Question 1

If the U.S. government imposes a quota on toy imports, then

Accepted Answer

A)   net capital outflow rises.
B)   net exports rise.
C)   the exchange rate rises.
D)   All of the above are correct.

Question 2

Figure 14-2
 
-Refer to Figure 14-2. What are the equilibrium values of the real exchange rate and net exports?

Accepted Answer

A)   1.4, 100
B)   1, 200
C)   .6, 300
D)   None of the above are correct.

Question 3

Suppose a country experiences capital flight. Of the demand for loanable funds and the supply of currency in the market for foreign-currency exchange, which shifts right?

Accepted Answer

A)   only the demand for loanable funds
B)   only the supply of its currency in the market for foreign-currency exchange
C)   both curves shift right
D)   neither curve shifts right

Question 4

At the equilibrium real interest rate in the open-economy macroeconomic model, the equilibrium quantity of loanable funds equals

Accepted Answer

A)   net capital outflow.
B)   domestic investment.
C)   foreign currency supplied.
D)   national saving.

Question 5

Net capital outflow represents the quantity of dollars supplied in the foreign-currency exchange market.

Accepted Answer

A) True 
 B)False

Question 6

If there is a surplus in the market for loanable funds, the resulting change in the real interest rate

Accepted Answer

A)   reduces both the quantity of loanable funds supplied and the quantity of loanable funds demanded.
B)   reduces the quantity of loanable funds supplied and raises the quantity of loanable funds demanded
C)   raises both the quantity of loanable funds supplied and the quantity of loanable funds demanded.
D)   raises the quantity of loanable funds supplied and reduces the quantity of loanable funds demanded.

Question 7

If the demand for dollars in the market for foreign-currency exchange shifts left, then the exchange rate

Accepted Answer

A)   rises and the quantity of dollars exchanged rises.
B)   rises and the quantity of dollars exchanged does not change.
C)   falls and the quantity of dollars exchanged falls.
D)   falls and the quantity of dollars exchanged does not change.

Question 8

In equilibrium which of the following happens if the U.S. imposes tariffs on leather boots?

Accepted Answer

A)   U.S. production of leather boots rise
B)   U.S. net exports rise
C)   the exchange rate falls
D)   All of the above are correct.

Question 9

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 investment

Question 10

If a county becomes more likely to default on its bonds, what happens to that country's interest rate and exchange rate? Explain.

Accepted Answer

A higher probability of default leads to...

Question 11

A rise in the government budget deficit

Accepted Answer

A)   increases the interest rate so in the market for foreign-currency exchange, supply shifts right.
B)   increases the interest rate so in the market for foreign-currency exchange,supply shifts left.
C)   decreases the interest rate so in the market for foreign-currency exchange, supply shifts left.
D)   decreases the interest rate so in the market for foreign-currency exchange supply shifts right.

Question 12

If the U.S. imposes a quota on cotton, then

Accepted Answer

A)   both exports and imports of other goods will rise.
B)   exports of other goods will rise and imports of other goods will fall.
C)   exports of other goods will fall and imports of other goods will rise.
D)   both imports and exports of other goods will fall.

Question 13

In the long run import quotas do not affect the size of net exports.

Accepted Answer

A) True 
 B)False

Question 14

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.

Question 15

In the open-economy macroeconomic model, the purchase of a capital asset by domestic residents adds to the demand for loanable funds

Accepted Answer

A)   only if the asset is located at home.
B)   only if the asset is located abroad.
C)   whether the asset is located at home or abroad.
D)   None of the above is correct.

Question 16

The real exchange rate measures the

Accepted Answer

A)   price of domestic currency relative to foreign currency.
B)   price of domestic goods relative to the price of foreign goods.
C)   rate of domestic and foreign interest.
D)   None of the above is correct.

Question 17

Which of the following will decrease U.S. net capital outflow?

Accepted Answer

A)   capital flight from the United States
B)   the government budget deficit increases
C)   the U.S. imposes import quotas
D)   None of the above is correct.

Question 18

If fear of default on bonds issued by U.S. corporations rise, 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.

Question 19

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.

Question 20

If at a given exchange rate foreign citizens wanted to buy fewer U.S bonds, then the

Accepted Answer

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

Exam 14: A Macroeconomic Theory of the Open Economy

If the demand for dollars in the market for foreign-currency exchange shifts left, then the exchange rate

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The real exchange rate measures the

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Net capital outflow represents the quantity of dollars supplied in the foreign-currency exchange market.

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If the U.S. imposes a quota on cotton, then

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In equilibrium which of the following happens if the U.S. imposes tariffs on leather boots?

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Suppose a country experiences capital flight. Of the demand for loanable funds and the supply of currency in the market for foreign-currency exchange, which shifts right?

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If a county becomes more likely to default on its bonds, what happens to that country's interest rate and exchange rate? Explain.

Correct AnswerverifiedA higher probability of default leads to...View AnswerShow Answer

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

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A rise in the government budget deficit

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A rise in the budget deficit

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At the equilibrium real interest rate in the open-economy macroeconomic model, the equilibrium quantity of loanable funds equals

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If at a given exchange rate foreign citizens wanted to buy fewer U.S bonds, then the

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Figure 14-2 -Refer to Figure 14-2. What are the equilibrium values of the real exchange rate and net exports?

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

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If the U.S. government imposes a quota on toy imports, then

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In the long run import quotas do not affect the size of net exports.

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In the open-economy macroeconomic model, the purchase of a capital asset by domestic residents adds to the demand for loanable funds

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If fear of default on bonds issued by U.S. corporations rise, then

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Which of the following will decrease U.S. net capital outflow?

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If there is a surplus in the market for loanable funds, the resulting change in the real interest rate

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A higher probability of default leads to...
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