Question 1

In equilibrium a country has a net capital outflow of $200 billion and domestic investment of $150 billion. What is the quantity of loanable funds demanded?

Accepted Answer

A)   $50 billion
B)   $150 billion
C)   $200 billion
D)   $350 billion

Question 2

Figure 32-1 
-Refer to Figure 32-1. If the real interest rate is 6 percent, the quantity of loanable funds demanded is

Accepted Answer

A)   $20 billion, and the quantity supplied is $40 billion.
B)   $20 billion, and the quantity supplied is $60 billion.
C)   $60 billion, and the quantity supplied is $20 billion.
D)   $60 billion, and the quantity supplied is $40 billion.

Question 3

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 billion

Question 4

If a country repeals an investment tax credit,

Accepted Answer

A)   net capital outflow and the real exchange rate rise.
B)   net capital outflow rises and the real exchange rate falls.
C)   net capital outflow falls and the real exchange rate rises.
D)   net capital outflow and the real exchange rate fall.

Question 5

An increase in the budget deficit makes domestic interest rates

Accepted Answer

A)   rise because the supply of loanable funds shifts left.
B)   fall because the supply of loanable funds shifts left.
C)   rise because the demand for loanable funds shifts right.
D)   fall because the demand for loanable funds shifts right.

Question 6

An import quota imposed by the U.S. would reduce U.S. imports, but have no impact on U.S. exports.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following would both make a country's real exchange rate rise?

Accepted Answer

A)   its budget deficit increases and bonds issued in the country become riskier
B)   bonds issued in that country become riskier and it imposes an import quota
C)   it imposes an import quota and the budget deficit increases
D)   None of the above are correct.

Question 8

Other things the same, when a Canadian company imports bicycles from the U.S., the open-economy macroeconomic model treats this transaction as part of the demand for dollars in the U.S. foreign-currency exchange market.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A)   net exports and the real exchange rate rise.
B)   net exports rise and the real exchange rate falls.
C)   net exports fall and the real exchange rate rises.
D)   net exports and the real exchange rate fall.

Question 10

In the open-economy macroeconomic model, the amount of net capital outflow represents the quantity of dollars

Accepted Answer

A)   supplied for the purpose of selling assets domestically.
B)   supplied for the purpose of buying foreign assets.
C)   demanded for the purpose of buying U.S. net exports of goods and services.
D)   demanded for the purpose of importing foreign goods and services.

Question 11

If a government increases its budget deficit, then domestic interest rates

Accepted Answer

A)   and net exports rise.
B)   rise and net exports fall.
C)   fall and net exports rise.
D)   and net exports fall.

Question 12

If the real interest rate were above the equilibrium rate, there would be a shortage of loanable funds.

Accepted Answer

A) True 
 B)False

Question 13

An increase in a country's real interest rate reduces that country's net capital outflow.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is the most accurate statement?

Accepted Answer

A)   Trade policy has neither microeconomic nor macroeconomic effects.
B)   Trade policy has similar microeconomic and macroeconomic effects.
C)   The effects of trade policy are more macroeconomic than microeconomic.
D)   The effects of trade policy are more microeconomic than macroeconomic.

Question 15

Which of the following decrease if the U.S. imposes an import quota on computer components?

Accepted Answer

A)   U.S. exports and U.S. imports
B)   U.S. exports but not U.S. imports
C)   U.S. imports but not U.S. exports
D)   neither U.S. exports nor U.S. imports

Question 16

Why do higher real interest rates lead to lower net capital outflow?

Accepted Answer

Higher domestic interest rates make dome...

Question 17

A U.S. grocery chain borrows money to buy a warehouse in Ohio and another in Italy. Borrowing for which warehouses)  is included in the demand for loanable funds in the U.S.?

Accepted Answer

A)   both the one in Ohio and the one in Italy
B)   only the one in Ohio
C)   only the one in Italy
D)   neither the one in Ohio nor the one in Italy

Question 18

Figure 32-5
Refer to this diagram of the open-economy macroeconomic model to answer the questions below. 
-Refer to Figure 32-5. Starting from 3% and .75, an increase in the government budget surplus can be illustrated as a move to

Accepted Answer

A)   4% and 1
B)   4% and .5
C)   2% and 1
D)   2% and .5

Question 19

Figure 32-7
Refer to this diagram of the open-economy macroeconomic model of the Mexican economy to answer the questions below.
 
-Refer to Figure 32-7. Suppose that the Mexican economy starts at r2 and e3. Which of the following is consistent with the effects of capital flight?

Accepted Answer

A)   a shift from D2 to D1 in Panel A
B)   a shift from NCO1 to NCO2 in Panel B
C)   a shift from D2 to D1 in Panel C
D)   All of the above shifts are consistent with the effects of capital flight.

Question 20

Suppose the real exchange rate is such that the market for foreign-currency exchange has a surplus. This surplus will lead to

Accepted Answer

A)   an appreciation of the dollar, an increase in U.S. net exports, and so an increase in the quantity of dollars demanded in the foreign exchange market.
B)   an appreciation of the dollar, a decrease in U.S. net exports, and so a decrease in the quantity of dollars demanded in the foreign exchange market.
C)   a depreciation of the dollar, an increase in U.S. net exports, and so an increase in the quantity of dollars demanded in the foreign exchange market.
D)   a depreciation of the dollar, a decrease in U.S. net exports, and so a decrease in the quantity of dollars demanded in the foreign exchange market.

Exam 14: A Macroeconomic Theory of the Open Economy

Which of the following would both make a country's real exchange rate rise?

Correct AnswerverifiedShow Answer

Other things the same, when a Canadian company imports bicycles from the U.S., the open-economy macroeconomic model treats this transaction as part of the demand for dollars in the U.S. foreign-currency exchange market.

Correct AnswerverifiedShow Answer

Why do higher real interest rates lead to lower net capital outflow?

Correct AnswerverifiedHigher domestic interest rates make dome...View AnswerShow Answer

An import quota imposed by the U.S. would reduce U.S. imports, but have no impact on U.S. exports.

Correct AnswerverifiedShow Answer

Figure 32-7 Refer to this diagram of the open-economy macroeconomic model of the Mexican economy to answer the questions below. -Refer to Figure 32-7. Suppose that the Mexican economy starts at r2 and e3. Which of the following is consistent with the effects of capital flight?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An increase in the budget deficit makes domestic interest rates

Correct AnswerverifiedShow Answer

If a country repeals an investment tax credit,

Correct AnswerverifiedShow Answer

An increase in a country's real interest rate reduces that country's net capital outflow.

Correct AnswerverifiedShow Answer

Figure 32-1 -Refer to Figure 32-1. If the real interest rate is 6 percent, the quantity of loanable funds demanded is

Correct AnswerverifiedShow Answer

If a government increases its budget deficit, then domestic interest rates

Correct AnswerverifiedShow Answer

A U.S. grocery chain borrows money to buy a warehouse in Ohio and another in Italy. Borrowing for which warehouses) is included in the demand for loanable funds in the U.S.?

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, the amount of net capital outflow represents the quantity of dollars

Correct AnswerverifiedShow Answer

Which of the following is the most accurate statement?

Correct AnswerverifiedShow Answer

Which of the following decrease if the U.S. imposes an import quota on computer components?

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

Figure 32-5 Refer to this diagram of the open-economy macroeconomic model to answer the questions below. -Refer to Figure 32-5. Starting from 3% and .75, an increase in the government budget surplus can be illustrated as a move to

Correct AnswerverifiedShow Answer

In equilibrium a country has a net capital outflow of $200 billion and domestic investment of $150 billion. What is the quantity of loanable funds demanded?

Correct AnswerverifiedShow Answer

If the real interest rate were above the equilibrium rate, there would be a shortage of loanable funds.

Correct AnswerverifiedShow Answer

Suppose the real exchange rate is such that the market for foreign-currency exchange has a surplus. This surplus will lead to

Correct AnswerverifiedShow Answer

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Higher domestic interest rates make dome...
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