Question 1

In the open-economy macroeconomic model, if net capital outflow increases 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) A) and C)
F) None of the above

Question 2

An increase in the government budget deficit shifts the supply of loanable funds to the left.

Accepted Answer

A) True 
 B)False

Question 3

Other things the same, if the U.S. interest rate falls, then U.S. residents will want to purchase

Accepted Answer

A)   more foreign assets, which increases the quantity of loanable funds demanded.
B)   fewer foreign assets, which decreases the quantity of loanable funds demanded.
C)   more foreign assets, which increase the quantity of loanable funds supplied.
D)   fewer foreign assets, which decreases the quantity of loanable funds supplied.E) C) and D)
F) A) and D)

Question 4

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 5

Which of the following decreases if the U.S. removes an import quota on computer components?

Accepted Answer

A)   U.S. imports and U.S. exports.
B)   U.S. imports but not U.S. exports.
C)   U.S. exports but not U.S. imports.
D)   Neither U.S. exports nor U.S. imports.E) A) and C)
F) A) and B)

Question 6

In 2009 Greece's budget deficit rose and people became worried about the ability of the Greek government to continue to make payments on its debt. Which of these events raise a country's interest rates?

Accepted Answer

A)   an increase in the budget deficit and increased concerns about the ability of the government to pay back its debt
B)   an increase in the budget deficit, but not increased concerns about the ability of the government to pay back its debt
C)   increased concerns about the ability of the government to pay back its debt, but not an increase in the budget deficit
D)   neither an increase in the budget deficit nor increased concerns about the ability of the government to pay back its debtE) A) and B)
F) B) and C)

Question 7

Net capital outflow represents the quantity of dollars supplied in the foreign-currency exchange market.

Accepted Answer

A) True 
 B)False

Question 8

In the open-economy macroeconomic model which of the following falls if there is an increase in the budget deficit?

Accepted Answer

A)   the interest rate
B)   net exports
C)   the exchange rate
D)   All of the above are correct.E) A) and B)
F) B) and D)

Question 9

If a country went from a government budget deficit to a surplus, national saving would

Accepted Answer

A)   increase, shifting the supply of loanable funds right.
B)   increase, shifting the supply of loanable funds left.
C)   decrease, shifting the demand for loanable funds right.
D)   decrease, shifting the demand for loanable funds left.E) B) and C)
F) All of the above

Question 10

Which of the following make(s)  demand for U.S. dollars in the market for foreign-currency exchange higher than otherwise?

Accepted Answer

A)   a U.S. airline wanting buy jets made in France and a Swedish hospital wanting to buy medical equipment made in the U.S.
B)   a U.S. airline wanting to buy jets made in France, but not a Swedish hospital wanting to buy medical equipment made in the U.S.
C)   a Swedish hospital wanting to buy medical equipment made in the U.S., but not a U.S. airline wanting to buy jets made in France
D)   neither a U.S. bank wanting to lend money to a Canadian company nor a U.S. firm wanting to buy computers made in South KoreaE) All of the above
F) B) and C)

Question 11

In the open-economy macroeconomic model, if investment demand increases, then

Accepted Answer

A)   net exports and the real exchange rate rise.
B)   net exports rise and the real exchange rate falls.
C)   net exports fall and the real exchange rate rises.
D)   net exports and the real exchange rate fall.E) A) and B)
F) A) and C)

Question 12

If at a given real interest rate desired national saving is $60 billion, domestic investment is $30 billion, and net capital outflow is $20 billion, then at that real interest rate in the loanable funds market there is a

Accepted Answer

A)   surplus. The real interest rate will rise.
B)   surplus. The real interest rate will fall.
C)   shortage. The real interest rate will rise.
D)   shortage. The real interest rate will fall.E) B) and C)
F) A) and D)

Question 13

An increase in the budget deficit causes net capital outflow to

Accepted Answer

A)   rise, because the supply of loanable funds shifts right.
B)   rise, because the demand for loanable funds shifts right.
C)   fall, because the supply of loanable funds shifts left.
D)   fall, because the demand for loanable funds shifts right.E) All of the above
F) B) and C)

Question 14

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 15

What happens to each of the following if investment becomes more desirable at each interest rate?
a. the interest rate
b. net capital outflow
c. the exchange rate

Accepted Answer

The interest rate ri...

Question 16

In equilibrium which of the following happens if the U.S. imposes tariffs on power tools?

Accepted Answer

A)   U.S. net exports rise
B)   the exchange rate falls
C)   U.S. production of power tools rises
D)   All of the above are correct.E) None of the above
F) A) and B)

Question 17

The purchase of a capital asset adds to the demand for loanable funds only if that asset is a domestic one.

Accepted Answer

A) True 
 B)False

Question 18

A country has national saving of $100 billion, government expenditures of $30 billion, domestic investment of $80 billion, and net capital outflow of $20 billion. What is its demand for loanable funds?

Accepted Answer

A)   $60 billion
B)   $70 billion
C)   $100 billion
D)   $120 billionE) B) and D)
F) A) and B)

Question 19

The theory of purchasing-power parity implies that the demand curve for foreign-currency exchange is

Accepted Answer

A)   downward sloping.
B)   upward sloping.
C)   horizontal.
D)   vertical.E) B) and D)
F) None of the above

Question 20

If at a given real interest rate desired national saving is $140 billion, domestic investment is $90 billion, and net capital outflow is $60 billion, then at that real interest rate in the loanable funds market there is a

Accepted Answer

A)   surplus. The real interest rate will rise.
B)   surplus. The real interest rate will fall.
C)   shortage. The real interest rate will rise.
D)   shortage. The real interest rate will fall.E) C) and D)
F) B) and D)

Exam 32: A Macroeconomic Theory of the Open Economy

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

Correct AnswerverifiedShow Answer

Which of the following make(s) demand for U.S. dollars in the market for foreign-currency exchange higher than otherwise?

Correct AnswerverifiedShow Answer

Other things the same, if the U.S. interest rate falls, then U.S. residents will want to purchase

Correct AnswerverifiedShow Answer

An increase in the budget deficit causes net capital outflow to

Correct AnswerverifiedShow Answer

If a country went from a government budget deficit to a surplus, national saving would

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model which of the following falls if there is an increase in the budget deficit?

Correct AnswerverifiedShow Answer

If at a given real interest rate desired national saving is $140 billion, domestic investment is $90 billion, and net capital outflow is $60 billion, then at that real interest rate in the loanable funds market there is a

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

A country has national saving of $100 billion, government expenditures of $30 billion, domestic investment of $80 billion, and net capital outflow of $20 billion. What is its demand for loanable funds?

Correct AnswerverifiedShow Answer

What happens to each of the following if investment becomes more desirable at each interest rate? a. the interest rate b. net capital outflow c. the exchange rate

Correct AnswerverifiedThe interest rate ri...View AnswerShow Answer

If at a given real interest rate desired national saving is $60 billion, domestic investment is $30 billion, and net capital outflow is $20 billion, then at that real interest rate in the loanable funds market there is a

Correct AnswerverifiedShow Answer

In 2009 Greece's budget deficit rose and people became worried about the ability of the Greek government to continue to make payments on its debt. Which of these events raise a country's interest rates?

Correct AnswerverifiedShow Answer

The theory of purchasing-power parity implies that the demand curve for foreign-currency exchange is

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, if investment demand increases, then

Correct AnswerverifiedShow Answer

The purchase of a capital asset adds to the demand for loanable funds only if that asset is a domestic one.

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, if net capital outflow increases then

Correct AnswerverifiedShow Answer

An increase in the government budget deficit shifts the supply of loanable funds to the left.

Correct AnswerverifiedShow Answer

Net capital outflow represents the quantity of dollars supplied in the foreign-currency exchange market.

Correct AnswerverifiedShow Answer

In equilibrium which of the following happens if the U.S. imposes tariffs on power tools?

Correct AnswerverifiedShow Answer

Which of the following decreases if the U.S. removes an import quota on computer components?

Correct AnswerverifiedShow Answer

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desired na...
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The interest rate ri...
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