Question 1

In which case(s)  does(do)  a country's demand for loanable funds shift left?

Accepted Answer

A)  both an increase in the budget deficit and capital flight
B)  an increase in the budget deficit, but not capital flight
C)  capital flight, but not an increase in the budget deficit
D)  neither an increase in the budget deficit nor capital flightE) C) and D)
F) None of the above

Question 2

If a government started with a budget deficit and moved to a surplus, domestic investment

Accepted Answer

A)  and the real exchange rate would rise.
B)  and the real exchange rate would fall.
C)  would rise and the real exchange rate would fall.
D)  would fall and the real exchange rate would rise.E) B) and D)
F) A) and B)

Question 3

If there is a surplus in the market for loanable funds, the resulting change in the real interest rate

Accepted Answer

A)  reduces both the quantity of loanable funds supplied and the quantity of loanable funds demanded.
B)  reduces the quantity of loanable funds supplied and raises the quantity of loanable funds demanded
C)  raises both the quantity of loanable funds supplied and the quantity of loanable funds demanded.
D)  raises the quantity of loanable funds supplied and reduces the quantity of loanable funds demanded.E) C) and D)
F) A) and C)

Question 4

In the open-economy macroeconomic model, a decrease in the domestic interest rate shifts

Accepted Answer

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

Question 5

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) A) and C)
F) A) and B)

Question 6

Figure 19-4 
-Refer to Figure 19-4. Suppose that U.S. firms desire to purchase more capital in the U.S. The effects of this could be illustrated by

Accepted Answer

A)  shifting the demand curve in panel a to the right and the demand curve in panel c to the left.
B)  shifting the demand curve in panel a to the right and the supply curve in panel c to the left.
C)  shifting the supply curve in panel a to the right and the demand curve in panel c to the left.
D)  shifting the supply curve in panel a to the right and the supply curve in panel c to the right.E) C) and D)
F) A) and C)

Question 7

Which of the following is most likely to increase U.S. exports?

Accepted Answer

A)  The government gives subsidies to U.S. firms that export goods or services.
B)  The government reduces the size of the budget surplus.
C)  The United States unilaterally reduces its restrictions on foreign imports.
D)  Taxes on domestic saving rise.E) B) and C)
F) A) and D)

Question 8

Suppose the U.S. imposes an import quota on steel. U.S. exports

Accepted Answer

A)  increase, the real exchange rate of the U.S. dollar appreciates, and U.S. net capital outflow increases.
B)  increase, the real exchange rate of the U.S. dollar depreciates, and U.S. net capital outflow is unchanged.
C)  decrease, the real exchange rate of the U.S. dollar appreciates, and U.S. net capital outflow is unchanged.
D)  decrease, the real exchange rate of the U.S. dollar depreciates, and U.S. net capital outflow decreases.E) A) and B)
F) B) and D)

Question 9

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) A) and C)

Question 10

Figure 19-1 
-Refer to Figure 19-1. In the Figure shown, if the real interest rate is 2 percent, there will be a

Accepted Answer

A)  surplus of $20 billion.
B)  surplus of $40 billion.
C)  shortage of $20 billion.
D)  shortage of $40 billion.E) C) and D)
F) B) and D)

Question 11

If C+I+G>Y, then net exports and net capital outflow are both less than zero.

Accepted Answer

A) True 
 B)False

Question 12

In the open economy model, the supply of loanable funds comes from national saving and net capital outflow.

Accepted Answer

A) True 
 B)False

Question 13

When a country experiences capital flight, which of the following rise?

Accepted Answer

A)  its real interest rate and its real exchange rate
B)  its real interest rate but not its real exchange rate
C)  its real exchange rate but not its real interest rate
D)  neither its real interest rate nor its foreign exchange rateE) A) and D)
F) All of the above

Question 14

The imposition of an import quota shifts

Accepted Answer

A)  the supply of currency right, so the exchange rate falls.
B)  the supply of currency left, so the exchange rate rises.
C)  the demand for currency right, so the exchange rate rises.
D)  the demand for currency left, so the exchange rate falls.E) B) and D)
F) C) and D)

Question 15

If a county becomes more likely to default on its bonds, what happens to that country's interest rate and exchange rate? Explain.

Accepted Answer

A higher probability of default leads to...

Question 16

If there is a surplus in the U.S. loanable funds market, then

Accepted Answer

A)  NCO > I.
B)  NCO 
C)  NCO + I > S.
D)  NCO + I < S.E) B) and C)
F) B) and D)

Question 17

Other things the same, if the interest rate falls, then

Accepted Answer

A)  firms will want to borrow more, which increases the quantity of loanable funds demanded.
B)  firms will want to borrow less, which decreases the quantity of loanable funds demanded.
C)  firms will want to borrow more, which increase the quantity of loanable funds supplied.
D)  firms will want to borrow less, which decreases the quantity of loanable funds supplied.E) A) and D)
F) None of the above

Question 18

Suppose that the United States imposes an import quota on televisions. In the open-economy macroeconomic model this quota shifts the

Accepted Answer

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

Question 19

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

Question 20

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) A) and C)
F) B) and C)

Exam 19: A Macroeconomic Theory of the Open Economy

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

Correct Answer
verified

If there is a surplus in the market for loanable funds, the resulting change in the real interest rate

Correct Answer
verified

If a county becomes more likely to default on its bonds, what happens to that country's interest rate and exchange rate? Explain.

Correct Answer
verified
A higher probability of default leads to...
View Answer

If C+I+G>Y, then net exports and net capital outflow are both less than zero.

Correct Answer
verified

Suppose that the United States imposes an import quota on televisions. In the open-economy macroeconomic model this quota shifts the

Correct Answer
verified

In the open-economy macroeconomic model, a decrease in the domestic interest rate shifts

Correct Answer
verified

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

Correct Answer
verified

Figure 19-4 -Refer to Figure 19-4. Suppose that U.S. firms desire to purchase more capital in the U.S. The effects of this could be illustrated by

Correct Answer
verified

Correct Answer
verified

If there is a surplus in the U.S. loanable funds market, then

Correct Answer
verified

The imposition of an import quota shifts

Correct Answer
verified

When a country experiences capital flight, which of the following rise?

Correct Answer
verified

Other things the same, if the interest rate falls, then

Correct Answer
verified

In the open economy model, the supply of loanable funds comes from national saving and net capital outflow.

Correct Answer
verified

Which of the following is most likely to increase U.S. exports?

Correct Answer
verified

If a government started with a budget deficit and moved to a surplus, domestic investment

Correct Answer
verified

Suppose the U.S. imposes an import quota on steel. U.S. exports

Correct Answer
verified

Figure 19-1 -Refer to Figure 19-1. In the Figure shown, if the real interest rate is 2 percent, there will be a

Correct Answer
verified

In which case(s) does(do) a country's demand for loanable funds shift left?

Correct Answer
verified

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

Correct Answer
verified

Exam 19: A Macroeconomic Theory of the Open Economy

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

Correct AnswerverifiedShow Answer

If there is a surplus in the market for loanable funds, the resulting change in the real interest rate

Correct AnswerverifiedShow Answer

If a county becomes more likely to default on its bonds, what happens to that country's interest rate and exchange rate? Explain.

Correct AnswerverifiedA higher probability of default leads to...View AnswerShow Answer

If C+I+G>Y, then net exports and net capital outflow are both less than zero.

Correct AnswerverifiedShow Answer

Suppose that the United States imposes an import quota on televisions. In the open-economy macroeconomic model this quota shifts the

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, a decrease in the domestic interest rate shifts

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 19-4 -Refer to Figure 19-4. Suppose that U.S. firms desire to purchase more capital in the U.S. The effects of this could be illustrated by

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If there is a surplus in the U.S. loanable funds market, then

Correct AnswerverifiedShow Answer

The imposition of an import quota shifts

Correct AnswerverifiedShow Answer

When a country experiences capital flight, which of the following rise?

Correct AnswerverifiedShow Answer

Other things the same, if the interest rate falls, then

Correct AnswerverifiedShow Answer

In the open economy model, the supply of loanable funds comes from national saving and net capital outflow.

Correct AnswerverifiedShow Answer

Which of the following is most likely to increase U.S. exports?

Correct AnswerverifiedShow Answer

If a government started with a budget deficit and moved to a surplus, domestic investment

Correct AnswerverifiedShow Answer

Suppose the U.S. imposes an import quota on steel. U.S. exports

Correct AnswerverifiedShow Answer

Figure 19-1 -Refer to Figure 19-1. In the Figure shown, if the real interest rate is 2 percent, there will be a

Correct AnswerverifiedShow Answer

In which case(s) does(do) a country's demand for loanable funds shift left?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A higher probability of default leads to...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified