Question 1

Which of the following leads to an increase in net exports in the long run?

Accepted Answer

A)   either a decrease in the budget deficit or imposing an import quota
B)   a decrease in the budget deficit but not imposing an import quota
C)   imposing an import quota but not a decrease in the budget deficit
D)   neither a decrease in the budget deficit nor imposing an import quotaE) A) and B)
F) C) and D)

Question 2

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) A) and B)

Question 3

In the open-economy macroeconomic model,net capital outflow links the markets for loanable funds and foreign-currency exchange.

Accepted Answer

A) True 
 B)False

Question 4

If policymakers impose import restrictions on clothing,the U.S.trade deficit will shrink.

Accepted Answer

A) True 
 B)False

Question 5

If the quantity of loanable funds supplied is greater than the quantity demanded,then

Accepted Answer

A)   there is a shortage of loanable funds and the interest rate will fall.
B)   there is a shortage of loanable funds and the interest rate will rise.
C)   there is a surplus of loanable funds and the interest rate will fall.
D)   there is a surplus of loanable funds and the interest rate will rise.E) All of the above
F) None of the above

Question 6

Although trade policies do not affect a country's overall trade balance,they do affect specific firms and industries.

Accepted Answer

A) True 
 B)False

Question 7

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 left.E) A) and D)
F) A) and B)

Question 8

Suppose the U.S.government institutes a "Buy American" campaign,in order to encourage spending on domestic goods.What effect will this have on the U.S.trade balance?

Accepted Answer

Such a campaign will increase the demand...

Question 9

If the demand for dollars in the market for foreign-currency exchange shifts right,then the exchange rate

Accepted Answer

A)   rises and the quantity of dollars exchanged rises.
B)   rises and the quantity of dollars exchanged does not change.
C)   falls and the quantity of dollars exchanged falls.
D)   falls and the quantity of dollars exchanged does not change.E) B) and D)
F) A) and B) B

Question 10

Figure 32-1 
-Refer to Figure 32-1.In the Figure shown,if the real interest rate is 6 percent,the quantity of loanable funds demanded is

Accepted Answer

A)   $20 billion,and the quantity supplied is $40 billion.
B)   $20 billion,and the quantity supplied is $60 billion.
C)   $60 billion,and the quantity supplied is $20 billion.
D)   $60 billion,and the quantity supplied is $40 billion.E) B) and D)
F) B) and C)

Question 11

The country of Frequencia is politically very stable and has a long tradition of respecting property rights.If several other countries suddenly became politically unstable,we would expect Frequencia's

Accepted Answer

A)   real interest rate to rise.
B)   real exchange rate to fall.
C)   net exports to fall.
D)   None of the above is likely.E) None of the above
F) A) and B)

Question 12

In the open-economy macroeconomic model,if for some reason foreign citizens want to purchase more U.S.goods and services at each exchange rate,then

Accepted Answer

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

Question 13

A higher U.S.interest rate discourages Americans from buying foreign assets and encourages foreigners to buy U.S.assets.

Accepted Answer

A) True 
 B)False

Question 14

When Mexico suffered from capital flight in 1994,Mexico's real interest rate

Accepted Answer

A)   fell and the peso appreciated.
B)   fell and the peso depreciated.
C)   rose and the peso appreciated.
D)   rose and the peso depreciated.E) A) and C)
F) A) and B)

Question 15

Other things the same,when a Greek company imports bicycles from the U.S. ,the open-economy macroeconomic model treats this transaction as an increase in the quantity of dollars demanded in the U.S.foreign-currency exchange market.

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) A) and C)

Question 17

In 1995 House Speaker Newt Gingrich threatened to send the United States into default on its debt.During the day of this announcement,U.S.interest rates rose and the real exchange rate of the U.S.dollar depreciated.Which of these changes is consistent with the results of the open-economy macroeconomic model?

Accepted Answer

A)   the increase in U.S.interest rates
B)   the depreciation of the real exchange rate of the U.S.dollar
C)   Both a and b are consistent.
D)   Neither a nor b are consistent.E) C) and D)
F) All of the above C

Question 18

If the U.S.imposed an import quota on construction equipment,then the sales of U.S.construction equipment producers would

Accepted Answer

A)   rise and the exports of other U.S.industries would rise.
B)   rise and the exports of other U.S.industries would fall.
C)   fall and the exports of other U.S.industries would rise.
D)   fall and the exports of other U.S.industries would fall.E) None of the above
F) A) and B)

Question 19

Other things the same,if the U.S.real exchange rate depreciated,then U.S.net exports would

Accepted Answer

A)   fall and the quantity of dollars demanded in the market for foreign-currency exchange would fall.
B)   fall and the quantity of dollars demanded in the market for foreign-currency exchange would rise.
C)   rise and the quantity of dollars demanded in the market for foreign-currency exchange would fall.
D)   rise and the quantity of dollars demanded in the market for foreign-currency exchange would rise.E) A) and B)
F) A) and C)

Question 20

An increase in the budget deficit causes domestic interest rates

Accepted Answer

A)   and net capital outflow to rise.
B)   to rise and net capital outflow to fall.
C)   to fall and net capital outflow to rise.
D)   and net capital outflow to fall.E) A) and D)
F) A) and C) B

Exam 32: A Macroeconomic Theory of the Open Economy

Which of the following leads to an increase in net exports in the long run?

Correct Answer
verified

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

Correct Answer
verified

In the open-economy macroeconomic model,net capital outflow links the markets for loanable funds and foreign-currency exchange.

Correct Answer
verified

If policymakers impose import restrictions on clothing,the U.S.trade deficit will shrink.

Correct Answer
verified

If the quantity of loanable funds supplied is greater than the quantity demanded,then

Correct Answer
verified

Although trade policies do not affect a country's overall trade balance,they do affect specific firms and industries.

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

Suppose the U.S.government institutes a "Buy American" campaign,in order to encourage spending on domestic goods.What effect will this have on the U.S.trade balance?

Correct Answer
verified
Such a campaign will increase the demand...
View Answer

If the demand for dollars in the market for foreign-currency exchange shifts right,then the exchange rate

Correct Answer
verified
B

Figure 32-1 -Refer to Figure 32-1.In the Figure shown,if the real interest rate is 6 percent,the quantity of loanable funds demanded is

Correct Answer
verified

The country of Frequencia is politically very stable and has a long tradition of respecting property rights.If several other countries suddenly became politically unstable,we would expect Frequencia's

Correct Answer
verified

In the open-economy macroeconomic model,if for some reason foreign citizens want to purchase more U.S.goods and services at each exchange rate,then

Correct Answer
verified

A higher U.S.interest rate discourages Americans from buying foreign assets and encourages foreigners to buy U.S.assets.

Correct Answer
verified

When Mexico suffered from capital flight in 1994,Mexico's real interest rate

Correct Answer
verified

Other things the same,when a Greek company imports bicycles from the U.S. ,the open-economy macroeconomic model treats this transaction as an increase in the quantity of dollars demanded in the U.S.foreign-currency exchange market.

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified
C

If the U.S.imposed an import quota on construction equipment,then the sales of U.S.construction equipment producers would

Correct Answer
verified

Other things the same,if the U.S.real exchange rate depreciated,then U.S.net exports would

Correct Answer
verified

An increase in the budget deficit causes domestic interest rates

Correct Answer
verified
B

Exam 32: A Macroeconomic Theory of the Open Economy

Which of the following leads to an increase in net exports in the long run?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model,net capital outflow links the markets for loanable funds and foreign-currency exchange.

Correct AnswerverifiedShow Answer

If policymakers impose import restrictions on clothing,the U.S.trade deficit will shrink.

Correct AnswerverifiedShow Answer

If the quantity of loanable funds supplied is greater than the quantity demanded,then

Correct AnswerverifiedShow Answer

Although trade policies do not affect a country's overall trade balance,they do affect specific firms and industries.

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

Suppose the U.S.government institutes a "Buy American" campaign,in order to encourage spending on domestic goods.What effect will this have on the U.S.trade balance?

Correct AnswerverifiedSuch a campaign will increase the demand...View AnswerShow Answer

If the demand for dollars in the market for foreign-currency exchange shifts right,then the exchange rate

Correct AnswerverifiedB

Figure 32-1 -Refer to Figure 32-1.In the Figure shown,if the real interest rate is 6 percent,the quantity of loanable funds demanded is

Correct AnswerverifiedShow Answer

The country of Frequencia is politically very stable and has a long tradition of respecting property rights.If several other countries suddenly became politically unstable,we would expect Frequencia's

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model,if for some reason foreign citizens want to purchase more U.S.goods and services at each exchange rate,then

Correct AnswerverifiedShow Answer

A higher U.S.interest rate discourages Americans from buying foreign assets and encourages foreigners to buy U.S.assets.

Correct AnswerverifiedShow Answer

When Mexico suffered from capital flight in 1994,Mexico's real interest rate

Correct AnswerverifiedShow Answer

Other things the same,when a Greek company imports bicycles from the U.S. ,the open-economy macroeconomic model treats this transaction as an increase in the quantity of dollars demanded in the U.S.foreign-currency exchange market.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedC

If the U.S.imposed an import quota on construction equipment,then the sales of U.S.construction equipment producers would

Correct AnswerverifiedShow Answer

Other things the same,if the U.S.real exchange rate depreciated,then U.S.net exports would

Correct AnswerverifiedShow Answer

An increase in the budget deficit causes domestic interest rates

Correct AnswerverifiedB

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Correct Answer
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Correct Answer
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Such a campaign will increase the demand...
View Answer

Correct Answer
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B

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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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C

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B