Question 1

Scenario 32-4
​
In 2011 Greek citizens were concerned about the size of government debt. Fearful that the government might be unable to fulfill its promise to insure depositors in Greek banks against losses created by bank failures, depositors moved funds out of Greek banks.
-Refer to Scenario 32-4. What happened to domestic investment? Why?

Accepted Answer

Domestic investment ...

Question 2

Figure 32-1  ​
-Refer to Figure 32-1. If the real interest rate is 7 percent, the quantity of loanable funds demanded is

Accepted Answer

A)  $70 billion, and the quantity supplied is $10 billion.
B)  $10 billion, and the quantity supplied is $70 billion.
C)  $10 billion, and the quantity supplied is $10 billion.D) All of the above
E) None of the above

Question 3

What is the source of the demand for loanable funds in the open-economy macroeconomic model ?

Accepted Answer

investment...

Question 4

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

Accepted Answer

A)  both the demand for loanable funds and the supply of dollars in the market for foreign-currency exchange right.
B)  the demand for loanable funds right and shift the supply of dollars in the market for foreign-currency exchange left.
C)  the demand for loanable funds left and shift the supply of dollars in the market for foreign-currency exchange right.
D)  both the demand for loanable funds and the supply of dollars in the market for foreign-currency exchange left.E) None of the above
F) A) and B)

Question 5

If for some reason Americans desired to increase their purchases of foreign assets, then other things the same

Accepted Answer

A)  both the real exchange rate and the quantity of dollars exchanged in the market for foreign currency would fall.
B)  both the real exchange rate and the quantity of dollars exchanged in the market for foreign currency would rise.
C)  the real exchange rate would rise and the quantity of dollars exchanged in the market for foreign currency would fall.
D)  the real exchange rate would fall and the quantity of dollars exchanged in the market for foreign currency would rise.E) C) and D)
F) None of the above

Question 6

What do trade policies do to the standard of living?

Accepted Answer

Trade policies reduce both imports and e...

Question 7

What effect do protectionist policies have on the trade deficit?

Accepted Answer

Protectionist policies increase the dema...

Question 8

In an open economy, the supply of loanable funds comes from national saving.

Accepted Answer

A) True 
 B)False  True

Question 9

If a country's government moves from a budget deficit to a budget surplus, which curve in the market for loanable funds shifts and which direction does it shift? What happens to the interest rate?

Accepted Answer

The supply of loanab...

Question 10

Figure 32-3
Refer to the following diagram of the open-economy macroeconomic model to answer the questions that follow.
​
Graph (a) 
Graph (b)    Graph (c)   ​
-Refer to Figure 32-3. Suppose that the government goes from a budget surplus to a budget deficit. The effects of the change could be illustrated by shifting the

Accepted Answer

A)  demand curve in panel a to the right and the demand curve in graph (c)  to the left.
B)  demand curve in panel a to the left and the supply curve in graph (c)  to the left.
C)  supply curve in panel a to the right and the demand curve in graph (c)  to the right.
D)  supply curve in panel a to the left and the supply curve in graph (c)  to the left.E) All of the above
F) A) and B)

Question 11

In the market for foreign-currency exchange, capital flight shifts the

Accepted Answer

A)  demand curve right.
B)  demand curve left.
C)  supply curve right.
D)  supply curve left.E) A) and C)
F) None of the above

Question 12

In 2002, the United States placed higher tariffs on imports of steel. According to the open-economy macroeconomic model this policy reduced imports

Accepted Answer

A)  into the United States and made U.S.net exports rise.
B)  into the United States and made the net supply of dollars in the foreign exchange market shift right.
C)  of steel into the United States, but reduced U.S.exports of other goods by an equal amount.
D)  of steel into the United States and increased U.S.exports of other goods by an equal amount.E) C) and D)
F) A) and D)

Question 13

Trade policies

Accepted Answer

A)  alter the trade balance because they alter imports of the country that implemented them.
B)  alter the trade balance because they alter net capital outflow of the country that implemented them.
C)  do not alter the trade balance because they cannot alter the national saving or domestic investment of the country that implements them.
D)  do not alter the trade balance because they cannot alter the real exchange rate of the currency of the country that implements them.E) B) and D)
F) None of the above

Question 14

Other things the same, when the real exchange rate of the dollar appreciates, U.S. goods become more desirable to U.S. residents, but less desirable to foreign residents.

Accepted Answer

A) True 
 B)False

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

Because a government budget deficit represents

Accepted Answer

A)  negative public saving, it increases national saving.
B)  positive public saving, it increases national saving.
C)  positive public saving, it decreases national saving.
D)  negative public saving, it decreases national saving.E) None of the above
F) C) and D) D

Question 17

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

Accepted Answer

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

Question 18

If the demand for loanable funds shifts right, then the real interest rate

Accepted Answer

A)  and the equilibrium quantity of loanable funds both fall.
B)  falls and the equilibrium quantity of loanable funds rises.
C)  and the equilibrium quantity of loanable funds both rise.
D)  rises and the equilibrium quantify of loanable funds falls.E) A) and C)
F) A) and D)

Question 19

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) None of the above
F) All of the above

Question 20

Scenario 32-1
​
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 Scenario 32-1. What does this change in the deficit do to net capital outflows? Defend your answer.

Accepted Answer

Net capital outflow falls because the do...

Exam 32: A Macroeconomic Theory of the Open Economy

Correct Answer
verified
Domestic investment ...
View Answer

Figure 32-1 -Refer to Figure 32-1. If the real interest rate is 7 percent, the quantity of loanable funds demanded is

Correct Answer
verified

What is the source of the demand for loanable funds in the open-economy macroeconomic model ?

Correct Answer
verified
investment...
View Answer

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

Correct Answer
verified

If for some reason Americans desired to increase their purchases of foreign assets, then other things the same

Correct Answer
verified

What do trade policies do to the standard of living?

Correct Answer
verified
Trade policies reduce both imports and e...
View Answer

What effect do protectionist policies have on the trade deficit?

Correct Answer
verified
Protectionist policies increase the dema...
View Answer

In an open economy, the supply of loanable funds comes from national saving.

Correct Answer
verified
True

If a country's government moves from a budget deficit to a budget surplus, which curve in the market for loanable funds shifts and which direction does it shift? What happens to the interest rate?

Correct Answer
verified
The supply of loanab...
View Answer

Correct Answer
verified

In the market for foreign-currency exchange, capital flight shifts the

Correct Answer
verified

In 2002, the United States placed higher tariffs on imports of steel. According to the open-economy macroeconomic model this policy reduced imports

Correct Answer
verified

Trade policies

Correct Answer
verified

Other things the same, when the real exchange rate of the dollar appreciates, U.S. goods become more desirable to U.S. residents, but less desirable to foreign residents.

Correct Answer
verified

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

Correct Answer
verified

Because a government budget deficit represents

Correct Answer
verified
D

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

Correct Answer
verified
B

If the demand for loanable funds shifts right, then the real interest rate

Correct Answer
verified

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 Answer
verified

Correct Answer
verified
Net capital outflow falls because the do...
View Answer

Exam 32: A Macroeconomic Theory of the Open Economy

Correct AnswerverifiedDomestic investment ...View AnswerShow Answer

Figure 32-1 ​ -Refer to Figure 32-1. If the real interest rate is 7 percent, the quantity of loanable funds demanded is

Correct AnswerverifiedShow Answer

What is the source of the demand for loanable funds in the open-economy macroeconomic model ?

Correct Answerverifiedinvestment...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

If for some reason Americans desired to increase their purchases of foreign assets, then other things the same

Correct AnswerverifiedShow Answer

What do trade policies do to the standard of living?

Correct AnswerverifiedTrade policies reduce both imports and e...View AnswerShow Answer

What effect do protectionist policies have on the trade deficit?

Correct AnswerverifiedProtectionist policies increase the dema...View AnswerShow Answer

In an open economy, the supply of loanable funds comes from national saving.

Correct AnswerverifiedTrue

If a country's government moves from a budget deficit to a budget surplus, which curve in the market for loanable funds shifts and which direction does it shift? What happens to the interest rate?

Correct AnswerverifiedThe supply of loanab...View AnswerShow Answer

Correct AnswerverifiedShow Answer

In the market for foreign-currency exchange, capital flight shifts the

Correct AnswerverifiedShow Answer

In 2002, the United States placed higher tariffs on imports of steel. According to the open-economy macroeconomic model this policy reduced imports

Correct AnswerverifiedShow Answer

Trade policies

Correct AnswerverifiedShow Answer

Other things the same, when the real exchange rate of the dollar appreciates, U.S. goods become more desirable to U.S. residents, but less desirable to foreign residents.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Because a government budget deficit represents

Correct AnswerverifiedD

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

Correct AnswerverifiedB

If the demand for loanable funds shifts right, then the real interest rate

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

Correct AnswerverifiedNet capital outflow falls because the do...View AnswerShow Answer

Correct Answer
verified
Domestic investment ...
View Answer

Figure 32-1 -Refer to Figure 32-1. If the real interest rate is 7 percent, the quantity of loanable funds demanded is

Correct Answer
verified

Correct Answer
verified
investment...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Trade policies reduce both imports and e...
View Answer

Correct Answer
verified
Protectionist policies increase the dema...
View Answer

Correct Answer
verified
True

Correct Answer
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The supply of loanab...
View Answer

Correct Answer
verified

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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D

Correct Answer
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B

Correct Answer
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Correct Answer
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Correct Answer
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Net capital outflow falls because the do...
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