Question 1

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 2

In the open-economy macroeconomic model, a higher U.S. real exchange rate makes

Accepted Answer

A)   U.S. goods more expensive relative to foreign goods and reduces the quantity of dollars supplied.
B)   U.S. goods more expensive relative to foreign goods and reduces the quantity of dollars demanded.
C)   foreign goods more expensive relative to U.S. goods and reduces the quantity of dollars supplied.
D)   foreign goods more expensive relative to U.S. goods and reduces the quantity of dollars demanded.E) None of the above
F) All of the above

Question 3

A firm produces construction equipment, some of which it sells to domestic businesses and some of which it exports. Which of the following effects of capital flight in the country where it produces would likely increase the quantity of equipment it sells?

Accepted Answer

A)   both what happens to the interest rate and what happens to the exchange rate
B)   what happens to the interest rate but not what happens to the exchange rate
C)   what happens to the exchange rate but not what happens to the interest rate
D)   neither what happens to the interest rate nor what happens to the interest rate.E) A) and D)
F) B) and D)

Question 4

Other things the same, if the expected return on U.S. assets increases, the

Accepted Answer

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

Question 5

In the open-economy macroeconomic model, the source of the supply of loanable funds is

Accepted Answer

A)   personal saving
B)   public saving
C)   public saving + personal saving
D)   public saving + personal saving + net capital outflowsE) A) and C)
F) None of the above

Question 6

An increase in the government budget deficit shifts the demand for loanable funds to the right.

Accepted Answer

A) True 
 B)False

Question 7

An increase in real interest rates in the United States

Accepted Answer

A)   discourages both U.S. and foreign residents from buying U.S. assets.
B)   encourages both U.S. and foreign residents to buy U.S. assets.
C)   encourages U.S. residents to buy U.S. assets, but discourages foreign residents from buying U.S. assets.
D)   encourages foreign residents to buy U.S. assets, but discourages U.S. residents from buying U.S. assets.E) B) and C)
F) None of the above

Question 8

A country has national saving of $100 billion, government expenditures of $30 billion, domestic investment of $80 billion, and net capital outflow of $20 billion. What is its demand for loanable funds?

Accepted Answer

A)   $60 billion
B)   $70 billion
C)   $100 billion
D)   $120 billionE) A) and D)
F) A) and C)

Question 9

Which of the following is the most likely response to an increase in the U.S. real interest rate?

Accepted Answer

A)   a London bank purchases a U.S. bond instead of a Japanese bond it had considered purchasing
B)   U.S. firms decide to buy more capital goods
C)   a U.S. citizen decides to put less money in his savings account than he had planned.
D)   All of the above are consistent.E) A) and B)
F) B) and C)

Question 10

What is the source of the supply of dollars in the market for foreign-currency exchange?

Accepted Answer

The answer of What is the source of the supply...

Question 11

Which of the following is considered part of the supply of U.S. dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

Accepted Answer

A)   both a U.S. bank wanting to lend money to a Canadian company and a U.S. firm wanting to buy computers made in South Korea
B)   a U.S. bank wanting to lend money to a Canadian company, but not a U.S. firm wanting to buy computers made in South Korea
C)   a U.S. firm wanting to buy computers made in South Korea, but not a U.S.bank wanting to lend money to a Canadian company
D)   neither a U.S. bank wanting to lend money to a Canadian company nor a U.S. firm wanting to buy computers made in South KoreaE) A) and C)
F) None of the above

Question 12

Refer to Shoe Quota. Overall as a result of this change in policy, what happens to exports, imports, and net exports?

Accepted Answer

Exports and imports ...

Question 13

Other things the same, a decrease in the real interest rate

Accepted Answer

A)   increases the quantity of loanable funds demanded.
B)   shifts the demand for loanable funds curve to the right.
C)   decreases the quantity of loanable funds demanded.
D)   shifts the demand for loanable funds curve to the left.E) A) and B)
F) B) and C)

Question 14

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 15

If the exchange rate rises, domestic goods become relatively ______ expensive. This change in the affordability of domestic goods makes domestic goods _____ attractive to foreigners. So, _______ ______.

Accepted Answer

more, less...

Question 16

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

Accepted Answer

A)   less expensive relative to foreign goods, which makes exports rise and imports fall.
B)   less expensive relative to foreign goods, which makes exports fall and imports rise.
C)   more expensive relative to foreign goods, which makes exports rise and imports fall.
D)   more expensive relative to foreign goods, which makes exports fall and imports rise.E) A) and D)
F) B) and D)

Question 17

In the open-economy macroeconomic model, the market for loanable funds identity can be written as

Accepted Answer

A)   S = I
B)   S = NCO
C)   S = I + NCO
D)   S + I = NCOE) B) and C)
F) B) and D)

Question 18

If at a given real interest rate desired national saving is $200 billion, domestic investment is $100 billion, and net capital outflow is $80 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 D)
F) A) and B)

Question 19

A country has national saving of $80 billion, government expenditures of $40 billion, domestic investment of $50 billion, and net capital outflow of $30 billion. What is its supply of loanable funds?

Accepted Answer

A)   $30 billion
B)   $40 billion
C)   $50 billion
D)   $80 billionE) B) and D)
F) A) and D)

Question 20

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

Accepted Answer

A)   only the demand for loanable funds.
B)   only the supply of dollars in the market for foreign-currency exchange.
C)   only the net capital outflow curve and the supply of dollars in the market for foreign currency exchange.
D)   the demand for loanable funds, the net capital outflow curve, and the supply of dollars in the market for foreign currency exchange.E) A) and D)
F) None of the above

Exam 19: A Macroeconomic Theory of the Open Economy

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

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An increase in real interest rates in the United States

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, the market for loanable funds identity can be written as

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In the open-economy macroeconomic model, a higher U.S. real exchange rate makes

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Which of the following is considered part of the supply of U.S. dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

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In the open-economy macroeconomic model, the source of the supply of loanable funds is

Correct AnswerverifiedShow Answer

A firm produces construction equipment, some of which it sells to domestic businesses and some of which it exports. Which of the following effects of capital flight in the country where it produces would likely increase the quantity of equipment it sells?

Correct AnswerverifiedShow Answer

If the exchange rate rises, domestic goods become relatively ______ expensive. This change in the affordability of domestic goods makes domestic goods _____ attractive to foreigners. So, _______ ______.

Correct Answerverifiedmore, less...View AnswerShow Answer

Other things the same, a decrease in the real interest rate

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

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What is the source of the supply of dollars in the market for foreign-currency exchange?

Correct AnswerverifiedShow Answer

If at a given real interest rate desired national saving is $200 billion, domestic investment is $100 billion, and net capital outflow is $80 billion, then at that real interest rate in the loanable funds market there is a

Correct AnswerverifiedShow Answer

A country has national saving of $80 billion, government expenditures of $40 billion, domestic investment of $50 billion, and net capital outflow of $30 billion. What is its supply of loanable funds?

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An increase in the government budget deficit shifts the demand for loanable funds to the right.

Correct AnswerverifiedShow Answer

Which of the following is the most likely response to an increase in the U.S. real interest rate?

Correct AnswerverifiedShow Answer

A country has national saving of $100 billion, government expenditures of $30 billion, domestic investment of $80 billion, and net capital outflow of $20 billion. What is its demand for loanable funds?

Correct AnswerverifiedShow Answer

Other things the same, if the expected return on U.S. assets increases, the

Correct AnswerverifiedShow Answer

Refer to Shoe Quota. Overall as a result of this change in policy, what happens to exports, imports, and net exports?

Correct AnswerverifiedExports and imports ...View AnswerShow 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

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

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If the exchange rate rises, domestic goods become relatively ____ expensive. This change in the affordability of domestic goods makes domestic goods _ attractive to foreigners. So, _ __.

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more, less...
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Exports and imports ...
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The intere...
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