Question 1

A rise in the budget deficit

Accepted Answer

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

Question 2

A tax on imported goods is called a(n)

Accepted Answer

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

Question 3

If a country repeals an investment tax credit that,subsidizes domestic investment,

Accepted Answer

A)  net capital outflow and the real exchange rate rise.
B)  net capital outflow rises and the real exchange rate falls.
C)  net capital outflow falls and the real exchange rate rises.
D)  net capital outflow and the real exchange rate fall.E) None of the above
F) A) and B)

Question 4

If a country raises its budget deficit,then net capital outflow

Accepted Answer

A)  rises,so the supply of its currency shifts right in the market for foreign-currency exchange.
B)  rises,so the demand for its currency shifts right in the market for foreign-currency exchange.
C)  falls,so the supply of its currency shifts left in the market for foreign-currency exchange.
D)  falls,so the demand for its currency shifts right in the market for foreign-currency exchange.E) None of the above
F) All of the above

Question 5

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

Question 6

If people decide that some country is now a more risky place to keep their saving,then at the original interest rate in that country there is a

Accepted Answer

A)  surplus of loanable funds,so the interest rate increases.
B)  surplus of loanable funds,so the interest rate decreases.
C)  shortage of loanable funds,so the interest rate increases.
D)  shortage of loanable funds,so the interest rate decreases.E) C) and D)
F) B) and D)

Question 7

If the U.S.imposed an import quota on furniture,U.S.net exports of furniture

Accepted Answer

A)  and net exports of other U.S.goods and services would rise.
B)  would rise but net exports of other goods and services would fall.
C)  would fall but net exports of other goods and services would rise.
D)  and net exports of other U.S.goods and services would fall.E) None of the above
F) A) and C)

Question 8

Which of the following would cause the real exchange rate of the U.S.dollar to appreciate?

Accepted Answer

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

Question 9

When a country experiences capital flight,which of the following rise?

Accepted Answer

A)  its real interest rate and its real exchange rate
B)  its real interest rate but not its real exchange rate
C)  its real exchange rate but not its real interest rate
D)  neither its real interest rate nor its foreign exchange rateE) B) and D)
F) None of the above B

Question 10

If a country raises its budget deficit,then in the market for foreign-currency exchange

Accepted Answer

A)  supply shifts left.
B)  supply shifts right.
C)  demand shifts left.
D)  supply shifts rightE) None of the above
F) A) and C)

Question 11

An increase in a country's budget deficit

Accepted Answer

A)  increases net capital outflow,so the demand for its currency in the market for foreign-currency exchange shifts right.
B)  increases net capital outflow,so the supply of its currency in the market for foreign-currency exchange shifts right.
C)  decreases net capital outflow,so the demand for its currency in the market for foreign-currency exchange shifts left.
D)  decreases net capital outflow,so the supply of its currency in the market for foreign-currency exchange shifts left.E) A) and D)
F) A) and C)

Question 12

In which case(s) does(do) a country's supply of loanable funds shift right?

Accepted Answer

A)  both an increase in the budget deficit and capital flight
B)  an increase in the budget deficit,but not capital flight
C)  capital flight,but not an increase in the budget deficit
D)  neither an increase in the budget deficit nor capital flightE) All of the above
F) A) and B)

Question 13

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 D)
F) A) and B) A

Question 14

When a country experiences capital flight,its net capital outflow,

Accepted Answer

A)  which is part of the demand for loanable funds,increases.
B)  which is part of the supply of loanable funds,increases.
C)  which is part of the demand for loanable funds,decreases.
D)  which is part of the supply of loanable funds,decreases.E) A) and B)
F) B) and D)

Question 15

When a country experiences capital flight,the interest rate

Accepted Answer

A)  falls because the demand for loanable funds shifts left.
B)  falls because the supply for loanable funds shifts right.
C)  rises because the demand for loanable funds shifts right.
D)  rises because the supply for loanable funds shifts left.E) A) and C)
F) A) and D) C

Question 16

Trade policies

Accepted Answer

A)  alter the trade balance because they alter imports of the country that implemented them.
B)  alter the trade balance because they alter net capital outflow of the country that implemented them.
C)  do not alter the trade balance because they cannot alter the national saving or domestic investment of the country that implements them.
D)  do not alter the trade balance because they cannot alter the real exchange rate of the currency of the country that implements them.E) A) and D)
F) A) and B)

Question 17

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) All of the above

Question 18

If the people thought that many banks in a certain country were at or near the point of bankruptcy,then that country's real exchange rate

Accepted Answer

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

Question 19

When Mexico suffered from capital flight in 1994,Mexico's net capital outflow

Accepted Answer

A)  and net exports decreased.
B)  and net exports increased.
C)  increased while net exports decreased.
D)  decreased while net exports increased.E) All of the above
F) A) and D)

Question 20

When fear of default on bonds issued by U.S.corporations decline,then

Accepted Answer

A)  net capital outflow and the exchange rate both rise.
B)  net capital outflow rises and the exchange rate falls.
C)  net capital outflow falls and the exchange rate rises.
D)  net capital outflow and the exchange rate both fall.E) All of the above
F) A) and D)

Exam 19: A Macroeconomic Theory of the Open Economy: How Policies and Events Affect an Open Economy

A rise in the budget deficit

Correct AnswerverifiedShow Answer

A tax on imported goods is called a(n)

Correct AnswerverifiedShow Answer

If a country repeals an investment tax credit that,subsidizes domestic investment,

Correct AnswerverifiedShow Answer

If a country raises its budget deficit,then net capital outflow

Correct AnswerverifiedShow Answer

An increase in the budget deficit makes domestic interest rates

Correct AnswerverifiedShow Answer

If people decide that some country is now a more risky place to keep their saving,then at the original interest rate in that country there is a

Correct AnswerverifiedShow Answer

If the U.S.imposed an import quota on furniture,U.S.net exports of furniture

Correct AnswerverifiedShow Answer

Which of the following would cause the real exchange rate of the U.S.dollar to appreciate?

Correct AnswerverifiedShow Answer

When a country experiences capital flight,which of the following rise?

Correct AnswerverifiedB

If a country raises its budget deficit,then in the market for foreign-currency exchange

Correct AnswerverifiedShow Answer

An increase in a country's budget deficit

Correct AnswerverifiedShow Answer

In which case(s) does(do) a country's supply of loanable funds shift right?

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 AnswerverifiedA

When a country experiences capital flight,its net capital outflow,

Correct AnswerverifiedShow Answer

When a country experiences capital flight,the interest rate

Correct AnswerverifiedC

Trade policies

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the people thought that many banks in a certain country were at or near the point of bankruptcy,then that country's real exchange rate

Correct AnswerverifiedShow Answer

When Mexico suffered from capital flight in 1994,Mexico's net capital outflow

Correct AnswerverifiedShow Answer

When fear of default on bonds issued by U.S.corporations decline,then

Correct AnswerverifiedShow Answer

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B

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A

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C

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