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Exam 32: A Macroeconomic Theory of the Open Economy

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Question 21

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What happens to each of the following if investment becomes less desirable at each interest rate? A. the interest rate B. net capital outflow C. the exchange rate

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The interest rate fa...

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Question 22

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If the United States raised its tariff on tires, then at the original exchange rate there would be a

A) surplus in the market for foreign-currency exchange, so the real exchange rate would appreciate.
B) surplus in the market for foreign-currency exchange, so the real exchange rate would depreciate.
C) shortage in the market for foreign-currency exchange, so the real exchange rate would appreciate.
D) shortage in the market for foreign-currency exchange, so the real exchange rate would depreciate.

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Question 23

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In 1998, the Russian government defaulted on its bonds. According to the open-economy macroeconomic model, this should have

What happens to net capital outflow as the real interest rate falls? Explain your answer.

Scenario 32-3 ​ Concerns raised about the declining U.S. shoe industry and unfair labor practices in foreign shoe factories lead the Congress and President to impose a quota on shoe imports. -Refer to Scenario 32-3. Overall as a result of this change in policy, what happens to exports, imports, and net exports?

Other things the same, if the U.S. interest rate rises, U.S. assets become ____ attractive. So, desired net capital outflow _____. This change in net capital outflow, shifts the __________ curve in the market for foreign-currency exchange to the ______.

In the open-economy macroeconomic model, the source of the supply of loanable funds is

If U.S. net exports are negative, then net capital outflow is

Figure 32-1 ​ -Refer to Figure 32-1. If the real interest rate is 7 percent, there will be a

A country has domestic investment of $260 billion. Its citizens purchase $605 billion of foreign assets and foreign citizens purchase $315 billion of its assets. What is national saving?

When a country imposes a trade quota, the demand for currency in the market for foreign exchange shifts to the right

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

Explain how the relation between the real exchange rate and net exports explains the downward slope of the demand for foreign-currency exchange curve.

The open-economy macroeconomic model examines the determination of

Figure 32-3 Refer to the following diagram of the open-economy macroeconomic model to answer the questions that follow. ​ Graph (a) Graph (b) Graph (c) ​ -Refer to Figure 32-3. At an interest rate of 4 percent, the diagram indicates that

According to the open-economy macroeconomic model, if the U.S. government budget deficit increases, then both U.S. domestic investment and U.S. net capital outflow decrease.

Scenario 32-5 ​ Suppose that Congress and the President enact legislation that provides a tax rebate to businesses that purchase capital goods. Assume other countries make no policy changes. -Refer to Scenario 32-5. In the market for loanable funds which curve shifts and which direction does it shift?

If there is a surplus of loanable funds, the quantity demanded is

Scenario 32-3 ​ Concerns raised about the declining U.S. shoe industry and unfair labor practices in foreign shoe factories lead the Congress and President to impose a quota on shoe imports. -Refer to Scenario 32-3. What is a quota? What is a tariff?

In the open-economy macroeconomic model, if there were a surplus in the market for foreign-currency exchange, the real exchange rate would appreciate.