Question 1

Other things the same, in the open-economy macroeconomic model, if the exchange rate rises,

Accepted Answer

A)  the demand for dollars shifts left.
B)  the demand for dollars shifts right.
C)  the quantity of dollars demanded falls.
D)  the quantity of dollars demanded rises.E) None of the above
F) C) and D)

Question 2

A country has I = $200 billion, S = $400 billion, and purchased $600 billion of foreign assets, how many of its assets did foreigners purchase?

Accepted Answer

A)  $0
B)  $200 billion
C)  $400 billion
D)  $800 billionE) A) and B)
F) None of the above

Question 3

If the risk of buying U.S. assets rises because it is discovered that lending institutions had not carefully evaluated borrowers prior to lending them funds, then

Accepted Answer

A)  net capital outflow and the real exchange rate will rise.
B)  net capital outflow will rise and the real exchange rate will fall.
C)  net capital outflow will fall and the real exchange rate will rise.
D)  net capital outflow and the exchange rate will fall.E) B) and C)
F) A) and C)

Question 4

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 5

In the open economy macroeconomic model, the amount of dollars demanded in the market for foreign-currency exchange at a given real exchange rate increases if

Accepted Answer

A)  either U.S. imports or exports increase.
B)  either U.S. imports or exports decrease.
C)  either U.S. imports increase or U.S. exports decrease.
D)  either U.S. imports decrease or U.S. exports increase.E) A) and C)
F) None of the above

Question 6

Other things the same, which of the following would a rise in the real interest rate raise:
desired investment spending, desired national saving, desired net capital outflow?

Accepted Answer

desired na...

Question 7

When the U.S. real interest rate rises, foreigners will want to purchase

Accepted Answer

A)  more U.S. assets so U.S. net capital outflow rises.
B)  more U.S. assets so U.S. net capital outflow falls.
C)  less U.S. assets so U.S. net capital outflow rises.
D)  less U.S. assets so U.S. net capital outflow falls.E) B) and C)
F) A) and B)

Question 8

Over the past two decades, the U.S. has persistently exported more goods and services than it has imported.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is correct concerning the open-economy macroeconomic model?

Accepted Answer

A)  The net-capital-outflow curve slopes upward.
B)  The key determinant of net capital outflow is the real exchange rate.
C)  The supply of dollars in the market for foreign-currency exchange is vertical.
D)  None of the above is correct.E) A) and C)
F) B) and C)

Question 10

Refer to Depositors Move Funds Out of Greek Banks. Because of depositors reactions what happened to net capital outflow?

Accepted Answer

Greece's n...

Question 11

A country has output of $900 billion, consumption of $600 billion, government expenditures of $150 billion and investment of $120 billion. What is its supply of loanable funds?

Accepted Answer

A)  $30 billion
B)  $90 billion
C)  $120 billion
D)  $150 billionE) None of the above
F) B) and C)

Question 12

If interest rates rise in the U.S., then other things the same

Accepted Answer

A)  foreigners would buy more U.S. bonds which increases the quantity of loanable funds demanded in the U.S.
B)  foreigners would buy more U.S. bonds which reduces the quantity of loanable funds demanded in the U.S.
C)  foreigners would buy fewer U.S. bonds which increases the quantity of loanable funds demanded in the U.S.
D)  foreigners would buy fewer U.S. bonds which reduces the quantity of loanable funds demanded in the U.S.E) B) and D)
F) All of the above

Question 13

If a country imposes a tariff on some good, then which of the following curves shifts right?

Accepted Answer

A)  both the demand for loanable funds and demand in the market for foreign-currency exchange.
B)  the demand for loanable funds and demand in the market for foreign-currency exchange.
C)  demand in the market for foreign-currency exchange but not the demand for loanable funds.
D)  neither the demand for loanable funds nor demand in the market for foreign-currency exchange.E) A) and B)
F) None of the above

Question 14

The explanation for the slope of

Accepted Answer

A)  the supply of loanable funds curve is based on the logic that a higher real interest rate leads to higher saving.
B)  the demand for loanable funds curve is based on the logic that a higher interest rate leads to higher saving.
C)  the supply of loanable funds curve is based on the logic that a higher real interest rate leads to lower saving.
D)  the demand for loanable funds curve is based on the logic that a higher interest rate leads to lower saving.E) A) and C)
F) A) and B)

Question 15

If there is a surplus of loanable funds, the quantity demanded is

Accepted Answer

A)  greater than the quantity supplied and the interest rate will rise.
B)  greater than the quantity supplied and the interest rate will fall.
C)  less than the quantity supplied and the interest rate will rise.
D)  less than the quantity supplied and the interest rate will fall.E) None of the above
F) C) and D)

Question 16

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 domestic real exchange rate app...

Question 17

Because the open-economy macroeconomic model focuses on the long run, it is assumed that

Accepted Answer

A)  GDP, but not the price level is given.
B)  the price level, but not GDP is given.
C)  both the price level and GDP are given.
D)  the price level and GDP are variables to be determined by the model.E) A) and D)
F) B) and C)

Question 18

When the U.S. real interest rate falls, purchasing U.S. assets becomes

Accepted Answer

A)  less attractive and so U.S. net capital outflow rises.
B)  less attractive and so U.S. net capital outflow falls.
C)  more attractive and so U.S. net capital outflow rises.
D)  more attractive and so U.S. net capital outflow falls.E) B) and D)
F) A) and B)

Question 19

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

Accepted Answer

A)  and net exports decreased.
B)  and net exports increased.
C)  increased while net exports decreased.
D)  decreased while net exports increased.E) A) and D)
F) B) and C)

Question 20

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) B) and D)

Exam 32: A Macroeconomic Theory of the Open Economy

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

Refer to Depositors Move Funds Out of Greek Banks. Because of depositors reactions what happened to net capital outflow?

Correct AnswerverifiedGreece's n...View AnswerShow Answer

Over the past two decades, the U.S. has persistently exported more goods and services than it has imported.

Correct AnswerverifiedShow Answer

In the open economy macroeconomic model, the amount of dollars demanded in the market for foreign-currency exchange at a given real exchange rate increases if

Correct AnswerverifiedShow Answer

If there is a surplus of loanable funds, the quantity demanded is

Correct AnswerverifiedShow Answer

Because the open-economy macroeconomic model focuses on the long run, it is assumed that

Correct AnswerverifiedShow Answer

Which of the following is correct concerning the open-economy macroeconomic model?

Correct AnswerverifiedShow Answer

When the U.S. real interest rate falls, purchasing U.S. assets becomes

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When the U.S. real interest rate rises, foreigners will want to purchase

Correct AnswerverifiedShow Answer

Other things the same, in the open-economy macroeconomic model, if the exchange rate rises,

Correct AnswerverifiedShow Answer

A country has output of $900 billion, consumption of $600 billion, government expenditures of $150 billion and investment of $120 billion. What is its supply of loanable funds?

Correct AnswerverifiedShow Answer

If the risk of buying U.S. assets rises because it is discovered that lending institutions had not carefully evaluated borrowers prior to lending them funds, then

Correct AnswerverifiedShow Answer

If interest rates rise in the U.S., then other things the same

Correct AnswerverifiedShow Answer

Other things the same, which of the following would a rise in the real interest rate raise: desired investment spending, desired national saving, desired net capital outflow?

Correct Answerverifieddesired na...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

If a country imposes a tariff on some good, then which of the following curves shifts right?

Correct AnswerverifiedShow Answer

The explanation for the slope of

Correct AnswerverifiedShow Answer

A country has I = $200 billion, S = $400 billion, and purchased $600 billion of foreign assets, how many of its assets did foreigners purchase?

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 domestic real exchange rate app...View AnswerShow Answer

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The interest rate ri...
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Greece's n...
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desired na...
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When the domestic real exchange rate app...
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