate rises, U.S. assets become __ attractive. So, desired net capital outflow _. This change in net capital outflow shifts the __ curve in the market for foreign-currency exchange to the .

Correct Answer
verified
more, fall...
View Answer

In an open economy, national saving equals

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

At the equilibrium real interest rate in the open-economy macroeconomic model

Correct Answer
verified

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, _ .

Correct Answer
verified
less, more...
View Answer

Suppose that India has a government budget surplus, and then goes into deficit. This change would

Correct Answer
verified

Exam 14: A Macroeconomic Theory of the Open Economy

If at a given exchange rate foreign citizens want to buy fewer U.S bonds, then the

Correct AnswerverifiedShow Answer

Other things the same, an increase in the U.S. real interest rate induces

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe supply of domestic currenc...View AnswerShow Answer

If a tariff on beef were implemented, which of the following would rise?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If a country's exchange rate rises, what happens to its exports and what happens to its imports?

Correct AnswerverifiedIts export...View AnswerShow Answer

A decrease in the budget deficit causes domestic interest rates

Correct AnswerverifiedShow Answer

If the U.S. were to impose import quotas

Correct AnswerverifiedShow Answer

If people decide that some country is now a more risky place to keep their saving, then at the original interest rate in that country there is a

Correct AnswerverifiedShow Answer

If U.S. citizens decide to save a larger fraction of their incomes, the real interest rate

Correct AnswerverifiedShow Answer

A country has output of $600 billion, consumption of $350 billion, government expenditures of $90 billion and investment of $60 billion. What is its supply of loanable funds?

Correct AnswerverifiedShow Answer

When Mexico suffered from capital flight in 1994, the U.S. real interest rate

Correct AnswerverifiedShow Answer

When a country experiences capital flight, its net capital outflow,

Correct AnswerverifiedShow Answer

Other things the same, if the U.S. interest rate rises, U.S. assets become ____ attractive. So, desired net capital outflow _____. This change in net capital outflow shifts the __________ curve in the market for foreign-currency exchange to the ______.

Correct Answerverifiedmore, fall...View AnswerShow Answer

In an open economy, national saving equals

Correct AnswerverifiedShow Answer

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

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

Correct AnswerverifiedShow Answer

At the equilibrium real interest rate in the open-economy macroeconomic model

Correct AnswerverifiedShow Answer

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, _______ ______.

Correct Answerverifiedless, more...View AnswerShow Answer

Suppose that India has a government budget surplus, and then goes into deficit. This change would

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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The supply of domestic currenc...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Its export...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Other things the same, if the U.S. interest rate rises, U.S. assets become __ attractive. So, desired net capital outflow _. This change in net capital outflow shifts the __ curve in the market for foreign-currency exchange to the .

Correct Answer
verified
more, fall...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct 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, _ .

Correct Answer
verified
less, more...
View Answer

Correct Answer
verified