Question 1

When a country suffers from capital flight, the exchange rate

Accepted Answer

A)   depreciates, because demand in the market for foreign-currency exchange shifts left.
B)   depreciates, because supply in the market for foreign-currency exchange shifts right.
C)   appreciates, because demand in the market for foreign-currency exchange shifts right.
D)   None of the above is correct.E) None of the above
F) B) and C)

Question 2

If the United States imposes an import quota on clothing, then U.S. exports

Accepted Answer

A)   increase, U.S. imports increase, and U.S. net exports will not change.
B)   increase, U.S. imports decrease, and U.S. net exports increase.
C)   decrease, U.S. imports increase, and U.S. net exports decrease.
D)   decrease, U.S. imports decrease, and U.S. net exports will not change.E) B) and C)
F) B) and D)

Question 3

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) None of the above

Question 4

If the supply of loanable funds shifts right, then

Accepted Answer

A)   the real interest rate and the equilibrium quantity of loanable funds both fall.
B)   the real interest rate falls and the equilibrium quantity of loanable funds rises.
C)   the real interest rate and the equilibrium quantity of loanable funds both rise.
D)   the real interest rate rises and the equilibrium quantity of loanable funds falls.E) A) and D)
F) A) and C)

Question 5

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) A) and B)

Question 6

U.S. net capital outflow

Accepted Answer

A)   is a source of the supply of loanable funds, and the source of the supply of dollars in the foreign exchange market.
B)   is a source of the supply of loanable funds, and a source of the demand for dollars in the foreign exchange market.
C)   is a part of the demand for loanable funds, and the source of the supply of dollars in the foreign exchange market.
D)   is a part of the demand for loanable funds, and a source of the demand for dollars in the foreign exchange market.E) All of the above
F) A) and B)

Question 7

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) B) and C)

Question 8

Which of the following is the correct way to show the effects of a newly imposed import quota?

Accepted Answer

A)   Shift the demand for loanable funds right, the supply of dollars in the market for foreign-currency exchange right, and the demand for dollars left.
B)   Shift the demand for loanable funds right, and the supply of dollars in the market for foreign-currency exchange left.
C)   Shift the demand for dollars in the market for foreign-currency exchange left.
D)   None of the above is correct.E) All of the above
F) B) and D)

Question 9

In the open-economy macroeconomic model, if there is a surplus in the market for foreign-currency exchange, which of the following will move the market to equilibrium?

Accepted Answer

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

Question 10

What do trade policies do to the standard of living?

Accepted Answer

Trade policies reduce both imports and e...

Question 11

If a government started with a budget deficit and moved to a surplus, domestic investment

Accepted Answer

A)   and the real exchange rate would rise.
B)   and the real exchange rate would fall.
C)   would rise and the real exchange rate would fall.
D)   would fall and the real exchange rate would rise.E) B) and C)
F) A) and D)

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

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 14

When a country experiences capital flight, its net capital outflow,

Accepted Answer

A)   which is part of the demand for loanable funds, increases.
B)   which is part of the supply of loanable funds, increases.
C)   which is part of the demand for loanable funds, decreases.
D)   which is part of the supply of loanable funds, decreases.E) C) and D)
F) A) and C)

Question 15

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) A) and B)
F) A) and C)

Question 16

An increase in the budget deficit

Accepted Answer

A)   reduces net capital outflow and domestic investment.
B)   reduces net capital outflow and raises domestic investment.
C)   raises net capital outflow and domestic investment
D)   raises net capital outflow and reduces domestic investment.E) B) and C)
F) A) and B)

Question 17

In the open-economy macroeconomic model, the supply of dollars in the market for foreign-currency exchange comes from

Accepted Answer

A)   net exports
B)   net capital outflow
C)   net exports + net capital outflow
D)   net exports - net capital outflowE) All of the above
F) A) and C)

Question 18

A country has national saving of $80 billion, government expenditures of $40 billion, domestic investment of $60 billion, and net capital outflow of $20 billion. What is its demand for loanable funds?

Accepted Answer

A)   $40 billion
B)   $60 billion
C)   $80 billion
D)   $120 billionE) B) and C)
F) A) and B)

Question 19

Figure 14-4
 2 and E3, an increase in the budget deficit can be illustrated as a move to A)  r1 and E4. B)  r1 and E2. C)  r3 and E4. D)  r3 and E2. " class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 14-5. Starting from r2 and E3, an increase in the budget deficit can be illustrated as a move to

Accepted Answer

A)   r1 and E4.
B)   r1 and E2.
C)   r3 and E4.
D)   r3 and E2.E) A) and B)
F) A) and C)

Question 20

At a given real exchange rate, which of the following, by itself, would increase the supply of dollars in the market for foreign-currency exchange?

Accepted Answer

A)   foreign citizens want to buy more U.S. bonds
B)   U.S. citizens want to buy more foreign bonds
C)   foreign citizens want to buy more U.S. goods
D)   U.S. citizens want to buy more foreign goodsE) All of the above
F) B) and D)

Exam 14: A Macroeconomic Theory of the Open Economy

If a government started with a budget deficit and moved to a surplus, domestic investment

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

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

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

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If the supply of loanable funds shifts right, then

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Figure 14-4 -Refer to Figure 14-5. Starting from r2 and E3, an increase in the budget deficit can be illustrated as a move to

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

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

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A country has national saving of $80 billion, government expenditures of $40 billion, domestic investment of $60 billion, and net capital outflow of $20 billion. What is its demand for loanable funds?

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When a country suffers from capital flight, the exchange rate

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In the open-economy macroeconomic model, the supply of dollars in the market for foreign-currency exchange comes from

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At a given real exchange rate, which of the following, by itself, would increase the supply of dollars in the market for foreign-currency exchange?

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What do trade policies do to the standard of living?

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

Which of the following is the correct way to show the effects of a newly imposed import quota?

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When a country experiences capital flight, its net capital outflow,

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An increase in the budget deficit

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In the open-economy macroeconomic model, if there is a surplus in the market for foreign-currency exchange, which of the following will move the market to equilibrium?

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U.S. net capital outflow

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

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If the United States imposes an import quota on clothing, then U.S. exports

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Figure 14-4 -Refer to Figure 14-5. Starting from r₂ and E₃, an increase in the budget deficit can be illustrated as a move to

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Trade policies reduce both imports and e...
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