Question 1

Other things the same, if the U.S. interest rate rises, what happens to the net capital outflow of other countries?

Accepted Answer

As the U.S. real interest rate rises, U....

Question 2

If there is a surplus in the U.S. loanable funds market, then the interest rate

Accepted Answer

A)   rises, which increases quantity of loanable funds demanded.
B)   rises, which decreases the quantity of loanable funds demanded.
C)   falls, which increases the quantity of loanable funds demanded.
D)   falls, which decreases the quantity of loanable funds demanded.E) None of the above
F) All of the above

Question 3

A country has output of $600 billion, consumption of $350 billion, government expenditures of $90 billion and investment of $60 billion. What is its supply of loanable funds?

Accepted Answer

A)   $160 billion
B)   $150 billion
C)   $60 billion
D)   $30 billionE) B) and D)
F) All of the above

Question 4

Figure 32-1 
-Refer to Figure 32-1. If the real interest rate is 2 percent, there will be a

Accepted Answer

A)   surplus of $20 billion.
B)   surplus of $40 billion.
C)   shortage of $20 billion.
D)   shortage of $40 billion.E) A) and C)
F) C) and D)

Question 5

Which of the following would make both the equilibrium real interest rate and the equilibrium quantity of loanable funds increase?

Accepted Answer

A)   The demand for loanable funds shifts right.
B)   The demand for loanable funds shifts left.
C)   The supply of loanable funds shifts right.
D)   The supply of loanable funds shifts left.E) B) and C)
F) A) and D)

Question 6

In the open-economy macroeconomic model, at the equilibrium real interest rate, the amount that people including government) want to save exactly balances desired domestic investment.

Accepted Answer

A) True 
 B)False

Question 7

Refer to Budget in Recession. This change in the deficit causes net capital outflow to change. How is this change in net capital outflow shown in the market for foreign-currency exchange? What happens to the exchange rate?

Accepted Answer

The supply of domestic currenc...

Question 8

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

Accepted Answer

A)   U.S. supply of loanable funds, U.S. interest rates, U.S. domestic investment
B)   U.S. imports, U.S. interest rates, 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) All of the above
F) A) and B)

Question 9

Other things the same, an increase 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.E) A) and D)
F) All of the above

Question 10

Suppose that the United States imposes an import quota on televisions. In the open-economy macroeconomic model this quota shifts the

Accepted Answer

A)   U.S. supply of loanable funds left.
B)   U.S. demand for loanable funds left.
C)   demand for U.S. dollars in the market for foreign-currency exchange right.
D)   supply of U.S. dollars in the market for foreign-currency exchange left.E) A) and B)
F) B) and D)

Question 11

Which of the following is always correct in an open economy?

Accepted Answer

A)   S = I
B)   S = NX + NCO
C)   S = NCO
D)   S = I + NCOE) B) and C)
F) A) and D)

Question 12

In an open economy, the source of the demand for loanable funds is

Accepted Answer

A)   national saving
B)   national saving + net capital outflow
C)   investment + the government budget deficit
D)   investment + net capital outflowE) A) and B)
F) None of the above

Question 13

Over the past two decades the U.S. has persistently had trade deficits.

Accepted Answer

A) True 
 B)False

Question 14

In the open­economy macroeconomic model, if a country's interest rate falls, then its

Accepted Answer

A)   net capital outflow and its 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 its net exports fall.E) None of the above
F) B) and C)

Question 15

A country has private saving of $500 billion, public saving of -$100 billion, domestic investment of $150 billion, and net capital outflow of $250 billion. What is its supply of loanable funds?

Accepted Answer

A)   $650 billion
B)   $600 billion
C)   $400 billion
D)   $350 billionE) A) and D)
F) B) and D)

Question 16

A firm produces construction equipment, some of which it exports. Which of the following effects of an increase in the government budget deficit would likely reduce the quantity of equipment it sells?

Accepted Answer

A)   the change in the interest rate and the change in the exchange rate
B)   the change in the interest rate but not the change in the exchange rate
C)   the change in the exchange rate but not the change in the interest rate
D)   neither the change in the interest rate nor the change in the exchange rateE) None of the above
F) B) and C)

Question 17

A decrease in the budget deficit causes domestic interest rates

Accepted Answer

A)   and investment to rise.
B)   to rise and investment to fall.
C)   to fall and investment to rise.
D)   and investment to fall.E) A) and B)
F) A) and C)

Question 18

If the U.S. imposed import quotas on cotton, 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) None of the above
F) C) and D)

Question 19

If the U.S. imposed an import quota on farm machinery, then sales of U.S. farm machinery equipment producers would

Accepted Answer

A)   rise and the exports of other U.S. industries would rise.
B)   rise and the exports of other U.S. industries would fall.
C)   fall and the exports of other U.S. industries would rise.
D)   fall and the exports of other U.S. industries would fall.E) B) and C)
F) All of the above

Question 20

If the United States imposes an import quota on clothing, then U.S. exports

Accepted Answer

A)   increase, U.S. imports increase, and U.S. net exports will not change.
B)   increase, U.S. imports decrease, and U.S. net exports increase.
C)   decrease, U.S. imports increase, and U.S. net exports decrease.
D)   decrease, U.S. imports decrease, and U.S. net exports will not change.E) None of the above
F) A) and B)

Exam 19: A Macroeconomic Theory of the Open Economy

If the U.S. imposed an import quota on farm machinery, then sales of U.S. farm machinery equipment producers would

Correct AnswerverifiedShow Answer

If there is a surplus in the U.S. loanable funds market, then the interest rate

Correct AnswerverifiedShow Answer

A country has output of $600 billion, consumption of $350 billion, government expenditures of $90 billion and investment of $60 billion. What is its supply of loanable funds?

Correct AnswerverifiedShow Answer

Other things the same, if the U.S. interest rate rises, what happens to the net capital outflow of other countries?

Correct AnswerverifiedAs the U.S. real interest rate rises, U....View AnswerShow Answer

Suppose that the United States imposes an import quota on televisions. In the open-economy macroeconomic model this quota shifts the

Correct AnswerverifiedShow Answer

A firm produces construction equipment, some of which it exports. Which of the following effects of an increase in the government budget deficit would likely reduce the quantity of equipment it sells?

Correct AnswerverifiedShow Answer

A country has private saving of $500 billion, public saving of -$100 billion, domestic investment of $150 billion, and net capital outflow of $250 billion. What is its supply of loanable funds?

Correct AnswerverifiedShow Answer

In the open­economy macroeconomic model, if a country's interest rate falls, then its

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A decrease in the budget deficit causes domestic interest rates

Correct AnswerverifiedShow Answer

Refer to Budget in Recession. This change in the deficit causes net capital outflow to change. How is this change in net capital outflow shown in the market for foreign-currency exchange? What happens to the exchange rate?

Correct AnswerverifiedThe supply of domestic currenc...View AnswerShow Answer

Which of the following would make both the equilibrium real interest rate and the equilibrium quantity of loanable funds increase?

Correct AnswerverifiedShow Answer

If the United States imposes an import quota on clothing, then U.S. exports

Correct AnswerverifiedShow Answer

If the U.S. imposed import quotas on cotton, then which of the following would rise?

Correct AnswerverifiedShow Answer

Over the past two decades the U.S. has persistently had trade deficits.

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, at the equilibrium real interest rate, the amount that people including government) want to save exactly balances desired domestic investment.

Correct AnswerverifiedShow Answer

Which of the following is always correct in an open economy?

Correct AnswerverifiedShow Answer

In an open economy, the source of the demand for loanable funds is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 32-1 -Refer to Figure 32-1. If the real interest rate is 2 percent, there will be a

Correct AnswerverifiedShow Answer

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As the U.S. real interest rate rises, U....
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In the openeconomy macroeconomic model, if a country's interest rate falls, then its

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The supply of domestic currenc...
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