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Exam 32: A Macroeconomic Theory of the Open Economy

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Question 1

Multiple Choice

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In an open economy,the demand for loanable funds comes from

A) only those who want to borrow funds to buy domestic capital goods.
B) only those who want to borrow funds to buy foreign assets.
C) those who want to borrow funds to buy either domestic capital goods or foreign assets.
D) neither those who want to borrow funds to buy domestic capital goods nor those who want to borrow funds to buy foreign assets.

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

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C

Question 2

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An import quota imposed by Egypt would reduce Egyptian imports,but have no impact on Egyptian exports.

A) True
B) False

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Question 3

Multiple Choice

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

In the open-economy macroeconomic model,which of the following would make India's net capital outflow decrease?

Which of the following will not change the U.S.real interest rate?

Suppose that the U.S.imposes an import quota on automobiles.The quota makes the real exchange rate of U.S.dollars

Which of the following is the most likely result from an increase in the government's budget surplus?

An increase in the U.S.government budget deficit shifts the

Suppose that the Turkish government budget deficit increases.What curves in the open-economy macroeconomic model shift? Explain why each curve shifts the direction it does.

In the open-economy macroeconomic model,net capital outflow links the markets for loanable funds and foreign-currency exchange.

If Argentina suffers from capital flight,Argentinean domestic investment will fall and Argentinean net exports will increase.

In 2002,the United States imposed restrictions on the importation of steel into the United States.Our open-economy macroeconomic model shows that such a policy would

Although trade policies do not affect a country's overall trade balance,they do affect specific firms and industries.

Other things the same,when the real exchange rate of the dollar appreciates,U.S.goods become more attractive to U.S.residents,but less attractive to foreign residents.

In an open economy,the supply of loanable funds comes from national saving.

Figure 32-3 -Refer to Figure 32-4.In the market for foreign-currency exchange,the effects of an increase in the budget surplus is illustrated as a move from g to

-Refer to Figure 32-5.If the economy were initially at the equilibrium marked h and the government imposed quotas on imports of toys and textiles the equilibrium would move to

State what,if anything,each of the following does to the supply or demand of loanable funds. a.net capital outflow increases at each interest rate b.domestic investment increases at each interest rate c.the government deficit increases d.private saving increases

When a country imposes a trade restriction,the real exchange rate of that country's currency appreciates.

Suppose the U.S.government institutes a "Buy American" campaign,in order to encourage spending on domestic goods.What effect will this have on the U.S.trade balance?