Question 1

If a country's budget deficit increases,then in the foreign exchange market,

Accepted Answer

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

Question 2

Over the past three decades,the United States has

Accepted Answer

A)   generally had,or been very near to a trade balance.
B)   had trade deficits in about as many years as it has trade surpluses.
C)   persistently had a trade deficit.
D)   persistently had a trade surplus.E) B) and C)
F) A) and B)

Question 3

If U.S.citizens decide to save a smaller fraction of their incomes,U.S.domestic investment

Accepted Answer

A)   increases,and U.S.net capital outflow increases.
B)   increases,and U.S.net capital outflow decreases.
C)   decreases,and U.S.net capital outflow increases.
D)   decreases,and U.S.net capital outflow decreases.E) A) and D)
F) C) and D) D

Question 4

Which of the following is consistent with moving from a surplus to equilibrium in the market for foreign currency exchange?

Accepted Answer

A)   the exchange rate falls causing U.S.residents to import more
B)   the exchange rate falls causing U.S.residents to import less
C)   the exchange rate rises causing U.S.residents to import more
D)   the exchange rate rises causing U.S.residents to import lessE) All of the above
F) A) and B) B

Question 5

Recently the Greek government had large deficits and people became worried about Greece's ability to continue to make payments on its debt.Which of the 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) A) and C)

Question 6

A drop in a country's real interest rate reduces that country's net capital outflow.

Accepted Answer

A) True 
 B)False

Question 7

The primary focus of the open-economy macroeconomic model is the determination of GDP and the price level.

Accepted Answer

A) True 
 B)False

Question 8

Capital flight shifts the NCO curve to the left.

Accepted Answer

A) True 
 B)False

Question 9

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

Question 10

When a country's government budget deficit increases,

Accepted Answer

A)   the real exchange rate of its currency and its net exports increase.
B)   the real exchange rate of its currency and its net exports decrease.
C)   the real exchange rate of its currency increases and its net exports decrease.
D)   the real exchange rate of its currency decreases and its net exports increase.E) A) and D)
F) C) and D)

Question 11

What do trade policies do to the standard of living?

Accepted Answer

Trade policies reduce both imports and e...

Question 12

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

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 C)
F) All of the above

Question 14

If a country raises its budget deficit,the net capital outflow

Accepted Answer

A)   rises,so the supply of its currency shifts right in the market for foreign currency exchange.
B)   rises,so the demand for its currency shifts right in the market for foreign currency exchange.
C)   falls,so the supply of its currency shifts left in the market for foreign currency exchange.
D)   falls,so the demand for its currency shifts right in the market for foreign currency exchange.E) None of the above
F) B) and C)

Question 15

What effect do protectionist policies have on the trade deficit?

Accepted Answer

Protectionist policies increase the dema...

Question 16

An economy recently had 700 billion euros of saving and 200 billion euros of net capital outflow.What was its investment? What was its quantity of loanable funds supplied?

Accepted Answer

500 billio...

Question 17

When a country experiences capital flight,the interest rate

Accepted Answer

A)   falls because the demand for loanable funds shifts left.
B)   falls because the supply for loanable funds shifts right.
C)   rises because the demand for loanable funds shifts right.
D)   rises because the supply for loanable funds shifts left.E) A) and D)
F) None of the above

Question 18

Which of the following would both raise the U.S.exchange rate?

Accepted Answer

A)   capital flight from other countries to the U.S.occurs and the U.S.moves from budget surplus to budget deficit
B)   capital flight from other countries to the U.S.occurs and the U.S.moves from budget deficit to budget surplus
C)   capital flight from the U.S.to other countries occurs,the U.S.moves from budget surplus to budget deficit
D)   capital flight from U.S.to other countries occurs,the U.S.moves from budget deficit to budget surplusE) A) and B)
F) All of the above

Question 19

Which of the following decreases if the U.S.imposes 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) B) and D)
F) A) and B) A

Question 20

Refer to Figure 19-3.At an interest rate of 3 percent,the diagram indicates that

Accepted Answer

A)   there is a surplus in the market for foreign-currency exchange.
B)   national saving equals domestic investment.
C)   net capital outflow + domestic investment = national saving.
D)   in the market for foreign-currency exchange the quantity of dollars supplied equals the quantity of dollars demanded.E) All of the above
F) None of the above

Exam 32: A Macroeconomic Theory of the Open Economy

If a country's budget deficit increases,then in the foreign exchange market,

Correct AnswerverifiedShow Answer

Over the past three decades,the United States has

Correct AnswerverifiedShow Answer

If U.S.citizens decide to save a smaller fraction of their incomes,U.S.domestic investment

Correct AnswerverifiedD

Which of the following is consistent with moving from a surplus to equilibrium in the market for foreign currency exchange?

Correct AnswerverifiedB

Recently the Greek government had large deficits and people became worried about Greece's ability to continue to make payments on its debt.Which of the these events raise a country's interest rates?

Correct AnswerverifiedShow Answer

A drop in a country's real interest rate reduces that country's net capital outflow.

Correct AnswerverifiedShow Answer

The primary focus of the open-economy macroeconomic model is the determination of GDP and the price level.

Correct AnswerverifiedShow Answer

Capital flight shifts the NCO curve to the left.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When a country's government budget deficit increases,

Correct AnswerverifiedShow Answer

What do trade policies do to the standard of living?

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

The explanation for the slope of

Correct AnswerverifiedShow Answer

Trade policies

Correct AnswerverifiedShow Answer

If a country raises its budget deficit,the net capital outflow

Correct AnswerverifiedShow Answer

What effect do protectionist policies have on the trade deficit?

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

An economy recently had 700 billion euros of saving and 200 billion euros of net capital outflow.What was its investment? What was its quantity of loanable funds supplied?

Correct Answerverified500 billio...View AnswerShow Answer

When a country experiences capital flight,the interest rate

Correct AnswerverifiedShow Answer

Which of the following would both raise the U.S.exchange rate?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedA

Refer to Figure 19-3.At an interest rate of 3 percent,the diagram indicates that

Correct AnswerverifiedShow Answer

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D

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B

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Trade policies reduce both imports and e...
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Protectionist policies increase the dema...
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500 billio...
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A

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