Question 1

When the government budget deficit increases, national saving decreases.

Accepted Answer

A) True 
 B)False

Question 2

Other things the same, an increase in the U.S. interest rate causes the quantity of loanable funds supplied to

Accepted Answer

A)  rise because net capital outflow and domestic investment rise.
B)  rise because national saving rises.
C)  fall because net capital outflow and domestic investment rise.
D)  fall because national saving falls.E) B) and C)
F) A) and C)

Question 3

If a country has a positive net capital outflow, then

Accepted Answer

A)  on net it is purchasing assets from abroad. This adds to its demand for domestically generated loanable funds.
B)  on net it is purchasing assets from abroad. This subtracts from its demand for domestically generated loanable funds.
C)  on net other countries are purchasing assets from it. This adds to its demand for domestically generated loanable funds.
D)  on net other countries are purchasing assets from it. This subtracts from its demand for domestically generated loanable funds.E) All of the above
F) None of the above

Question 4

If the government of Canada increased its budget deficit, then domestic investment

Accepted Answer

A)  and net exports would rise.
B)  would rise and net exports would fall.
C)  would fall and net exports would rise.
D)  and net exports would fall.E) All of the above
F) None of the above

Question 5

If the exchange rate rises, foreign residents want to purchase ______ domestic goods and domestic residents want to purchase _____ foreign goods. In the market for foreign-currency exchange, these changes are shown as a _______ in the quantity of dollars ______.

Accepted Answer

fewer, mor...

Question 6

An increase in real interest rates in the United States

Accepted Answer

A)  discourages both U.S. and foreign residents from buying U.S. assets.
B)  encourages both U.S. and foreign residents to buy U.S. assets.
C)  encourages U.S. residents to buy U.S. assets, but discourages foreign residents from buying U.S. assets.
D)  encourages foreign residents to buy U.S. assets, but discourages U.S. residents from buying U.S. assets.E) B) and C)
F) All of the above

Question 7

A country has national saving of $50 billion, government expenditures of $30 billion, domestic investment of $10 billion, and net capital outflow of $40 billion. What is its supply of loanable funds?

Accepted Answer

A)  $20 billion
B)  $30 billion
C)  $50 billion
D)  $60 billionE) A) and D)
F) C) and D)

Question 8

Refer to Depositors Move Funds Out of Greek Banks. Which curve in the domestic loanable funds market shifted and which direction did it shift?

Accepted Answer

The demand...

Question 9

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) C) and D)
F) B) and C)

Question 10

If a country had capital flight, then the real exchange rate would

Accepted Answer

A)  fall. To offset this fall the government could increase the budget deficit.
B)  fall. To offset this fall the government could decrease the budget deficit.
C)  rise. To offset this rise the government could increase the budget deficit.
D)  rise. To offset this rise the government could decrease the budget deficit.E) None of the above
F) C) and D)

Question 11

In the open-economy macroeconomic model, the market for loanable funds identity can be written as

Accepted Answer

A)  S = NCO - I
B)  S = NCO
C)  S = I - NCO
D)  S = I + NCOE) A) and D)
F) All of the above

Question 12

A country has output of $600 billion, consumption of $350 billion, government expenditures of $90 billion and investment of $60 billion. What is its supply of loanable funds?

Accepted Answer

A)  $160 billion
B)  $150 billion
C)  $60 billion
D)  $30 billionE) A) and C)
F) C) and D)

Question 13

An open economy has GDP of $1,000 billion, consumption of $650 billion, government expenditures of $150 billion, and domestic investment of $40 billion. What is its demand for loanable funds?

Accepted Answer

A)  $40 billion
B)  $120 billion
C)  $160 billion
D)  $200 billionE) A) and C)
F) A) and B)

Question 14

Other things the same, a higher real exchange rate raises net exports.

Accepted Answer

A) True 
 B)False

Question 15

When the U.S. real interest rate falls, purchasing U.S. assets becomes

Accepted Answer

A)  more attractive to both U.S. and foreign residents.
B)  more attractive to U.S. residents and less attractive to foreign residents.
C)  less attractive to U.S. residents and more attractive to foreign residents.
D)  less attractive to both U.S. residents and foreign residents.E) A) and D)
F) C) and D)

Question 16

An increase in the budget deficit

Accepted Answer

A)  reduces investment because the interest rate rises.
B)  reduces investment because the interest rate falls.
C)  raises investment because the interest rate rises.
D)  raises investment because the interest rate falls.E) B) and D)
F) A) and B)

Question 17

An increase in the government budget deficit shifts the demand for loanable funds to the right.

Accepted Answer

A) True 
 B)False

Question 18

Figure 32-5
Refer to this diagram of the open-economy macroeconomic model to answer the questions below.

-Refer to Figure 32-5. In the market for foreign-currency exchange, the effects of an increase in the budget surplus can be illustrated as a move from j to

Accepted Answer

A)  g.
B)  h.
C)  i.
D)  k.E) All of the above
F) C) and D)

Question 19

A country has domestic investment of $200 billion. Its citizens purchase $600 of foreign assets and foreign citizens purchase $300 of its assets. What is national saving?

Accepted Answer

A)  $400 billion
B)  $500 billion
C)  $600 billion
D)  $800 billionE) B) and D)
F) A) and B)

Question 20

Refer to Budget Reform. In the market for loanable funds which curve(s) does this policy change shift? Which direction does it shift?

Accepted Answer

Since the budget def...

Exam 32: A Macroeconomic Theory of the Open Economy

A country has domestic investment of $200 billion. Its citizens purchase $600 of foreign assets and foreign citizens purchase $300 of its assets. What is national saving?

Correct AnswerverifiedShow Answer

If a country had capital flight, then the real exchange rate would

Correct AnswerverifiedShow Answer

A country has national saving of $50 billion, government expenditures of $30 billion, domestic investment of $10 billion, and net capital outflow of $40 billion. What is its supply of loanable funds?

Correct AnswerverifiedShow Answer

An open economy has GDP of $1,000 billion, consumption of $650 billion, government expenditures of $150 billion, and domestic investment of $40 billion. What is its demand for loanable funds?

Correct AnswerverifiedShow Answer

If a country has a positive net capital outflow, then

Correct AnswerverifiedShow Answer

When the government budget deficit increases, national saving decreases.

Correct AnswerverifiedShow Answer

An increase in the budget deficit

Correct AnswerverifiedShow Answer

An increase in the government budget deficit shifts the demand for loanable funds to the right.

Correct AnswerverifiedShow Answer

An increase in real interest rates in the United States

Correct AnswerverifiedShow Answer

Other things the same, an increase in the U.S. interest rate causes the quantity of loanable funds supplied to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the exchange rate rises, foreign residents want to purchase ______ domestic goods and domestic residents want to purchase _____ foreign goods. In the market for foreign-currency exchange, these changes are shown as a _______ in the quantity of dollars ______.

Correct Answerverifiedfewer, mor...View AnswerShow Answer

If the government of Canada increased its budget deficit, then domestic investment

Correct AnswerverifiedShow Answer

Refer to Depositors Move Funds Out of Greek Banks. Which curve in the domestic loanable funds market shifted and which direction did it shift?

Correct AnswerverifiedThe demand...View AnswerShow Answer

In the open-economy macroeconomic model, the market for loanable funds identity can be written as

Correct AnswerverifiedShow Answer

When the U.S. real interest rate falls, purchasing U.S. assets becomes

Correct AnswerverifiedShow Answer

A country has output of $600 billion, consumption of $350 billion, government expenditures of $90 billion and investment of $60 billion. What is its supply of loanable funds?

Correct AnswerverifiedShow Answer

Figure 32-5 Refer to this diagram of the open-economy macroeconomic model to answer the questions below. -Refer to Figure 32-5. In the market for foreign-currency exchange, the effects of an increase in the budget surplus can be illustrated as a move from j to

Correct AnswerverifiedShow Answer

Refer to Budget Reform. In the market for loanable funds which curve(s) does this policy change shift? Which direction does it shift?

Correct AnswerverifiedSince the budget def...View AnswerShow Answer

Other things the same, a higher real exchange rate raises net exports.

Correct AnswerverifiedShow Answer

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If the exchange rate rises, foreign residents want to purchase ____ domestic goods and domestic residents want to purchase _ foreign goods. In the market for foreign-currency exchange, these changes are shown as a _ in the quantity of dollars __.

Correct Answer
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fewer, mor...
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The demand...
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Since the budget def...
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