Question 1

In equilibrium a country has a net capital outflow of $200 billion and domestic investment of $150 billion. What is the quantity of loanable funds demanded?

Accepted Answer

A)   $50 billion
B)   $150 billion
C)   $200 billion
D)   $350 billionE) B) and C)
F) A) and D)

Question 2

If a country raises its budget deficit then

Accepted Answer

A)   both its supply of and demand for loanable funds shift.
B)   its supply of but not its demand for loanable funds shifts.
C)   its demand for but not its supply of loanable funds shifts.
D)   neither its supply nor its demand for loanable funds shift.E) C) and D)
F) B) and D)

Question 3

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

Accepted Answer

A)   increases, and U.S. net capital outflow increases.
B)   increases, and U.S. net capital outflow decreases.
C)   decreases, and U.S. net capital outflow increases.
D)   decreases, and U.S. net capital outflow decreases.E) All of the above
F) None of the above

Question 4

In the 1980s, both the U.S. government budget and U.S. trade deficits increased.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is the most accurate statement?

Accepted Answer

A)   Trade policy has neither microeconomic nor macroeconomic effects.
B)   Trade policy has similar microeconomic and macroeconomic effects.
C)   The effects of trade policy are more macroeconomic than microeconomic.
D)   The effects of trade policy are more microeconomic than macroeconomic.E) B) and C)
F) None of the above

Question 6

Figure 32-4
Refer to this diagram of the open-economy macroeconomic model to answer the questions below. 
-Refer to Figure 32-4. Suppose that U.S. firms desire to purchase more capital in the U.S. The effects of this could be illustrated by

Accepted Answer

A)   shifting the demand curve in panel a to the right and the demand curve in panel c to the left.
B)   shifting the demand curve in panel a to the right and the supply curve in panel c to the left.
C)   shifting the supply curve in panel a to the right and the demand curve in panel c to the left.
D)   shifting the supply curve in panel a to the right and the supply curve in panel c to the right.E) None of the above
F) B) and C)

Question 7

If U.S. residents chose to travel overseas less due to concerns about the safety of foreign travel, then in the open- economy macroeconomic model

Accepted Answer

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

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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 falls causing U.S. residents to import more
B)   the exchange rate falls causing U.S. residents to import less
C)   the exchange rate rises causing U.S. residents to import more
D)   the exchange rate rises causing U.S. residents to import lessE) A) and B)
F) All of the above

Question 10

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

Question 11

In the open-economy macroeconomic model, the supply of loanable funds comes from

Accepted Answer

A)   national saving. Demand comes from only domestic investment.
B)   national saving. Demand comes from domestic investment and net capital outflow.
C)   Only net capital outflow. Demand for loanable funds comes from national saving.
D)   domestic investment and net capital outflow. Demand for loanable funds comes from national saving.E) A) and B)
F) None of the above

Question 12

If for some reason Americans desired to increase their purchases of foreign assets, then other things the same

Accepted Answer

A)   both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency exchange would fall.
B)   both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency would rise.
C)   the real exchange rate would rise and the quantity of dollars exchanged in the market for foreign-currency would fall.
D)   the real exchange rate would fall and the quantity of dollars exchanged in the market for foreign-currency would rise.E) None of the above
F) B) and C)

Question 13

If the U.S. imposed an import quota on farm machinery, then sales of U.S. farm machinery equipment producers would

Accepted Answer

A)   rise and the exports of other U.S. industries would rise.
B)   rise and the exports of other U.S. industries would fall.
C)   fall and the exports of other U.S. industries would rise.
D)   fall and the exports of other U.S. industries would fall.E) A) and B)
F) B) and C)

Question 14

A country has GDP of $700 billion, consumption of $450 billion, government expenditures of $100 billion, and domestic investment of $200 billion. What is its supply of loanable funds?

Accepted Answer

A)   $350 billion
B)   $250 billion
C)   $200 billion
D)   $150 billionE) A) and D)
F) B) and C)

Question 15

Other things the same, as the real interest rate rises

Accepted Answer

A)   domestic investment and net capital outflow both rise.
B)   domestic investment and net capital outflow both fall.
C)   domestic investment rises and net capital outflow falls.
D)   domestic investment falls and net capital outflow rises.E) None of the above
F) All of the above

Question 16

Other things the same, if foreigners desire to purchase more U.S. bonds, then the demand for loanable funds shifts left.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A)   national saving
B)   domestic investment
C)   net exports
D)   net capital outflowE) C) and D)
F) A) and B)

Question 18

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 19

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

Accepted Answer

A)   the exchange rate falls so foreign residents want to buy more U.S. goods and services
B)   the exchange rate falls so foreign residents want to buy fewer U.S. goods and services
C)   the exchange rate rises so foreign residents want to buy more U.S. goods and services
D)   the exchange rate rises so foreign residents want to buy fewer U.S. goods and servicesE) A) and D)
F) B) and D)

Question 20

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) None of the above
F) A) and B)

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, the supply of loanable funds comes from

Correct AnswerverifiedShow Answer

If U.S. residents chose to travel overseas less due to concerns about the safety of foreign travel, then in the open- economy macroeconomic model

Correct AnswerverifiedShow Answer

If the U.S. imposed an import quota on farm machinery, then sales of U.S. farm machinery equipment producers would

Correct AnswerverifiedShow Answer

Which of the following is the most accurate statement?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Other things the same, as the real interest rate rises

Correct AnswerverifiedShow Answer

A country has GDP of $700 billion, consumption of $450 billion, government expenditures of $100 billion, and domestic investment of $200 billion. What is its supply of loanable funds?

Correct AnswerverifiedShow Answer

If for some reason Americans desired to increase their purchases of foreign assets, then other things the same

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the 1980s, both the U.S. government budget and U.S. trade deficits increased.

Correct AnswerverifiedShow Answer

Other things the same, if foreigners desire to purchase more U.S. bonds, then the demand for loanable funds shifts left.

Correct AnswerverifiedShow Answer

Figure 32-4 Refer to this diagram of the open-economy macroeconomic model to answer the questions below. -Refer to Figure 32-4. Suppose that U.S. firms desire to purchase more capital in the U.S. The effects of this could be illustrated by

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If a country raises its budget deficit then

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In equilibrium a country has a net capital outflow of $200 billion and domestic investment of $150 billion. What is the quantity of loanable funds demanded?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified