Question 1

When the U.S.real interest rate falls,owning U.S.assets is

Accepted Answer

A)  less attractive and so U.S.net capital outflow rises.
B)  less attractive and so U.S.net capital outflow falls.
C)  more attractive and so U.S.net capital outflow rises.
D)  more attractive and so U.S.net capital outflow falls.

Question 2

Other things the same,when an Australian company imports sporting equipment from the U.S.,the open-economy macroeconomic model treats this transaction as an increase in the quantity of dollars demanded in the U.S.foreign-currency exchange market.

Accepted Answer

A) True 
 B)False

Question 3

In the open-economy macroeconomic model,other things the same,a decrease in the interest rate shifts

Accepted Answer

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

Question 4

Net capital outflow is equal to

Accepted Answer

A)  national saving minus the trade balance.
B)  domestic investment plus national saving.
C)  national saving minus domestic investment.
D)  domestic investment minus national saving.

Question 5

If the quantity of loanable funds supplied is greater than the quantity demanded,then

Accepted Answer

A)  there is a shortage of loanable funds and the interest rate will fall.
B)  there is a shortage of loanable funds and the interest rate will rise.
C)  there is a surplus of loanable funds and the interest rate will fall.
D)  there is a surplus of loanable funds and the interest rate will rise.

Question 6

In the open-economy macroeconomic model,the supply curve of currency is vertical because the quantity of currency supplied does not depend on the real exchange rate.

Accepted Answer

A) True 
 B)False

Question 7

Net capital outflow represents the quantity of dollars supplied in the foreign-currency exchange market.

Accepted Answer

A) True 
 B)False

Question 8

When Mexico suffered from capital flight in 1994,U.S.demand for loanable funds

Accepted Answer

A)  and U.S.net capital outflow rose.
B)  and U.S.net capital outflow fell.
C)  fell and U.S.net capital outflow rose.
D)  rose and U.S.net capital outflow fell.

Question 9

Which of the following is most likely to result if foreigners decide to withdraw the funds that they have loaned to the United States over the past two decades?

Accepted Answer

A)  U.S.net exports will rise.
B)  U.S.saving will rise.
C)  U.S.domestic investment will rise.
D)  the dollar will appreciate.

Question 10

The country of Meditor is politically very stable and has a long tradition of respecting property rights.If several other countries suddenly became politically unstable,we would expect Meditor's

Accepted Answer

A)  real interest rate to rise.
B)  real exchange rate to fall.
C)  net exports to fall.
D)  None of the above is likely.

Question 11

If there is capital flight from the United States,then the demand for loanable funds

Accepted Answer

A)  and the supply of dollars in the foreign-exchange market shift right.
B)  and the supply of dollars in the foreign-exchange market shift left.
C)  shifts left while the supply of dollars in the foreign-exchange market shifts right.
D)  shifts right while the supply of dollars in the foreign-exchange market shifts left.

Question 12

Suppose that the U.S.imposed an import quota on beef.Sales of U.S.beef producers would

Accepted Answer

A)  rise and exports of other industries would increase.
B)  rise and exports of other industries would decline.
C)  not change, exports of other industries would increase.
D)  not change, exports of other industries would decline.

Question 13

How are the identities S = NCO + I and NCO = NX related to the foreign currency exchange market and the loanable funds market?

Accepted Answer

S is national saving,which is the source...

Question 14

Which of the following would cause the real exchange rate of the U.S.dollar to depreciate?

Accepted Answer

A)  the U.S.government budget deficit increases
B)  capital flight from the United States
C)  the U.S.imposes import quotas
D)  None of the above is correct.

Question 15

-Refer to Figure 32-5.If the economy were initially in equilibrium at r₂ and E₃ and the government removed import quotas,the exchange rate would

Accepted Answer

A)  appreciate to E₄.
B)  appreciate to E₂.
C)  depreciate to E₁.
D)  depreciate to E₂.

Question 16

A drop in the Peruvian real interest rate reduces Peruvian net capital outflow.

Accepted Answer

A) True 
 B)False

Question 17

Because depreciation of the real exchange rate of the dollar increases U.S.net exports,the demand curve for dollars in the foreign-currency exchange market is downward sloping.

Accepted Answer

A) True 
 B)False

Question 18

In the open-economy macroeconomic model,if the supply of loanable funds increases,the interest rate

Accepted Answer

A)  and the real exchange rate increase.
B)  and the real exchange rate decrease.
C)  increases and the real exchange rate decreases.
D)  decreases and the real exchange rate increases.

Question 19

When Mexico suffered from capital flight in 1994,the U.S.real interest rate

Accepted Answer

A)  rose and the real exchange rate of the dollar appreciated.
B)  rose and the real exchange rate of the dollar depreciated.
C)  fell and the real exchange rate of the dollar appreciated.
D)  fell and the real exchange rate of the dollar depreciated.

Question 20

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

Accepted Answer

A)  U.S.citizens would buy more French bonds and French citizens would buy more U.S.bonds.
B)  U.S.citizens would buy more French bonds and French citizens would buy fewer U.S.bonds.
C)  U.S.citizens would buy fewer French bonds and French citizens would buy more U.S.bonds.
D)  U.S.citizens would buy fewer French bonds and French citizens would buy fewer U.S.bonds.

Exam 32: A Macroeconomic Theory of the Open Economy

Net capital outflow represents the quantity of dollars supplied in the foreign-currency exchange market.

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

Correct AnswerverifiedShow Answer

Which of the following would cause the real exchange rate of the U.S.dollar to depreciate?

Correct AnswerverifiedShow Answer

Net capital outflow is equal to

Correct AnswerverifiedShow Answer

Other things the same,when an Australian company imports sporting equipment from the U.S.,the open-economy macroeconomic model treats this transaction as an increase in the quantity of dollars demanded in the U.S.foreign-currency exchange market.

Correct AnswerverifiedShow Answer

If the quantity of loanable funds supplied is greater than the quantity demanded,then

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model,other things the same,a decrease in the interest rate shifts

Correct AnswerverifiedShow Answer

The country of Meditor is politically very stable and has a long tradition of respecting property rights.If several other countries suddenly became politically unstable,we would expect Meditor's

Correct AnswerverifiedShow Answer

Which of the following is most likely to result if foreigners decide to withdraw the funds that they have loaned to the United States over the past two decades?

Correct AnswerverifiedShow Answer

If there is capital flight from the United States,then the demand for loanable funds

Correct AnswerverifiedShow Answer

When Mexico suffered from capital flight in 1994,the U.S.real interest rate

Correct AnswerverifiedShow Answer

When the U.S.real interest rate falls,owning U.S.assets is

Correct AnswerverifiedShow Answer

When Mexico suffered from capital flight in 1994,U.S.demand for loanable funds

Correct AnswerverifiedShow Answer

-Refer to Figure 32-5.If the economy were initially in equilibrium at r₂ and E₃ and the government removed import quotas,the exchange rate would

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model,if the supply of loanable funds increases,the interest rate

Correct AnswerverifiedShow Answer

How are the identities S = NCO + I and NCO = NX related to the foreign currency exchange market and the loanable funds market?

Correct AnswerverifiedS is national saving,which is the source...View AnswerShow Answer

Because depreciation of the real exchange rate of the dollar increases U.S.net exports,the demand curve for dollars in the foreign-currency exchange market is downward sloping.

Correct AnswerverifiedShow Answer

Suppose that the U.S.imposed an import quota on beef.Sales of U.S.beef producers would

Correct AnswerverifiedShow Answer

A drop in the Peruvian real interest rate reduces Peruvian net capital outflow.

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model,the supply curve of currency is vertical because the quantity of currency supplied does not depend on the real exchange rate.

Correct AnswerverifiedShow Answer

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S is national saving,which is the source...
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