Question 1

In the open-economy macroeconomic model, net capital outflow links the markets for loanable funds and foreign-currency exchange.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A)  national saving.
B)  private saving.
C)  domestic investment.
D)  the sum of domestic investment and net capital outflow.

Question 3

In the open-economy macroeconomic model, which of the following increases net capital outflow?

Accepted Answer

A)  a fall in the real exchange rate, but not a fall in the real interest rate
B)  a fall in the real interest rate, but not a fall in the real exchange rate
C)  both a fall in the real exchange rate and a fall in the real interest rate
D)  neither a fall in the real exchange rate nor a fall in the real interest rate

Question 4

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 left

Question 5

In the open-economy macroeconomic model, the supply of dollars in the market for foreign-currency exchange comes from

Accepted Answer

A)  national saving
B)  domestic investment
C)  net exports
D)  net capital outflow

Question 6

In the open-economy macroeconomic model, other things the same, when a U.S. resident imports a foreign good, the demand for dollars in the foreign-currency exchange market decreases.

Accepted Answer

A) True 
 B)False

Question 7

Suppose that U.S. savers decide that holding Brazilian assets has become riskier. What happens to U.S. net capital outflow? What happens to the U.S. real interest rate?

Accepted Answer

U.S. net capital outflow decre...

Question 8

Other things the same, a decrease in the U.S. real interest rate induces

Accepted Answer

A)  Americans to buy more foreign assets, which increases U.S. net capital outflow.
B)  Americans to buy more foreign assets, which reduces U.S. net capital outflow.
C)  foreigners to buy more U.S. assets, which reduces U.S. net capital outflow.
D)  foreigners to buy more U.S. assets, which increases U.S. net capital outflow.

Question 9

Capital flight refers to

Accepted Answer

A)  the movement of workers across international borders in response to exchange rate changes.
B)  the movement of funds between financial intermediaries when interest rates change.
C)  the ability of foreign direct investment to lift a country out of poverty.
D)  a large and sudden movement of funds out of a country.

Question 10

Which of the following would shift the demand for dollars in the market for foreign currency exchange to the right?

Accepted Answer

A)  foreign citizens want to buy more U.S. goods and services at a given exchange rate
B)  foreign citizens want to buy fewer U.S. goods and services at a given exchange rate
C)  foreign citizens want to buy more U.S. bonds
D)  foreign citizens want to by fewer U.S. bonds

Question 11

In the open-economy macroeconomic model, if for some reason foreign citizens want to purchase more U.S. goods and services at each exchange rate, 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.

Question 12

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.

Question 13

In the market for foreign-currency exchange, the source of the supply of dollars is _________. The supply curve is _________ because _____________.

Accepted Answer

net capital outflow,...

Question 14

Capital flight raises a country's interest rate.

Accepted Answer

A) True 
 B)False

Question 15

Other things the same, a higher real interest rate raises the quantity of

Accepted Answer

A)  domestic investment.
B)  net capital outflow.
C)  loanable funds demanded.
D)  loanable funds supplied.

Question 16

Other things the same, a lower real interest rate decreases the quantity of

Accepted Answer

A)  loanable funds demanded.
B)  loanable funds supplied.
C)  domestic investment.
D)  net capital outflow.

Question 17

When the U.S. real interest rate falls

Accepted Answer

A)  U.S. purchases of foreign assets and foreign purchases of U.S. assets rise
B)  U.S. purchases of foreign assets rise and foreign purchases of U.S. assets fall
C)  U.S. purchases of foreign assets fall and foreign purchases of U.S. assets rise
D)  U.S. purchases of foreign assets and foreign purchases of U.S. assets fall

Question 18

Other things the same, an increase in the U.S. interest rate

Accepted Answer

A)  raises net capital outflow which decreases the quantity of loanable funds demanded.
B)  raises net capital outflow which increases the quantity of loanable funds demanded.
C)  lowers net capital outflow which decreases the quantity of loanable funds demanded.
D)  lowers net capital outflow which increases the quantity of loanable funds demanded.

Question 19

When a government increases its budget deficit, then that country's

Accepted Answer

A)  supply of loanable funds shifts right.
B)  supply of loanable funds shifts left.
C)  demand for loanable funds shifts right.
D)  demand for loanable funds shifts left.

Question 20

According to the open-economy macroeconomic model, if the United States moved from a government budget deficit to a government budget surplus, U.S. real interest rates would increase and the real exchange rate of the U.S. dollar would appreciate.

Accepted Answer

A) True 
 B)False

Exam 32: A Macroeconomic Theory of the Open Economy

Capital flight raises a country's interest rate.

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Capital flight refers to

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According to the open-economy macroeconomic model, if the United States moved from a government budget deficit to a government budget surplus, U.S. real interest rates would increase and the real exchange rate of the U.S. dollar would appreciate.

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Other things the same, an increase in the U.S. interest rate

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A trade policy is a government policy

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

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In the open-economy macroeconomic model, which of the following increases net capital outflow?

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In the market for foreign-currency exchange, the source of the supply of dollars is _________. The supply curve is _________ because _____________.

Correct Answerverifiednet capital outflow,...View AnswerShow Answer

When a government increases its budget deficit, then that country's

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In the open-economy macroeconomic model, if for some reason foreign citizens want to purchase more U.S. goods and services at each exchange rate, then

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Other things the same, a lower real interest rate decreases the quantity of

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Other things the same, a higher real interest rate raises the quantity of

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, other things the same, when a U.S. resident imports a foreign good, the demand for dollars in the foreign-currency exchange market decreases.

Correct AnswerverifiedShow Answer

Suppose that U.S. savers decide that holding Brazilian assets has become riskier. What happens to U.S. net capital outflow? What happens to the U.S. real interest rate?

Correct AnswerverifiedU.S. net capital outflow decre...View AnswerShow Answer

In the open-economy macroeconomic model, net capital outflow links the markets for loanable funds and foreign-currency exchange.

Correct AnswerverifiedShow Answer

Which of the following would shift the demand for dollars in the market for foreign currency exchange to the right?

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, the supply of dollars in the market for foreign-currency exchange comes from

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When the U.S. real interest rate falls

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

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Other things the same, a decrease in the U.S. real interest rate induces

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In the market for foreign-currency exchange, the source of the supply of dollars is _____. The supply curve is _ because _________.

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net capital outflow,...
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U.S. net capital outflow decre...
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