Question 1

If net exports are positive,then

Accepted Answer

A)   net capital outflow is positive,so foreign assets bought by Americans are greater than American assets bought by foreigners.
B)   net capital outflow is positive,so American assets bought by foreigners are greater than foreign assets bought by Americans.
C)   net capital outflow is negative,so foreign assets bought by Americans are greater than American assets bought by foreigners.
D)   net capital outflow is negative,so American assets bought by foreigners are greater than foreign assets bought by Americans.E) C) and D)
F) A) and B)

Question 2

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

Question 3

Explain how an increase in the demand for capital goods in the U.S.can lead to a change in the U.S.exchange rate.

Accepted Answer

An increase in demand for capital goods ...

Question 4

Which of the following would shift the supply of dollars in the market for foreign-currency exchange of the open-economy macroeconomic model to the left?

Accepted Answer

A)   The exchange rate rises.
B)   The exchange rate falls.
C)   The expected rate of return on U.S.assets rises.
D)   The expected rate of return on U.S.assets falls.E) A) and D)
F) B) and C)

Question 5

If the risk of buying U.S.assets rises because it is discovered that lending institutions had not carefully evaluated borrowers prior to lending them funds,then

Accepted Answer

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

Question 6

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 7

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

Accepted Answer

A)   higher interest rates
B)   lower imports
C)   lower net capital outflows
D)   lower domestic investmentE) None of the above
F) B) and D)

Question 8

If the risk of buying U.S.assets rises because it is discovered that lending institutions had not carefully evaluated borrowers prior to lending them funds,then

Accepted Answer

A)   net capital outflow and the real exchange rate will rise.
B)   net capital outflow will rise and the real exchange rate will fall.
C)   net capital outflow will fall and the real exchange rate will rise.
D)   net capital outflow and the exchange rate will fall.E) A) and B)
F) A) and D)

Question 9

If the U.S.imposed an import quota on corn,then in the U.S.

Accepted Answer

A)   exports and imports would rise.
B)   exports and imports would fall.
C)   exports would rise and imports would fall.
D)   exports would fall and imports would rise.E) A) and B)
F) None of the above

Question 10

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 B)
F) A) and C)

Question 11

Refer to Figure 32-6.If the economy were originally in equilibrium at a and g and the government removed import quotas on toys and textiles the economy would move to

Accepted Answer

A)   b and e
B)   c and h.
C)   d and i.
D)   None of the above is correct.E) A) and C)
F) A) and D)

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Why do higher real interest rates lead to lower net capital outflow?

Accepted Answer

Higher U.S.interest rates make U.S.asset...

Question 14

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) B) and D)
F) A) and B)

Question 15

If the supply of loanable funds shifts left,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 B)
F) A) and C)

Question 16

In the open-economy macroeconomic model,if the U.S.interest rate rises,then its

Accepted Answer

A)   net capital outflow rises,so the supply of dollars in the market for foreign exchange shifts right.
B)   net capital outflow rises,so the demand for dollars in the market for foreign exchange shifts right.
C)   net capital outflow falls,so the supply of dollars in the market for foreign exchange shifts left.
D)   net capital outflow falls,so the demand for dollars in the market for foreign exchange shifts left.E) B) and C)
F) B) and D)

Question 17

In the United States in the early 1980s,there was a government budget

Accepted Answer

A)   surplus and a trade surplus.
B)   deficit and a trade deficit.
C)   surplus and a trade deficit.
D)   deficit and a trade surplus.E) B) and D)
F) A) and B)

Question 18

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

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) B) and D)
F) C) and D)

Question 19

When the U.S.real exchange rate appreciates,U.S.goods become

Accepted Answer

A)   more attractive to consumers in the U.S.and abroad.
B)   more attractive to consumers in the U.S.and less attractive to consumers abroad.
C)   less attractive to consumers in the U.S.and abroad.
D)   less attractive to consumers in the U.S.and more attractive to consumers abroad.E) A) and C)
F) A) and B)

Question 20

When the government budget deficit increases,national saving increases.

Accepted Answer

A) True 
 B)False

Exam 32: A Macroeconomic Theory of the Open Economy

In the United States in the early 1980s,there was a government budget

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

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In the open-economy macroeconomic model,if the U.S.interest rate rises,then its

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

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Which of the following would shift the supply of dollars in the market for foreign-currency exchange of the open-economy macroeconomic model to the left?

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Why do higher real interest rates lead to lower net capital outflow?

Correct AnswerverifiedHigher U.S.interest rates make U.S.asset...View AnswerShow Answer

If net exports are positive,then

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Refer to Figure 32-6.If the economy were originally in equilibrium at a and g and the government removed import quotas on toys and textiles the economy would move to

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If the risk of buying U.S.assets rises because it is discovered that lending institutions had not carefully evaluated borrowers prior to lending them funds,then

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When the government budget deficit increases,national saving increases.

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

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If the supply of loanable funds shifts left,then

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

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U.S.net capital outflow

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Explain how an increase in the demand for capital goods in the U.S.can lead to a change in the U.S.exchange rate.

Correct AnswerverifiedAn increase in demand for capital goods ...View AnswerShow Answer

If the U.S.imposed an import quota on corn,then in the U.S.

Correct AnswerverifiedShow Answer

If the risk of buying U.S.assets rises because it is discovered that lending institutions had not carefully evaluated borrowers prior to lending them funds,then

Correct AnswerverifiedShow Answer

When the U.S.real exchange rate appreciates,U.S.goods become

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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Higher U.S.interest rates make U.S.asset...
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An increase in demand for capital goods ...
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