Question 1

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 2

Which of the following is included in the supply of U.S. dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

Accepted Answer

A)   a U.S. bank loans dollars to Tom to buy a U.S. made motorcycle
B)   a U.S. tire maker wants to build a new factory in China
C)   a U.S. company wants to import goods to sell in its retail stores
D)   All of the above are correct.

Question 3

The real exchange rate measures the

Accepted Answer

A)   price of domestic currency relative to foreign currency.
B)   price of domestic goods relative to the price of foreign goods.
C)   rate of domestic and foreign interest.
D)   None of the above is correct.

Question 4

Which of the following is the most accurate statement?

Accepted Answer

A)   Trade policy has neither microeconomic nor macroeconomic effects.
B)   Trade policy has similar microeconomic and macroeconomic effects.
C)   The effects of trade policy are more macroeconomic than microeconomic.
D)   The effects of trade policy are more microeconomic than macroeconomic.

Question 5

If people in the U.S. choose to save a smaller percentage of income, what will happen to the interest rate, net capital outflow, the exchange rate, and net exports?

Accepted Answer

The interest rate will rise, n...

Question 6

Suppose that the U.S. government budget deficit decreases. What curves in the open-economy macroeconomic model shift? Explain why each curve shifts the direction it does.

Accepted Answer

The supply of loanable funds curve shift...

Question 7

At the equilibrium real interest rate in the open-economy macroeconomic model, the equilibrium quantity of loanable funds equals

Accepted Answer

A)   net capital outflow.
B)   domestic investment.
C)   foreign currency supplied.
D)   national saving.

Question 8

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

Accepted Answer

A)   national saving
B)   domestic investment
C)   net exports
D)   net capital outflow

Question 9

Refer to Budget in Recession. What does this change in the deficit do to net capital outflows? Defend your answer.

Accepted Answer

Net capital outflow falls because the do...

Question 10

In the open-economy macroeconomic model, the demand for dollars shifts right if at any given exchange rate

Accepted Answer

A)   foreign residents want to buy more U.S. goods and services.
B)   U.S. residents want to buy fewer foreign goods and services.
C)   Both A and B are correct.
D)   None of the above is correct.

Question 11

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 12

A country has output of $900 billion, consumption of $600 billion, government expenditures of $150 billion and investment of $120 billion. What is its supply of loanable funds?

Accepted Answer

A)   $30 billion
B)   $90 billion
C)   $120 billion
D)   $150 billion

Question 13

Which of the following is the most likely result from an increase in a country's government budget surplus?

Accepted Answer

A)   higher interest rates
B)   lower imports
C)   lower net capital outflows
D)   lower domestic investment

Question 14

In which cases)  doesdo)  a country's supply of loanable funds shift right?

Accepted Answer

A)   both an increase in the budget deficit and capital flight
B)   an increase in the budget deficit, but not capital flight
C)   capital flight, but not an increase in the budget deficit
D)   neither an increase in the budget deficit nor capital flight

Question 15

In 2009 Greece's budget deficit rose and people became worried about the ability of the Greek government to continue to make payments on its debt. Which of these events raise a country's interest rates?

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 debt

Question 16

Which of the following decrease if the U.S. imposes an import quota on computer components?

Accepted Answer

A)   U.S. exports and U.S. imports
B)   U.S. exports but not U.S. imports
C)   U.S. imports but not U.S. exports
D)   neither U.S. exports nor U.S. imports

Question 17

Suppose that U.S. savers decide that holding Brazilian assets has become riskier. What happens to U.S. net capital outflow? What happens to the U.S. real interest rate?

Accepted Answer

U.S. net capital outflow decre...

Question 18

If a government of a country with a zero trade balance increases its budget deficit, then the real exchange rate

Accepted Answer

A)   appreciates and there is a trade surplus.
B)   appreciates and there is a trade deficit.
C)   depreciates and there is a trade surplus.
D)   depreciates and there is a trade deficit.

Question 19

In the long run import quotas do not affect the size of net exports.

Accepted Answer

A) True 
 B)False

Question 20

In the open-economy macroeconomic model, the key determinant of net capital outflow is the

Accepted Answer

A)   nominal exchange rate.
B)   nominal interest rate.
C)   real exchange rate.
D)   real interest rate.

Exam 19: A Macroeconomic Theory of the Open Economy

Suppose that the U.S. government budget deficit decreases. What curves in the open-economy macroeconomic model shift? Explain why each curve shifts the direction it does.

Correct AnswerverifiedThe supply of loanable funds curve shift...View AnswerShow Answer

Which of the following decrease if the U.S. imposes an import quota on computer components?

Correct AnswerverifiedShow Answer

A country has output of $900 billion, consumption of $600 billion, government expenditures of $150 billion and investment of $120 billion. What is its supply of loanable funds?

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, the demand for dollars shifts right if at any given exchange rate

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In 2009 Greece's budget deficit rose and people became worried about the ability of the Greek government to continue to make payments on its debt. Which of these events raise a country's interest rates?

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

The real exchange rate measures the

Correct AnswerverifiedShow Answer

In the long run import quotas do not affect the size of net exports.

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, the key determinant of net capital outflow is the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is included in the supply of U.S. dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

Correct AnswerverifiedShow Answer

Which of the following is the most likely result from an increase in a country's government budget surplus?

Correct AnswerverifiedShow Answer

Refer to Budget in Recession. What does this change in the deficit do to net capital outflows? Defend your answer.

Correct AnswerverifiedNet capital outflow falls because the do...View AnswerShow Answer

Which of the following is the most accurate statement?

Correct AnswerverifiedShow Answer

In which cases) doesdo) a country's supply of loanable funds shift right?

Correct AnswerverifiedShow Answer

If a government of a country with a zero trade balance increases its budget deficit, then the real exchange rate

Correct AnswerverifiedShow Answer

Suppose that U.S. savers decide that holding Brazilian assets has become riskier. What happens to U.S. net capital outflow? What happens to the U.S. real interest rate?

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

If people in the U.S. choose to save a smaller percentage of income, what will happen to the interest rate, net capital outflow, the exchange rate, and net exports?

Correct AnswerverifiedThe interest rate will rise, n...View AnswerShow Answer

At the equilibrium real interest rate in the open-economy macroeconomic model, the equilibrium quantity of loanable funds equals

Correct AnswerverifiedShow Answer

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The supply of loanable funds curve shift...
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Net capital outflow falls because the do...
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U.S. net capital outflow decre...
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The interest rate will rise, n...
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