Question 1

In the open-economy macroeconomic model, if the real exchange rate of the U.S. dollar were above its equilibrium level, the real exchange rate of the U.S. dollar would appreciate.

Accepted Answer

A) True 
 B)False

Question 2

In the open-economy macroeconomic model, at the equilibrium real interest rate, the amount that people (including government) want to save equals desired quantities of domestic investment and net capital outflow.

Accepted Answer

A) True 
 B)False

Question 3

Other things the same, people in the U.S. would want to save more if the real interest rate in the U.S.

Accepted Answer

A)  fell. The increased saving would increase the quantity of loanable funds demanded.
B)  fell. The increased saving would increase the quantity of loanable funds supplied.
C)  rose. The increased saving would increase the quantity of loanable funds demanded.
D)  rose. The increased saving would increase the quantity of loanable funds supplied.E) B) and D)
F) C) and D)

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

Question 5

In an open economy, the demand for loanable funds comes from both domestic investment and net capital outflow.

Accepted Answer

A) True 
 B)False

Question 6

An increase in the budget deficit makes domestic interest rates

Accepted Answer

A)  rise because the supply of loanable funds shifts left.
B)  fall because the supply of loanable funds shifts left.
C)  rise because the demand for loanable funds shifts right.
D)  fall because the demand for loanable funds shifts right.E) A) and C)
F) All of the above

Question 7

Because a government budget deficit represents

Accepted Answer

A)  negative public saving, it increases national saving.
B)  negative public saving, it decreases national saving.
C)  positive public saving, it increases national saving.
D)  positive public saving, it decreases national saving.E) All of the above
F) A) and C)

Question 8

A country has I = $200 billion, S = $400 billion, and purchased $600 billion of foreign assets, how many of its assets did foreigners purchase?

Accepted Answer

A)  $0
B)  $200 billion
C)  $400 billion
D)  $800 billionE) B) and C)
F) A) and B)

Question 9

Capital flight increases a country's interest rate. This increase in the interest rate makes net capital outflow lower than it would be had the interest rate stayed the same.

Accepted Answer

A) True 
 B)False

Question 10

In 2002, the United States placed higher tariffs on imports of steel. According to the open-economy macroeconomic model this policy should have

Accepted Answer

A)  reduced imports into the United States and made U.S. net exports rise.
B)  reduced imports into the United States and made the net supply of dollars in the foreign exchange market shift right.
C)  reduced imports of steel into the United States, but reduced U.S. exports of other goods by an equal amount.
D)  reduced imports of steel into the United States and increased U.S. exports of other goods by an equal amount.E) None of the above
F) A) and B)

Question 11

A U.S.-imposed quota on appliances would shift

Accepted Answer

A)  both the demand and supply curves in the market for foreign-currency exchange right.
B)  Both the demand and supply curves in the market for foreign-currency exchange right
C)  only the demand curve in the market for foreign-currency exchange right.
D)  Only the supply curve in the market for foreign-currency exchange rightE) A) and D)
F) A) and B)

Question 12

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

Question 13

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

Question 14

An increase in a country's budget surplus shifts its

Accepted Answer

A)  demand for loanable funds right and decreases investment spending.
B)  supply of loanable funds right and increases investment spending.
C)  supply of loanable funds left and decreases investment spending.
D)  None of the above is correct.E) All of the above
F) B) and C)

Question 15

If at a given exchange rate foreign citizens wanted to buy fewer U.S bonds, then the

Accepted Answer

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

Question 16

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

Question 17

In the open-economy macroeconomic model, the market for loanable funds equates national saving with

Accepted Answer

A)  domestic investment.
B)  net capital outflow.
C)  the sum of national consumption and government spending.
D)  the sum of domestic investment and net capital outflow.E) A) and C)
F) None of the above

Question 18

If net exports are negative, 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) B) and D)
F) A) and B)

Question 19

Which of the following make(s)  demand for U.S. dollars in the market for foreign-currency exchange higher than otherwise?

Accepted Answer

A)  a Russian firm wanting to buy equipment from a U.S. manufacturer and a U.S. manufacturer wanting to buy zinc from Canada
B)  a Russian firm wanting to buy equipment from a U.S. manufacturer but not a U.S. manufacturer wanting to buy zinc from Canada
C)  a U.S. manufacturer wanting to buy zinc from Canada but not a Russian firm wanting to buy equipment from a U.S. manufacturer
D)  neither a Russian firm wanting to buy equipment from a U.S. manufacturer nor a U.S. manufacturer wanting to buy zinc from CanadaE) All of the above
F) B) and C)

Question 20

Imposing an import quota causes the domestic real exchange rate to

Accepted Answer

A)  appreciate, which increases foreign demand for domestic goods.
B)  appreciate, which decreases foreign demand for domestic goods.
C)  depreciate, which increases foreign demand for domestic goods.
D)  depreciate, which decreases foreign demand for domestic goods.E) B) and D)
F) A) and C)

Exam 19: A Macroeconomic Theory of the Open Economy

Capital flight increases a country's interest rate. This increase in the interest rate makes net capital outflow lower than it would be had the interest rate stayed the same.

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

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In the open-economy macroeconomic model, if the real exchange rate of the U.S. dollar were above its equilibrium level, the real exchange rate of the U.S. dollar would appreciate.

Correct AnswerverifiedShow Answer

A country has I = $200 billion, S = $400 billion, and purchased $600 billion of foreign assets, how many of its assets did foreigners purchase?

Correct AnswerverifiedShow Answer

Which of the following make(s) demand for U.S. dollars in the market for foreign-currency exchange higher than otherwise?

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Other things the same, people in the U.S. would want to save more if the real interest rate in the U.S.

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, the market for loanable funds equates national saving with

Correct AnswerverifiedShow Answer

In an open economy, the demand for loanable funds comes from both domestic investment and net capital outflow.

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An increase in a country's budget surplus shifts its

Correct AnswerverifiedShow Answer

An increase in the budget deficit makes domestic interest rates

Correct AnswerverifiedShow Answer

Because a government budget deficit represents

Correct AnswerverifiedShow Answer

In 2002, the United States placed higher tariffs on imports of steel. According to the open-economy macroeconomic model this policy should have

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, at the equilibrium real interest rate, the amount that people (including government) want to save equals desired quantities of domestic investment and net capital outflow.

Correct AnswerverifiedShow Answer

If net exports are negative, then

Correct AnswerverifiedShow Answer

If at a given exchange rate foreign citizens wanted to buy fewer U.S bonds, then the

Correct AnswerverifiedShow Answer

A U.S.-imposed quota on appliances would shift

Correct AnswerverifiedShow Answer

Imposing an import quota causes the domestic real exchange rate to

Correct AnswerverifiedShow Answer

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