Question 1

Scenario 32-4
​
In 2011 Greek citizens were concerned about the size of government debt. Fearful that the government might be unable to fulfill its promise to insure depositors in Greek banks against losses created by bank failures, depositors moved funds out of Greek banks.
-Refer to Scenario 32-4. Because of depositors reactions what happened to net capital outflow?

Accepted Answer

Greece's n...

Question 2

In the open-economy macroeconomic model, the price that balances supply and demand in the market for foreign-currency exchange is the

Accepted Answer

A)  nominal exchange rate.
B)  nominal interest rate.
C)  real exchange rate.
D)  real interest rate.E) A) and B)
F) C) and D)

Question 3

If a country experiences capital flight, which of the following curves shift right?

Accepted Answer

A)  Only the demand for loanable funds.
B)  Only the supply of dollars in the market for foreign-currency exchange.
C)  Only the net capital outflow curve and the supply of dollars in the market for foreign currency exchange.
D)  The demand for loanable funds, the net capital outflow curve, and the supply of dollars in the market for foreign currency exchange.E) B) and D)
F) None of the above

Question 4

An increase in the government budget deficit shifts the supply of domestic currency in the market for foreign exchange to the right.

Accepted Answer

A) True 
 B)False

Question 5

Other things the same, a decrease in the U.K. real interest rate induces

Accepted Answer

A)  British people to buy fewer foreign assets, which increases U.K.'s net capital outflow.
B)  British people to buy more foreign assets, which reduces U.K.'s net capital outflow.
C)  foreigners to buy fewer U.K.assets, which increases U.K.'s net capital outflow.
D)  foreigners to buy more U.K.assets, which reduces U.K.'s net capital outflow.E) A) and B)
F) None of the above

Question 6

Explain how a decrease in the demand for capital goods in the U.S. can lead to a change in the U.S. exchange rate.

Accepted Answer

A decrease in demand for capital goods i...

Question 7

A U.S. grocery chain borrows money to buy a warehouse in Ohio and another in Italy. Borrowing for which warehouse(s)  is included in the demand for loanable funds in the United States?

Accepted Answer

A)  Both the one in Ohio and the one in Italy.
B)  Only the one in Ohio.
C)  Only the one in Italy.
D)  Neither the one in Ohio nor the one in Italy.E) A) and D)
F) None of the above

Question 8

An import quota imposed by the U.S. would reduce U.S. imports, but have no impact on U.S. exports.

Accepted Answer

A) True 
 B)False

Question 9

What happens to domestic investment as the real interest rate rises? Explain your answer.

Accepted Answer

As the real interest rate rise...

Question 10

If people in the U.S. choose to save a smaller percentage of income, what will happen to the interest rate, net capital outflow, the exchange rate, and net exports?

Accepted Answer

The interest rate will rise, n...

Question 11

In the open-economy macroeconomic model, at the equilibrium real interest rate, the amount that people (including government) want to save exactly balances desired domestic investment.

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

In the open-economy macroeconomic model, the market for loanable funds equates national saving with

Accepted Answer

A)  domestic investment.
B)  net capital outflow.
C)  the sum of domestic investment and net capital outflow.
D)  the sum of national consumption and government spending.E) B) and C)
F) A) and D)

Question 14

A large and sudden movement of funds out of a country is called

Accepted Answer

A)  arbitrage.
B)  capital flight.
C)  crowding out.
D)  capital mobility.E) A) and B)
F) A) and C)

Question 15

In an open economy, the source for the demand for loanable funds is

Accepted Answer

A)  national saving.
B)  national saving + net capital outflow.
C)  domestic investment.
D)  domestic investment + net capital outflow.E) A) and B)
F) C) and D)

Question 16

An increase in a country's real interest rate reduces that country's net capital outflow.

Accepted Answer

A) True 
 B)False

Question 17

At the equilibrium real interest rate in the open-economy macroeconomic model,

Accepted Answer

A)  saving = domestic investment.
B)  saving = net capital outflow.
C)  net capital outflow = domestic investment.
D)  net capital outflow + domestic investment = saving.E) A) and D)
F) B) and C)

Question 18

Other things the same, in the open-economy macroeconomic model, if the real exchange rate rises, the

Accepted Answer

A)  demand for dollars shifts left.
B)  demand for dollars shifts right.
C)  quantity of dollars demanded falls.
D)  quantity of dollars demanded rises.E) C) and D)
F) B) and C)

Question 19

In the open-economy macroeconomic model, other things the same, an increase in the exchange rate raises the quantity of dollars supplied in the market for foreign-currency exchange.

Accepted Answer

A) True 
 B)False

Question 20

Over the past two decades, the U.S. has persistently exported more goods and services than it has imported.

Accepted Answer

A) True 
 B)False

Exam 32: A Macroeconomic Theory of the Open Economy

An import quota imposed by the U.S. would reduce U.S. imports, but have no impact on U.S. exports.

Correct Answer
verified

In the open-economy macroeconomic model, other things the same, an increase in the exchange rate raises the quantity of dollars supplied in the market for foreign-currency exchange.

Correct Answer
verified

At the equilibrium real interest rate in the open-economy macroeconomic model,

Correct Answer
verified

An increase in the government budget deficit shifts the supply of domestic currency in the market for foreign exchange to the right.

Correct Answer
verified

Correct Answer
verified
Greece's n...
View Answer

An increase in a country's real interest rate reduces that country's net capital outflow.

Correct Answer
verified

If a country experiences capital flight, which of the following curves shift right?

Correct Answer
verified

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

Correct Answer
verified

Other things the same, in the open-economy macroeconomic model, if the real exchange rate rises, the

Correct Answer
verified

If people in the U.S. choose to save a smaller percentage of income, what will happen to the interest rate, net capital outflow, the exchange rate, and net exports?

Correct Answer
verified
The interest rate will rise, n...
View Answer

What happens to domestic investment as the real interest rate rises? Explain your answer.

Correct Answer
verified
As the real interest rate rise...
View Answer

Over the past two decades, the U.S. has persistently exported more goods and services than it has imported.

Correct Answer
verified

In the open-economy macroeconomic model, at the equilibrium real interest rate, the amount that people (including government) want to save exactly balances desired domestic investment.

Correct Answer
verified

A large and sudden movement of funds out of a country is called

Correct Answer
verified

In the open-economy macroeconomic model, the price that balances supply and demand in the market for foreign-currency exchange is the

Correct Answer
verified

A U.S. grocery chain borrows money to buy a warehouse in Ohio and another in Italy. Borrowing for which warehouse(s) is included in the demand for loanable funds in the United States?

Correct Answer
verified

In the open-economy macroeconomic model, the market for loanable funds equates national saving with

Correct Answer
verified

Explain how a decrease in the demand for capital goods in the U.S. can lead to a change in the U.S. exchange rate.

Correct Answer
verified
A decrease in demand for capital goods i...
View Answer

Other things the same, a decrease in the U.K. real interest rate induces

Correct Answer
verified

In an open economy, the source for the demand for loanable funds is

Correct Answer
verified

Exam 32: A Macroeconomic Theory of the Open Economy

An import quota imposed by the U.S. would reduce U.S. imports, but have no impact on U.S. exports.

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, other things the same, an increase in the exchange rate raises the quantity of dollars supplied in the market for foreign-currency exchange.

Correct AnswerverifiedShow Answer

At the equilibrium real interest rate in the open-economy macroeconomic model,

Correct AnswerverifiedShow Answer

An increase in the government budget deficit shifts the supply of domestic currency in the market for foreign exchange to the right.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedGreece's n...View AnswerShow Answer

An increase in a country's real interest rate reduces that country's net capital outflow.

Correct AnswerverifiedShow Answer

If a country experiences capital flight, which of the following curves shift right?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Other things the same, in the open-economy macroeconomic model, if the real exchange rate rises, the

Correct AnswerverifiedShow Answer

If people in the U.S. choose to save a smaller percentage of income, what will happen to the interest rate, net capital outflow, the exchange rate, and net exports?

Correct AnswerverifiedThe interest rate will rise, n...View AnswerShow Answer

What happens to domestic investment as the real interest rate rises? Explain your answer.

Correct AnswerverifiedAs the real interest rate rise...View AnswerShow Answer

Over the past two decades, the U.S. has persistently exported more goods and services than it has imported.

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, at the equilibrium real interest rate, the amount that people (including government) want to save exactly balances desired domestic investment.

Correct AnswerverifiedShow Answer

A large and sudden movement of funds out of a country is called

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, the price that balances supply and demand in the market for foreign-currency exchange is the

Correct AnswerverifiedShow Answer

A U.S. grocery chain borrows money to buy a warehouse in Ohio and another in Italy. Borrowing for which warehouse(s) is included in the demand for loanable funds in the United States?

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, the market for loanable funds equates national saving with

Correct AnswerverifiedShow Answer

Explain how a decrease in the demand for capital goods in the U.S. can lead to a change in the U.S. exchange rate.

Correct AnswerverifiedA decrease in demand for capital goods i...View AnswerShow Answer

Other things the same, a decrease in the U.K. real interest rate induces

Correct AnswerverifiedShow Answer

In an open economy, the source for the demand for loanable funds is

Correct AnswerverifiedShow Answer

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Greece's n...
View Answer

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Correct Answer
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Correct Answer
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The interest rate will rise, n...
View Answer

Correct Answer
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As the real interest rate rise...
View Answer

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verified

Correct Answer
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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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Correct Answer
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A decrease in demand for capital goods i...
View Answer

Correct Answer
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Correct Answer
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