Question 1

The open-economy macroeconomic model examines the determination of

Accepted Answer

A)  the output growth rate and the real interest rate.
B)  unemployment and the exchange rate.
C)  the output growth rate and the inflation rate.
D)  the trade balance and the exchange rate.

Question 2

If a country raises its budget deficit, then its

Accepted Answer

A)  net capital outflow and net exports rise.
B)  net capital outflow rises and net exports fall.
C)  net capital outflow falls and net exports rise.
D)  net capital outflow and net exports fall.

Question 3

The explanation for the slope of

Accepted Answer

A)  the supply of loanable funds curve is based on the logic that a higher real interest rate leads to higher saving.
B)  the demand for loanable funds curve is based on the logic that a higher interest rate leads to higher saving.
C)  the supply of loanable funds curve is based on the logic that a higher real interest rate leads to lower saving.
D)  the demand for loanable funds curve is based on the logic that a higher interest rate leads to lower saving.

Question 4

Which of the following could explain a decrease in the U.S. real exchange rate?

Accepted Answer

A)  the U.S. government budget deficit rises
B)  the U.S. impose import quotas
C)  the default risk of U.S. assets rise
D)  All of the above are correct.

Question 5

Which of the following would not be a consequence of an increase in the U.S. government budget deficit?

Accepted Answer

A)  U.S. interest rates rise.
B)  U.S. net capital outflow falls.
C)  The real exchange rate of the U.S. dollar depreciates.
D)  The U.S. supply of loanable funds shifts left.

Question 6

If the real exchange rate for the dollar is below the equilibrium level, the quantity of dollars supplied in the market for foreign-currency exchange is

Accepted Answer

A)  less than the quantity demanded and the dollar will appreciate.
B)  less than the quantity demanded and the dollar will depreciate.
C)  greater than the quantity demanded and the dollar will appreciate.
D)  greater than the quantity demanded and the dollar will depreciate.

Question 7

Other things the same, if the U.S. real exchange rate depreciated, then U.S. net exports would

Accepted Answer

A)  fall and the quantity of dollars demanded in the market for foreign-currency exchange would fall.
B)  fall and the quantity of dollars demanded in the market for foreign-currency exchange would rise.
C)  rise and the quantity of dollars demanded in the market for foreign-currency exchange would fall.
D)  rise and the quantity of dollars demanded in the market for foreign-currency exchange would rise.

Question 8

If the demand for net exports rises, which of the following happens in the open-economy macroeconomic model?

Accepted Answer

A)  the exchange rate rises
B)  the interest rate falls
C)  net capital outflow rises
D)  All of the above are correct.

Question 9

Capital flight reduces a country's real exchange rate.

Accepted Answer

A) True 
 B)False

Question 10

In 2002 it looked like the Argentinean government might default on its debt (which eventually it did) . The open-economy macroeconomic model predicts that this should have

Accepted Answer

A)  raised Argentinean interest rates and caused the Argentinean currency to appreciate.
B)  raised Argentinean interest rates and caused the Argentinean currency to depreciate.
C)  lowered Argentinean interest rates and caused the Argentinean currency to appreciate.
D)  lowered Argentinean interest rates and caused the Argentinean currency to depreciate.

Question 11

If the supply of dollars in the market for foreign-currency exchange shifts left, 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)  rises and the quantity of dollars exchanged rises.
D)  falls and the quantity of dollars exchanged does not change.

Question 12

Which of the following is most likely to increase the exports of a country?

Accepted Answer

A)  The government gives subsidies to firms that export goods or services.
B)  The government reduces the size of the budget surplus.
C)  Political instability within the country increases modestly.
D)  None of the above will increase exports.

Question 13

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.

Question 14

In the open-economy macroeconomic model, the market for loanable funds identity can be written as

Accepted Answer

A)  S = I
B)  S = NCO
C)  S = I + NCO
D)  S + I = NCO

Question 15

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

Accepted Answer

A)  greater than the quantity supplied and the interest rate will rise.
B)  greater than the quantity supplied and the interest rate will fall.
C)  less than the quantity supplied and the interest rate will rise.
D)  less than the quantity supplied and the interest rate will fall.

Question 16

In the open-economy macroeconomic model, the supply of dollars in the market for foreign-currency exchange comes from

Accepted Answer

A)  net exports
B)  net capital outflow
C)  net exports + net capital outflow
D)  net exports - net capital outflow

Question 17

Which of the following is consistent with moving from a surplus to equilibrium in the market for foreign currency exchange?

Accepted Answer

A)  the exchange rate falls causing U.S. residents to import more
B)  the exchange rate falls causing U.S. residents to import less
C)  the exchange rate rises causing U.S. residents to import more
D)  the exchange rate rises causing U.S. residents to import less

Question 18

In the open-economy macroeconomic model, the quantity of dollars demanded in the market for foreign-currency exchange

Accepted Answer

A)  depends on the real exchange rate. The quantity of dollars supplied in the foreign-exchange market depends on the real interest rate.
B)  depends on the real interest rate. The quantity of dollars supplied in the foreign-exchange market depends on the real exchange rate.
C)  and the quantity of dollars supplied in the market for foreign-currency exchange depend on the real exchange rate.
D)  and the quantity of dollars supplied in the market for foreign-currency exchange depend on the real interest rate.

Question 19

When a country's government budget deficit decreases,

Accepted Answer

A)  the real exchange rate of its currency and its net exports increase.
B)  the real exchange rate of its currency and its net exports decrease.
C)  the real exchange rate of its currency increases and its net exports decrease.
D)  the real exchange rate of its currency decreases and its net exports increase.

Question 20

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.

Exam 19: A Macroeconomic Theory of the Open Economy

If the demand for net exports rises, which of the following happens in the open-economy macroeconomic model?

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

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The explanation for the slope of

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Which of the following would not be a consequence of an increase in the U.S. government budget deficit?

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When a country's government budget deficit decreases,

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Other things the same, if the U.S. real exchange rate depreciated, then U.S. net exports would

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Which of the following is consistent with moving from a surplus to equilibrium in the market for foreign currency exchange?

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If a country raises its budget deficit, then its

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In the open-economy macroeconomic model, the supply of dollars in the market for foreign-currency exchange comes from

Correct AnswerverifiedShow Answer

In 2002 it looked like the Argentinean government might default on its debt (which eventually it did) . The open-economy macroeconomic model predicts that this should have

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following could explain a decrease in the U.S. real exchange rate?

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, the quantity of dollars demanded in the market for foreign-currency exchange

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Capital flight reduces a country's real exchange rate.

Correct AnswerverifiedShow Answer

The open-economy macroeconomic model examines the determination of

Correct AnswerverifiedShow Answer

If the real exchange rate for the dollar is below the equilibrium level, the quantity of dollars supplied in the market for foreign-currency exchange is

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, the market for loanable funds identity can be written as

Correct AnswerverifiedShow Answer

Which of the following is most likely to increase the exports of a country?

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