Question 1

In an open economy,

Accepted Answer

A)   net capital outflow = imports.
B)   net capital outflow = net exports.
C)   net capital outflow = exports.
D)   None of the above is correct.E) None of the above
F) All of the above

Question 2

If U.S. residents want to buy more foreign bonds, then in the market for foreign-currency exchange the exchange rate

Accepted Answer

A)   and the quantity of dollars traded rises.
B)   rises and the quantity of dollars traded falls.
C)   falls and the quantity of dollars traded rises.
D)   and the quantity of dollars traded falls.E) None of the above
F) B) and C)

Question 3

Which of the following is consistent with moving from a surplus to equilibrium in the market for foreign-currency exchange?

Accepted Answer

A)   the exchange rate appreciates making domestic goods relatively more expensive.
B)   the exchange rate appreciates making domestic goods relatively less expensive.
C)   the exchange rate depreciates making domestic goods relatively more expensive.
D)   the exchange rate depreciates making domestic goods relatively less expensive.E) A) and B)
F) B) and C)

Question 4

If the U.S. government imposes a quota on leather shoes, then net exports of U.S. shoes would

Accepted Answer

A)   rise.
B)   not change.
C)   fall.
D)   rise, not change, or fall depending on what happened to the exchange rate.E) B) and D)
F) B) and C)

Question 5

In the open-economy macroeconomic model, which of the following increases net capital outflow?

Accepted Answer

A)   a fall in the real exchange rate, but not a fall in the real interest rate
B)   a fall in the real interest rate, but not a fall in the real exchange rate
C)   both a fall in the real exchange rate and a fall in the real interest rate
D)   neither a fall in the real exchange rate nor a fall in the real interest rateE) All of the above
F) B) and D)

Question 6

If the demand for dollars in the market for foreign-currency exchange shifts left, then the exchange rate

Accepted Answer

A)   rises and the quantity of dollars exchanged rises.
B)   rises and the quantity of dollars exchanged does not change.
C)   falls and the quantity of dollars exchanged falls.
D)   falls and the quantity of dollars exchanged does not change.E) A) and C)
F) None of the above

Question 7

Which of the following will decrease U.S. net capital outflow?

Accepted Answer

A)   capital flight from the United States
B)   the government budget deficit increases
C)   the U.S. imposes import quotas
D)   None of the above is correct.E) A) and B)
F) All of the above

Question 8

In equilibrium which of the following happens if the U.S. imposes tariffs on power tools?

Accepted Answer

A)   U.S. net exports rise
B)   the exchange rate falls
C)   U.S. production of power tools rises
D)   All of the above are correct.E) None of the above
F) All of the above

Question 9

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 10

Other things the same, if the U.S. real exchange rate depreciated, then U.S. net exports would

Accepted Answer

A)   fall and the quantity of dollars demanded in the market for foreign-currency exchange would fall.
B)   fall and the quantity of dollars demanded in the market for foreign-currency exchange would rise.
C)   rise and the quantity of dollars demanded in the market for foreign-currency exchange would fall.
D)   rise and the quantity of dollars demanded in the market for foreign-currency exchange would rise.E) B) and C)
F) All of the above

Question 11

A limit on the quantity of a good produced abroad that can be purchased domestically is called an)

Accepted Answer

A)   tariff.
B)   excise tax.
C)   import quota.
D)   None of the above is correct.E) All of the above
F) A) and C)

Question 12

If there is a shortage in the market for foreign-currency exchange, what happens to the exchange rate and to net exports?

Accepted Answer

The exchange rate ri...

Question 13

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

Accepted Answer

As the real interest rate rise...

Question 14

When the real exchange rate for the dollar depreciates, U.S. goods become

Accepted Answer

A)   less expensive relative to foreign goods, which makes exports rise and imports fall.
B)   less expensive relative to foreign goods, which makes exports fall and imports rise.
C)   more expensive relative to foreign goods, which makes exports rise and imports fall.
D)   more expensive relative to foreign goods, which makes exports fall and imports rise.E) A) and B)
F) A) and C)

Question 15

In the open-economy macroeconomic model, if the supply of loanable funds increases, then the interest rate

Accepted Answer

A)   and the real exchange rate increase.
B)   and the real exchange rate decrease.
C)   increases and the real exchange rate decreases.
D)   decreases and the real exchange rate increases.E) A) and B)
F) C) and D)

Question 16

If the supply of dollars in the market for foreign-currency exchange shifts right, then the exchange rate

Accepted Answer

A)   rises and the quantity of dollars exchanged falls.
B)   rises and the quantity of dollars exchanged does not change.
C)   falls and the quantity of dollars exchanged rises.
D)   falls and the quantity of dollars exchanged does not change.E) All of the above
F) C) and D)

Question 17

Which of the following is most likely to increase U.S. exports?

Accepted Answer

A)   The government gives subsidies to U.S. firms that export goods or services.
B)   The government reduces the size of the budget surplus.
C)   The United States unilaterally reduces its restrictions on foreign imports.
D)   Taxes on domestic saving rise.E) C) and D)
F) A) and B)

Question 18

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

Accepted Answer

A)   the demand for loanable funds and the demand for its currency in the market for foreign-currency exchange
B)   the demand for loanable funds and the supply of its currency in the market for foreign-currency exchange
C)   the supply of loanable funds and the demand for its currency in the market for foreign-currency exchange
D)   the supply of loanable funds and the supply of its currency in the market for foreign-currency exchangeE) A) and B)
F) None of the above

Question 19

If interest rates rose more in Japan than in the U.S., then other things the same

Accepted Answer

A)   U.S. citizens would buy more Japanese bonds and Japanese citizens would buy more U.S. bonds.
B)   U.S. citizens would buy more Japanese bonds and Japanese citizens would buy fewer U.S. bonds.
C)   U.S. citizens would buy fewer Japanese bonds and Japanese citizens would buy more U.S. bonds.
D)   U.S. citizens would buy fewer Japanese bonds and Japanese citizens would buy fewer U.S. bonds.E) B) and D)
F) B) and C)

Question 20

Other things the same, in the open-economy macroeconomic model, which of the following would make China's net capital outflow increase?

Accepted Answer

A)   an increase in U.S. interest rates
B)   an increase in Chinese interest rates
C)   an appreciation of the Chinese yuan
D)   None of the above is correct.E) B) and C)
F) A) and B)

Exam 19: A Macroeconomic Theory of the Open Economy

If interest rates rose more in Japan than in the U.S., then other things the same

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If the supply of dollars in the market for foreign-currency exchange shifts right, then the exchange rate

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If the demand for dollars in the market for foreign-currency exchange shifts left, then the exchange rate

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Other things the same, if the U.S. real exchange rate depreciated, then U.S. net exports would

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

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In the open-economy macroeconomic model, which of the following increases net capital outflow?

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Other things the same, in the open-economy macroeconomic model, which of the following would make China's net capital outflow increase?

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In the open-economy macroeconomic model, if the supply of loanable funds increases, then the interest rate

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Which of the following is most likely to increase U.S. exports?

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

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Which of the following is consistent with moving from a surplus to equilibrium in the market for foreign-currency exchange?

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If the U.S. government imposes a quota on leather shoes, then net exports of U.S. shoes would

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

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

Which of the following will decrease U.S. net capital outflow?

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If U.S. residents want to buy more foreign bonds, then in the market for foreign-currency exchange the exchange rate

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In equilibrium which of the following happens if the U.S. imposes tariffs on power tools?

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In an open economy,

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When the real exchange rate for the dollar depreciates, U.S. goods become

Correct AnswerverifiedShow Answer

If there is a shortage in the market for foreign-currency exchange, what happens to the exchange rate and to net exports?

Correct AnswerverifiedThe exchange rate ri...View AnswerShow Answer

A limit on the quantity of a good produced abroad that can be purchased domestically is called an)

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As the real interest rate rise...
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The exchange rate ri...
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