Question 1

In the open-economy macroeconomic model, if foreign interest rates rise and the U.S interest rate stays the same then, U.S.

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 D)
F) B) and C)

Question 2

If the exchange rate rises, which of the following falls in the open-economy macroeconomic model?

Accepted Answer

A)   desired net exports and desired net capital outflow
B)   desired net exports but not desired net capital outflow
C)   desired net capital outflow but not desired net exports
D)   neither desired net exports nor desired net capital outflowE) A) and B)
F) A) and C)

Question 3

The primary focus of the open-economy macroeconomic model is the determination of GDP and the price level.

Accepted Answer

A) True 
 B)False

Question 4

If net exports are positive, then

Accepted Answer

A)   exports are greater than imports.
B)   net capital outflow is negative.
C)   Both of the above are correct.
D)   Neither of the above is correct.E) A) and B)
F) None of the above

Question 5

A trade policy is a government policy

Accepted Answer

A)   directed toward the goal of improving the tradeoff between equity and efficiency.
B)   that directly influences the quantity of goods and services that a country imports or exports.
C)   intended to exploit the tradeoff between inflation and unemployment by altering the budget deficit.
D)   concerning employment laws.E) A) and B)
F) A) and C)

Question 6

If there is a surplus in the U.S. loanable funds market, then the interest rate

Accepted Answer

A)   rises, which increases quantity of loanable funds demanded.
B)   rises, which decreases the quantity of loanable funds demanded.
C)   falls, which increases the quantity of loanable funds demanded.
D)   falls, which decreases the quantity of loanable funds demanded.E) None of the above
F) All of the above

Question 7

Which of the following is always correct in an open economy?

Accepted Answer

A)   S = I
B)   S = NX + NCO
C)   S = NCO
D)   S = I + NCOE) A) and B)
F) All of the above

Question 8

As the interest rate rises, it is possible that net capital outflow could move from a positive to a negative value.

Accepted Answer

A) True 
 B)False

Question 9

When Mexico suffered from capital flight in 1994, U.S. demand for loanable funds

Accepted Answer

A)   and U.S. net capital outflow rose.
B)   and U.S. net capital outflow fell.
C)   fell and U.S. net capital outflow rose.
D)   rose and U.S. net capital outflow fell.E) None of the above
F) C) and D)

Question 10

An increase in the budget deficit causes domestic interest rates

Accepted Answer

A)   and net capital outflow to rise.
B)   to rise and net capital outflow to fall.
C)   to fall and net capital outflow to rise.
D)   and net capital outflow to fall.E) B) and C)
F) None of the above

Question 11

In the open-economy macroeconomic model, the quantity of dollars demanded in the market for foreign-currency exchange

Accepted Answer

A)   depends on the real exchange rate. The quantity of dollars supplied in the foreign-exchange market depends on the real interest rate.
B)   depends on the real interest rate. The quantity of dollars supplied in the foreign-exchange market depends on the real exchange rate.
C)   and the quantity of dollars supplied in the market for foreign-currency exchange depend on the real exchange rate.
D)   and the quantity of dollars supplied in the market for foreign-currency exchange depend on the real interest rate.E) A) and C)
F) A) and B)

Question 12

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

Question 13

In the open-economy macroeconomic model, the

Accepted Answer

A)   exchange rate adjusts to equate private saving with the sum of investment, net exports, and net capital outflow.
B)   exchange rate adjusts to equate national saving with the sum of investment and net capital outflow.
C)   interest rate adjusts to equate private saving with the sum of investment, net exports, and net capital outflow.
D)   interest rate adjusts to equate national saving with the sum of investment and net capital outflow.E) All of the above
F) None of the above

Question 14

In the long run, import quotas increase net exports.

Accepted Answer

A) True 
 B)False

Question 15

The open-economy macroeconomic model includes

Accepted Answer

A)   only the market for loanable funds.
B)   only the market for foreign-currency exchange.
C)   both the market for loanable funds and the market for foreign-currency exchange.
D)   neither the market for loanable funds nor the market for foreign-currency exchange.E) All of the above
F) A) and B)

Question 16

Other things the same, if the real interest rate in a country falls, domestic residents will desire to purchase

Accepted Answer

A)   more capital goods and more foreign bonds.
B)   more capital goods but fewer foreign bonds.
C)   more foreign bonds but fewer capital goods.
D)   fewer capital goods and fewer foreign bonds.E) None of the above
F) B) and C)

Question 17

In the open-economy macroeconomic model, a decrease in the domestic interest rate shifts

Accepted Answer

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

Question 18

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 19

According to the open-economy macroeconomic model, a decrease in the U.S. government budget deficit increases U.S. net capital outflow, causes the real exchange rate of the dollar to depreciate, and increases U.S. net exports.

Accepted Answer

A) True 
 B)False

Question 20

In the 1980s, the U.S. government budget deficit rose. At the same time the U.S. trade deficit grew larger, the real exchange rate of the dollar appreciated, and U.S. net capital outflow decreased. Which of these events is contrary to what the open-economy macroeconomic model predicts concerning the effects of an increase in the budget deficit?

Accepted Answer

A)   the U.S. trade deficit grew
B)   the real exchange rate of the dollar appreciated
C)   U.S. net capital outflow fell
D)   None of the above is contrary to the predictions of the model.E) A) and B)
F) A) and C)

Exam 32: A Macroeconomic Theory of the Open Economy

If the exchange rate rises, which of the following falls in the open-economy macroeconomic model?

Correct Answer
verified

An increase in a country's budget deficit

Correct Answer
verified

As the interest rate rises, it is possible that net capital outflow could move from a positive to a negative value.

Correct Answer
verified

Correct Answer
verified

Which of the following is always correct in an open economy?

Correct Answer
verified

In the open-economy macroeconomic model, if foreign interest rates rise and the U.S interest rate stays the same then, U.S.

Correct Answer
verified

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 Answer
verified
300 billio...
View Answer

If there is a surplus in the U.S. loanable funds market, then the interest rate

Correct Answer
verified

A trade policy is a government policy

Correct Answer
verified

The primary focus of the open-economy macroeconomic model is the determination of GDP and the price level.

Correct Answer
verified

An increase in the budget deficit causes domestic interest rates

Correct Answer
verified

Other things the same, if the real interest rate in a country falls, domestic residents will desire to purchase

Correct Answer
verified

When Mexico suffered from capital flight in 1994, U.S. demand for loanable funds

Correct Answer
verified

In the long run, import quotas increase net exports.

Correct Answer
verified

In the open-economy macroeconomic model, the quantity of dollars demanded in the market for foreign-currency exchange

Correct Answer
verified

The open-economy macroeconomic model includes

Correct Answer
verified

According to the open-economy macroeconomic model, a decrease in the U.S. government budget deficit increases U.S. net capital outflow, causes the real exchange rate of the dollar to depreciate, and increases U.S. net exports.

Correct Answer
verified

If net exports are positive, then

Correct Answer
verified

In the open-economy macroeconomic model, the

Correct Answer
verified

In the open-economy macroeconomic model, a decrease in the domestic interest rate shifts

Correct Answer
verified

Exam 32: A Macroeconomic Theory of the Open Economy

If the exchange rate rises, which of the following falls in the open-economy macroeconomic model?

Correct AnswerverifiedShow Answer

An increase in a country's budget deficit

Correct AnswerverifiedShow Answer

As the interest rate rises, it is possible that net capital outflow could move from a positive to a negative value.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is always correct in an open economy?

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, if foreign interest rates rise and the U.S interest rate stays the same then, U.S.

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

If there is a surplus in the U.S. loanable funds market, then the interest rate

Correct AnswerverifiedShow Answer

A trade policy is a government policy

Correct AnswerverifiedShow Answer

The primary focus of the open-economy macroeconomic model is the determination of GDP and the price level.

Correct AnswerverifiedShow Answer

An increase in the budget deficit causes domestic interest rates

Correct AnswerverifiedShow Answer

Other things the same, if the real interest rate in a country falls, domestic residents will desire to purchase

Correct AnswerverifiedShow Answer

When Mexico suffered from capital flight in 1994, U.S. demand for loanable funds

Correct AnswerverifiedShow Answer

In the long run, import quotas increase net exports.

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, the quantity of dollars demanded in the market for foreign-currency exchange

Correct AnswerverifiedShow Answer

The open-economy macroeconomic model includes

Correct AnswerverifiedShow Answer

According to the open-economy macroeconomic model, a decrease in the U.S. government budget deficit increases U.S. net capital outflow, causes the real exchange rate of the dollar to depreciate, and increases U.S. net exports.

Correct AnswerverifiedShow Answer

If net exports are positive, then

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, the

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, a decrease in the domestic interest rate shifts

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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verified
300 billio...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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