Question 1

If the demand for dollars in the market for foreign-currency exchange shifts right, 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 2

If the government of a country with a zero trade balances increases its budget deficit, then interest rates

Accepted Answer

A)   rise and the trade balance moves to a surplus.
B)   rise and the trade balance moves to a deficit.
C)   fall and the trade balance moves to a surplus.
D)   fall and the trade balance moves to a deficit.

Question 3

In the open-economy macroeconomic model, the supply of dollars in the market for foreign-currency exchange is upward sloping.

Accepted Answer

A) True 
 B)False

Question 4

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 5

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 6

A U.S.-imposed quota on appliances would shift

Accepted Answer

A)   both the demand and supply curves in the market for foreign-currency exchange right
B)   both the demand and supply curves in the market for foreign-currency exchange right.
C)   only the demand curve in the market for foreign-currency exchange right.
D)   only the supply curve in the market for foreign-currency exchange right

Question 7

An increase in a country's budget surplus shifts its

Accepted Answer

A)   demand for loanable funds right and decreases investment spending.
B)   supply of loanable funds right and increases investment spending.
C)   supply of loanable funds left and decreases investment spending.
D)   None of the above is correct.

Question 8

If interest rates rise in the U.S., then other things the same

Accepted Answer

A)   foreigners would buy more U.S. bonds which increases the quantity of loanable funds demanded in the U.S.
B)   foreigners would buy more U.S. bonds which reduces the quantity of loanable funds demanded in the U.S.
C)   foreigners would buy fewer U.S. bonds which increases the quantity of loanable funds demanded in the U.S.
D)   foreigners would buy fewer U.S. bonds which reduces the quantity of loanable funds demanded in the U.S.

Question 9

In the open-economy macroeconomic model, if the supply of loanable funds shifts left

Accepted Answer

A)   the interest rate rises and the supply of dollars in the market for foreign currency exchange shifts right.
B)   the interest rate rises and the supply of dollars in the market for foreign currency exchange shifts left.
C)   the interest rate falls and the demand for dollars in the market for foreign currency exchange shifts right.
D)   the interest rate falls and the demand for dollars in the market for foreign currency exchange shifts left.

Question 10

In the open-economy macroeconomic model, if investment demand increases, then

Accepted Answer

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

Question 11

Which of the following could explain a decrease in the U.S. real exchange rate?

Accepted Answer

A)   the U.S. government budget deficit rises
B)   the U.S. impose import quotas
C)   the default risk of U.S. assets rise
D)   All of the above are correct.

Question 12

In the open-economy macroeconomic model, if a country's interest rate rises, then its

Accepted Answer

A)   net capital outflow and net exports rise.
B)   net capital outflow rises and its net exports fall.
C)   net capital outflow falls and its net exports rise.
D)   net capital outflow and net exports fall.

Question 13

In the open-economy macroeconomic model, if the U.S. interest rate rises, then its

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.

Question 14

Suppose a presidential candidate promises to increase the government budget surplus and claims that doing so will stop U.S. citizens from investing in foreign companies and increase the value of the dollar. Evaluate this promise.

Accepted Answer

An increase in the government budget sur...

Question 15

If the British government raised its budget deficit, then the pound (Britain's currency)  would

Accepted Answer

A)   depreciate and British net exports would rise.
B)   depreciate and British net exports would fall.
C)   appreciate and British net exports would rise.
D)   appreciate and British net exports would fall.

Question 16

In which case(s)  does(do)  a country's supply of loanable funds shift left?

Accepted Answer

A)   both an increase in the budget deficit and capital flight
B)   an increase in the budget deficit, but not capital flight
C)   capital flight, but not an increase in the budget deficit
D)   neither an increase in the budget deficit nor capital flight

Question 17

When a country experiences capital flight its

Accepted Answer

A)   net capital outflow increases and its real exchange rate rises.
B)   net capital outflow increases and its real exchange rate falls.
C)   net capital outflow decreases and its real exchange rate rises.
D)   net capital outflow decreases and its real exchange rate falls.

Question 18

If a country has a positive net capital outflow, then

Accepted Answer

A)   on net it is purchasing assets from abroad. This adds to its demand for domestically generated loanable funds.
B)   on net it is purchasing assets from abroad. This subtracts from its demand for domestically generated loanable funds.
C)   on net other countries are purchasing assets from it. This adds to its demand for domestically generated loanable funds.
D)   on net other countries are purchasing assets from it. This subtracts from its demand for domestically generated loanable funds.

Question 19

In the open-economy macroeconomic model, if the real exchange rate of the U.S. dollar were above its equilibrium level, the real exchange rate of the U.S. dollar would appreciate.

Accepted Answer

A) True 
 B)False

Question 20

A large and sudden movement of funds out of a country is called

Accepted Answer

A)   arbitrage.
B)   capital flight.
C)   crowding out.
D)   capital mobility.

Exam 14: A Macroeconomic Theory of the Open Economy

Suppose a presidential candidate promises to increase the government budget surplus and claims that doing so will stop U.S. citizens from investing in foreign companies and increase the value of the dollar. Evaluate this promise.

Correct AnswerverifiedAn increase in the government budget sur...View AnswerShow Answer

In the open-economy macroeconomic model, if the real exchange rate of the U.S. dollar were above its equilibrium level, the real exchange rate of the U.S. dollar would appreciate.

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, if the U.S. interest rate rises, then its

Correct AnswerverifiedShow Answer

If the British government raised its budget deficit, then the pound (Britain's currency) would

Correct AnswerverifiedShow Answer

If a country has a positive net capital outflow, then

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, if investment demand increases, then

Correct AnswerverifiedShow Answer

An increase in a country's budget surplus shifts its

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, if a country's interest rate rises, then its

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, the supply of dollars in the market for foreign-currency exchange is upward sloping.

Correct AnswerverifiedShow Answer

If the government of a country with a zero trade balances increases its budget deficit, then interest rates

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, if the supply of loanable funds shifts left

Correct AnswerverifiedShow Answer

If interest rates rise in the U.S., then other things the same

Correct AnswerverifiedShow Answer

A large and sudden movement of funds out of a country is called

Correct AnswerverifiedShow Answer

Which of the following could explain a decrease in the U.S. real exchange rate?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In which case(s) does(do) a country's supply of loanable funds shift left?

Correct AnswerverifiedShow Answer

When a country experiences capital flight its

Correct AnswerverifiedShow Answer

A U.S.-imposed quota on appliances would shift

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified
An increase in the government budget sur...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified