Question 1

If the Canadian government raises it budget deficit, then Canada's net capital outflows will

Accepted Answer

A)   increase, so its exchange rate will rise.
B)   increase, so its exchange rate will fall.
C)   decrease, so its exchange rate will rise.
D)   decrease, so its exchange rate will fall.E) B) and C)
F) A) and D)

Question 2

In the open-economy macroeconomic model, a decrease in the domestic interest rate shifts

Accepted Answer

A)   demand in the market for foreign-currency exchange to the right.
B)   demand in the market for foreign-currency exchange to the left.
C)   supply in the market for foreign-currency exchange to the right.
D)   supply in the market for foreign-currency exchange to the left.E) B) and C)
F) C) and D)

Question 3

If the Japanese government raised its budget deficit, then the yen would

Accepted Answer

A)   depreciate and Japanese net exports would rise.
B)   depreciate and Japanese net exports would fall.
C)   appreciate and Japanese net exports would rise.
D)   appreciate and Japanese net exports would fall.E) All of the above
F) B) and C)

Question 4

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

Question 5

U.S. Investment Tax Credit
Suppose that Congress and the President enact legislation that provides a tax rebate to businesses that purchase capital goods. Assume other countries make no policy changes.
-Refer to U.S. Investment Tax Credit. What happens to the exchange rate, U.S. net exports, and the net exports of foreign countries?

Accepted Answer

The exchange rate ri...

Question 6

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

Accepted Answer

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

Question 7

If a country removed an import quota on cotton, then overall that country's

Accepted Answer

A)   exports and imports would rise.
B)   exports would rise and imports would fall.
C)   exports would fall and imports would rise.
D)   exports and imports would fall.E) A) and B)
F) C) and D)

Question 8

Budget in Recession
During a recession government revenues from the income tax fall and government transfers rise as the reduction in income and the rise in unemployment raise the number of people who qualify for benefits.
-Refer to Budget in Recession. This change in the deficit causes the exchange rate to change. What does the change in the exchange rate do to net exports?

Accepted Answer

Because the exchange...

Question 9

According to the open-economy macroeconomic model, import quotas increase which of the following

Accepted Answer

A)   net exports and net capital outflow
B)   net exports but not net capital outflow.
C)   net capital outflow but not net exports.
D)   neither net exports nor net capital outflow.E) A) and B)
F) None of the above

Question 10

From 2001 to 2004, the U.S. government went from a budget surplus to a budget deficit. According to the open- economy macroeconomic model, this should have decreased

Accepted Answer

A)   both the supply of loanable funds and the supply of dollars in the market for foreign-currency exchange.
B)   neither the supply of loanable funds nor the supply of dollars in the market for foreign-currency exchange.
C)   the supply of loanable funds but not the supply of dollars in the market for foreign-currency exchange.
D)   the supply of dollars in the market for foreign-currency exchange, but not the supply of loanable funds.E) B) and C)
F) C) and D)

Question 11

In the open-economy macroeconomic model, the key determinant of net capital outflow is the

Accepted Answer

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

Question 12

A tax credit for purchases of capital goods causes the interest rate to increase and the exchange rate to appreciate.

Accepted Answer

A) True 
 B)False

Question 13

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 14

If there is capital flight from the United States, then the demand for loanable funds

Accepted Answer

A)   and the supply of dollars in the foreign-exchange market shift right.
B)   and the supply of dollars in the foreign-exchange market shift left.
C)   shifts left while the supply of dollars in the foreign-exchange market shifts right.
D)   shifts right while the supply of dollars in the foreign-exchange market shifts left.E) All of the above
F) A) and B)

Question 15

Figure 32-7
Refer to this diagram of the open-economy macroeconomic model of the Mexican economy to answer the questions below.
 
-Refer to Figure 32-7. Suppose the Mexican economy starts at r2 and e2. Which of the following new equilibrium is consistent with capital flight?

Accepted Answer

A)   r2 and e3
B)   r3 and e2
C)   r3 and e1
D)   None of the above is correct.E) None of the above
F) C) and D)

Question 16

Shoe Quota
Concerns raised about the declining U.S. shoe industry and unfair labor practices in foreign shoe factories lead the Congress and President to impose a quota on shoe imports.
-Refer to Shoe Quota. Overall as a result of this change in policy, what happens to exports, imports, and net exports?

Accepted Answer

Exports and imports ...

Question 17

Fill in the table below with the direction of the variables that change in response to the events in the first column.

Accepted Answer

The answer of Fill in the table below with the...

Question 18

The theory of purchasing-power parity implies that the demand curve for foreign-currency exchange is

Accepted Answer

A)   downward sloping.
B)   upward sloping.
C)   horizontal.
D)   vertical.E) A) and B)
F) None of the above

Question 19

In the long run import quotas do not affect the size of net exports.

Accepted Answer

A) True 
 B)False

Question 20

In 2009 Greece's budget deficit rose and people became worried about the ability of the Greek government to continue to make payments on its debt. Which of 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)

Exam 14: A Macroeconomic Theory of the Open Economy

In the long run import quotas do not affect the size of net exports.

Correct Answer
verified

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

Correct Answer
verified

According to the open-economy macroeconomic model, import quotas increase which of the following

Correct Answer
verified

Correct Answer
verified
The exchange rate ri...
View Answer

A tax credit for purchases of capital goods causes the interest rate to increase and the exchange rate to appreciate.

Correct Answer
verified

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

Correct Answer
verified

U.S. net capital outflow

Correct Answer
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Correct Answer
verified
Because the exchange...
View Answer

In the open-economy macroeconomic model, the key determinant of net capital outflow is the

Correct Answer
verified

From 2001 to 2004, the U.S. government went from a budget surplus to a budget deficit. According to the open- economy macroeconomic model, this should have decreased

Correct Answer
verified

In 2009 Greece's budget deficit rose and people became worried about the ability of the Greek government to continue to make payments on its debt. Which of these events raise a country's interest rates?

Correct Answer
verified

The theory of purchasing-power parity implies that the demand curve for foreign-currency exchange is

Correct Answer
verified

Fill in the table below with the direction of the variables that change in response to the events in the first column.

Correct Answer
verified

If a country removed an import quota on cotton, then overall that country's

Correct Answer
verified

If there is capital flight from the United States, then the demand for loanable funds

Correct Answer
verified

Correct Answer
verified
Exports and imports ...
View Answer

Figure 32-7 Refer to this diagram of the open-economy macroeconomic model of the Mexican economy to answer the questions below. -Refer to Figure 32-7. Suppose the Mexican economy starts at r2 and e2. Which of the following new equilibrium is consistent with capital flight?

Correct Answer
verified

If the Canadian government raises it budget deficit, then Canada's net capital outflows will

Correct Answer
verified

In the open-economy macroeconomic model, a decrease in the domestic interest rate shifts

Correct Answer
verified

If the Japanese government raised its budget deficit, then the yen would

Correct Answer
verified

Exam 14: A Macroeconomic Theory of the Open Economy

In the long run import quotas do not affect the size of net exports.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to the open-economy macroeconomic model, import quotas increase which of the following

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe exchange rate ri...View AnswerShow Answer

A tax credit for purchases of capital goods causes the interest rate to increase and the exchange rate to appreciate.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

U.S. net capital outflow

Correct AnswerverifiedShow Answer

Correct AnswerverifiedBecause the exchange...View AnswerShow Answer

In the open-economy macroeconomic model, the key determinant of net capital outflow is the

Correct AnswerverifiedShow Answer

From 2001 to 2004, the U.S. government went from a budget surplus to a budget deficit. According to the open- economy macroeconomic model, this should have decreased

Correct AnswerverifiedShow Answer

In 2009 Greece's budget deficit rose and people became worried about the ability of the Greek government to continue to make payments on its debt. Which of these events raise a country's interest rates?

Correct AnswerverifiedShow Answer

The theory of purchasing-power parity implies that the demand curve for foreign-currency exchange is

Correct AnswerverifiedShow Answer

Fill in the table below with the direction of the variables that change in response to the events in the first column.

Correct AnswerverifiedShow Answer

If a country removed an import quota on cotton, then overall that country's

Correct AnswerverifiedShow Answer

If there is capital flight from the United States, then the demand for loanable funds

Correct AnswerverifiedShow Answer

Correct AnswerverifiedExports and imports ...View AnswerShow Answer

Figure 32-7 Refer to this diagram of the open-economy macroeconomic model of the Mexican economy to answer the questions below. -Refer to Figure 32-7. Suppose the Mexican economy starts at r2 and e2. Which of the following new equilibrium is consistent with capital flight?

Correct AnswerverifiedShow Answer

If the Canadian government raises it budget deficit, then Canada's net capital outflows will

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, a decrease in the domestic interest rate shifts

Correct AnswerverifiedShow Answer

If the Japanese government raised its budget deficit, then the yen would

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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The exchange rate ri...
View Answer

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Because the exchange...
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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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Exports and imports ...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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