Question 1

If U.S. residents want to buy more foreign bonds, then in the market for foreign-currency exchange the exchange rate

Accepted Answer

A)  and the quantity of dollars traded rises.
B)  rises and the quantity of dollars traded falls.
C)  falls and the quantity of dollars traded rises.
D)  and the quantity of dollars traded falls.E) None of the above
F) A) and B)

Question 2

Suppose that U.S. investors decide that investment opportunities in African countries have improved. What happens to U.S. net capital outflow? What happens to the U.S. real interest rate?

Accepted Answer

U.S. net capital outflow will ...

Question 3

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.E) None of the above
F) B) and C)

Question 4

When the real exchange rate for the dollar depreciates, U.S. goods become

Accepted Answer

A)  less expensive relative to foreign goods, which makes exports rise and imports fall.
B)  less expensive relative to foreign goods, which makes exports fall and imports rise.
C)  more expensive relative to foreign goods, which makes exports rise and imports fall.
D)  more expensive relative to foreign goods, which makes exports fall and imports rise.E) C) and D)
F) A) and C)

Question 5

Other things the same, a higher real exchange rate reduces net exports.

Accepted Answer

A) True 
 B)False

Question 6

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.E) None of the above
F) C) and D)

Question 7

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 8

A country has national saving of $80 billion, government expenditures of $40 billion, domestic investment of $60 billion, and net capital outflow of $20 billion. What is its demand for loanable funds?

Accepted Answer

A)  $40 billion
B)  $60 billion
C)  $80 billion
D)  $120 billionE) A) and B)
F) C) and D)

Question 9

Which of the following contains a list only of things that increase when the budget deficit of the U.S. decreases?

Accepted Answer

A)  U.S. supply of loanable funds, U.S. net capital outflow, U.S. domestic investment
B)  U.S. supply of loanable funds, U.S. exports, the real exchange rate of the dollar
C)  U.S. interest rates, the real exchange rate of the dollar, U.S. domestic investment
D)  the real exchange rate of the dollar, U.S. net capital outflow, U.S. net exportsE) B) and D)
F) All of the above

Question 10

If there is a shortage of loanable funds, then

Accepted Answer

A)  the demand for loanable funds will shift right so the real interest rate rises.
B)  the supply of loanable funds will shift left so the real interest rate falls.
C)  there will be no shifts of the curves, but the real interest rate rises.
D)  there will be no shifts of the curves, but the real interest rate falls.E) A) and C)
F) A) and B)

Question 11

Which of the following contains a list only of things that decrease when the budget deficit of the U.S. increases?

Accepted Answer

A)  U.S. net exports, U.S. domestic investment, U.S. net capital outflow
B)  U.S. supply of loanable funds, U.S. interest rates, U.S. domestic investment
C)  U.S. imports, U.S. interest rates, the real exchange rate of the dollar
D)  None of the above is correct.E) B) and D)
F) All of the above

Question 12

A higher U.S. interest rate discourages Americans from buying foreign assets and encourages foreigners to buy U.S. assets.

Accepted Answer

A) True 
 B)False

Question 13

If interest rates rose more in the U.S. than in Canada, then other things the same

Accepted Answer

A)  U.S. citizens would buy more Canadian bonds and Canadian citizens would buy more U.S. bonds.
B)  U.S. citizens would buy more Canadian bonds and Canadian citizens would buy fewer U.S. bonds.
C)  U.S. citizens would buy fewer Canadian bonds and Canadian citizens would buy more U.S. bonds.
D)  U.S. citizens would buy fewer Canadian bonds and Canadian citizens would buy fewer U.S. bonds.E) C) and D)
F) None of the above

Question 14

Other things the same, if the Swedish real interest rate were to decrease, Swedish net capital outflow

Accepted Answer

A)  and net capital outflow of other countries would rise.
B)  and net capital outflow of other countries would fall.
C)  would rise, while net capital outflow of other countries would fall.
D)  would fall, while net capital outflow of other countries would rise.E) B) and D)
F) A) and B)

Question 15

Recently Greece ran large deficits and people became worried about the ability of its government to make payments on its debt. Which of the these events reduces a country's real exchange rate?

Accepted Answer

A)  an increase in the budget deficit, and increased concerns about the ability of the government to pay back its debt
B)  an increase in the budget deficit, but not increased concerns about the ability of the government to pay back its debt
C)  increased concerns about the ability of the government to pay back its debt, but not an increase in the budget deficit
D)  neither an increase in the budget deficit, nor increased concerns about the ability of the government to pay back its debtE) A) and D)
F) A) and B)

Question 16

If the exchange rate falls, U.S. residents pay

Accepted Answer

A)  more dollars for foreign bonds and get more dollars from interest payments.
B)  more dollars for foreign bonds but get fewer dollars from interest payments.
C)  fewer dollars for foreign bonds and also get fewer dollars from interest payments.
D)  fewer dollars for foreign bonds but get more dollars from interest payments.E) C) and D)
F) None of the above

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.E) A) and B)
F) A) and C)

Question 18

If the U.S. imposed an import quota on apples, then which of the following would rise?

Accepted Answer

A)  the U.S. real exchange rate and U.S. net exports
B)  the U.S. real exchange rate but not U.S. net exports
C)  U.S. net exports but not the U.S. real exchange rate
D)  neither the U.S. real exchange rate nor U.S. net exportsE) A) and D)
F) None of the above

Question 19

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

Accepted Answer

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

Question 20

The open-economy macroeconomic model takes

Accepted Answer

A)  GDP, but not the price level as given.
B)  the price level, but not GDP as given.
C)  both the price level and GDP as given.
D)  the price level and GDP as variables to be determined by the model.E) A) and B)
F) B) and D)

Exam 19: A Macroeconomic Theory of the Open Economy

Which of the following contains a list only of things that increase when the budget deficit of the U.S. decreases?

Correct AnswerverifiedShow Answer

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

Suppose that U.S. investors decide that investment opportunities in African countries have improved. What happens to U.S. net capital outflow? What happens to the U.S. real interest rate?

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

The open-economy macroeconomic model takes

Correct AnswerverifiedShow Answer

When the real exchange rate for the dollar depreciates, U.S. goods become

Correct AnswerverifiedShow Answer

If there is a shortage of loanable funds, then

Correct AnswerverifiedShow Answer

If interest rates rose more in the U.S. than in Canada, then other things the same

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the exchange rate falls, U.S. residents pay

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the U.S. imposed an import quota on apples, then which of the following would rise?

Correct AnswerverifiedShow Answer

Recently Greece ran large deficits and people became worried about the ability of its government to make payments on its debt. Which of the these events reduces a country's real exchange rate?

Correct AnswerverifiedShow Answer

Which of the following contains a list only of things that decrease when the budget deficit of the U.S. increases?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A higher U.S. interest rate discourages Americans from buying foreign assets and encourages foreigners to buy U.S. assets.

Correct AnswerverifiedShow Answer

Other things the same, a higher real exchange rate reduces net exports.

Correct AnswerverifiedShow Answer

Other things the same, if the Swedish real interest rate were to decrease, Swedish net capital outflow

Correct AnswerverifiedShow Answer

If U.S. residents want to buy more foreign bonds, then in the market for foreign-currency exchange the exchange rate

Correct AnswerverifiedShow Answer

A country has national saving of $80 billion, government expenditures of $40 billion, domestic investment of $60 billion, and net capital outflow of $20 billion. What is its demand for loanable funds?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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An increase in the government budget sur...
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U.S. net capital outflow will ...
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