Question 1

If at a given real interest rate desired national saving is $60 billion, domestic investment is $30 billion, and net capital outflow is $20 billion, then at that real interest rate in the loanable funds market there is a

Accepted Answer

A)   surplus. The real interest rate will rise.
B)   surplus. The real interest rate will fall.
C)   shortage. The real interest rate will rise.
D)   shortage. The real interest rate will fall.E) A) and B)
F) C) and D)

Question 2

When a country imposes an import quota, its

Accepted Answer

A)   imports fall and its net exports rise.
B)   imports fall and its net exports are unchanged.
C)   imports rise and its net exports are unchanged.
D)   imports and exports are unchanged.E) B) and D)
F) C) and D)

Question 3

If a country's budget deficit rises, then its exchange rate

Accepted Answer

A)   rises, so its imports rise.
B)   rises, so its imports fall.
C)   falls, so its imports rise.
D)   falls so its imports fall.E) A) and C)
F) C) and D)

Question 4

Which of the following happens in the market for loanable funds when there is capital flight?

Accepted Answer

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

Question 5

In the open-economy macroeconomic model which of the following falls if there is an increase in the budget deficit?

Accepted Answer

A)   the interest rate
B)   net exports
C)   the exchange rate
D)   All of the above are correct.E) A) and B)
F) B) and C)

Question 6

Figure 32-1 
-Refer to Figure 32-1. If the real interest rate is 6 percent, there will be pressure for

Accepted Answer

A)   the real interest rate to fall.
B)   the demand for loanable funds curve to shift left.
C)   the supply for loanable funds curve to shift right.
D)   All of the above are correct.E) A) and C)
F) None of the above

Question 7

Suppose that the United States imposes an import quota on televisions. In the open-economy macroeconomic model this quota shifts the

Accepted Answer

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

Question 8

In an open economy, the source for the demand for loanable funds is

Accepted Answer

A)   national saving.
B)   national saving + net capital outflow.
C)   investment
D)   investment + net capital outflowE) A) and B)
F) None of the above

Question 9

A country recently had 500 billion euros of national saving and 200 billion euros of domestic investment. What was its net capital outflow? What was its quantity of loanable funds demanded?

Accepted Answer

300 billio...

Question 10

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

Question 11

If at a given real interest rate desired national saving is $140 billion, domestic investment is $90 billion, and net capital outflow is $60 billion, then at that real interest rate in the loanable funds market there is a

Accepted Answer

A)   surplus. The real interest rate will rise.
B)   surplus. The real interest rate will fall.
C)   shortage. The real interest rate will rise.
D)   shortage. The real interest rate will fall.E) A) and B)
F) All of the above

Question 12

A country has private saving of $500 billion, public saving of -$100 billion, domestic investment of $150 billion, and net capital outflow of $250 billion. What is its supply of loanable funds?

Accepted Answer

A)   $650 billion
B)   $600 billion
C)   $400 billion
D)   $350 billionE) C) and D)
F) None of the above

Question 13

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

Question 14

When a country experiences capital flight its interest rate

Accepted Answer

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

Question 15

A country reduces its government budget deficit and also makes political reforms that lead people to believe this country's assets are less risky. Given the combination of a reduced deficit and lower asset risk, what happens to the interest rate?

Accepted Answer

The intere...

Question 16

In the open-economy macroeconomic model, if net capital outflow increases then

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 B)
F) B) and C)

Question 17

Which of the following is the correct way to show the effects of a newly imposed import quota?

Accepted Answer

A)   shift the demand for loanable funds left, the supply of dollars in the market for foreign- currency exchange left, and the demand for dollars in the market for foreign-currency exchange right
B)   shift the demand for loanable funds left, the supply of dollars in the market for foreign- currency exchange right, and the demand for dollars in the market for foreign-currency exchange left
C)   shift the demand for dollars in the market for foreign-currency exchange to the right
D)   shift the supply of dollars in the market for foreign-currency exchange to the leftE) None of the above
F) A) and C)

Question 18

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

Question 19

Which of the following would make the equilibrium real interest rate increase and the equilibrium quantity of funds decrease?

Accepted Answer

A)   The demand for loanable funds shifts right.
B)   The demand for loanable funds shifts left.
C)   The supply of loanable funds shifts right.
D)   The supply of loanable funds shifts left.E) None of the above
F) A) and C)

Question 20

Over the past two decades, the U.S. has persistently exported more goods and services than it has imported.

Accepted Answer

A) True 
 B)False

Exam 14: A Macroeconomic Theory of the Open Economy

When a country imposes an import quota, its

Correct AnswerverifiedShow Answer

Suppose that the United States imposes an import quota on televisions. In the open-economy macroeconomic model this quota shifts the

Correct AnswerverifiedShow Answer

A country recently had 500 billion euros of national saving and 200 billion euros of domestic investment. What was its net capital outflow? What was its quantity of loanable funds demanded?

Correct Answerverified300 billio...View AnswerShow Answer

Which of the following is the correct way to show the effects of a newly imposed import quota?

Correct AnswerverifiedShow Answer

If a country raises its budget deficit then

Correct AnswerverifiedShow Answer

If at a given real interest rate desired national saving is $140 billion, domestic investment is $90 billion, and net capital outflow is $60 billion, then at that real interest rate in the loanable funds market there is a

Correct AnswerverifiedShow Answer

Which of the following would make the equilibrium real interest rate increase and the equilibrium quantity of funds decrease?

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If at a given real interest rate desired national saving is $60 billion, domestic investment is $30 billion, and net capital outflow is $20 billion, then at that real interest rate in the loanable funds market there is a

Correct AnswerverifiedShow Answer

Which of the following happens in the market for loanable funds when there is capital flight?

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, if net capital outflow increases then

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model which of the following falls if there is an increase in the budget deficit?

Correct AnswerverifiedShow Answer

Figure 32-1 -Refer to Figure 32-1. If the real interest rate is 6 percent, there will be pressure for

Correct AnswerverifiedShow Answer

A country reduces its government budget deficit and also makes political reforms that lead people to believe this country's assets are less risky. Given the combination of a reduced deficit and lower asset risk, what happens to the interest rate?

Correct AnswerverifiedThe intere...View AnswerShow Answer

In an open economy, the source for the demand for loanable funds is

Correct AnswerverifiedShow Answer

When a country experiences capital flight its interest rate

Correct AnswerverifiedShow Answer

If a country's budget deficit rises, then its exchange rate

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

A country has private saving of $500 billion, public saving of -$100 billion, domestic investment of $150 billion, and net capital outflow of $250 billion. What is its supply of loanable funds?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Over the past two decades, the U.S. has persistently exported more goods and services than it has imported.

Correct AnswerverifiedShow Answer

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300 billio...
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The intere...
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