Question 1

Figure 32-7
Refer to this diagram of the open-economy macroeconomic model of the Mexican economy to answer the questions below. 
-Refer to Figure 32-7. Suppose that the Mexican economy starts at r2 and e3. Which of the following is consistent with the effects of capital flight?

Accepted Answer

A)   a shift from D2 to D1 in Panel A
B)   a shift from NCO1 to NCO2 in Panel B
C)   a shift from D2 to D1 in Panel C
D)   All of the above shifts are consistent with the effects of capital flight.

Question 2

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 3

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

Accepted Answer

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

Question 4

Refer to Depositors Move Funds Out of Greek Banks. Because of depositors reactions what happened to net capital outflow?

Accepted Answer

Greece's n...

Question 5

According to the open-economy macroeconomic model, import quotas increase which of the following

Accepted Answer

A)   net exports and net capital outflow
B)   net exports but not net capital outflow.
C)   net capital outflow but not net exports.
D)   neither net exports nor net capital outflow.

Question 6

Refer to Depositors Move Funds Out of Greek Banks. Which curve in the domestic loanable funds market shifted and which direction did it shift?

Accepted Answer

The demand...

Question 7

If a government has a budget surplus, then public saving

Accepted Answer

A)   is positive and increases national saving.
B)   is positive but decreases national saving.
C)   is negative and decreases national saving.
D)   is negative but increases national saving.

Question 8

Which of the following is correct concerning the open-economy macroeconomic model?

Accepted Answer

A)   The net-capital-outflow curve slopes upward.
B)   The key determinant of net capital outflow is the real exchange rate.
C)   The supply of dollars in the market for foreign-currency exchange is vertical.
D)   None of the above is correct.

Question 9

Other things the same, in the open-economy macroeconomic model, which of the following would make China's net capital outflow increase?

Accepted Answer

A)   an increase in U.S. interest rates
B)   an increase in Chinese interest rates
C)   an appreciation of the Chinese yuan
D)   None of the above is correct.

Question 10

Other things the same, a lower real interest rate decreases the quantity of

Accepted Answer

A)   loanable funds demanded.
B)   loanable funds supplied.
C)   domestic investment.
D)   net capital outflow.

Question 11

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 12

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

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

When the domestic real exchange rate app...

Question 14

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

Accepted Answer

A)   increased Russian interest rates and net exports.
B)   reduced Russian interest rates and net exports.
C)   increased Russian interest rates and reduced Russian net exports.
D)   reduced Russian interest rates and increased Russian net exports.

Question 15

In the open-economy macroeconomic model, the market for loanable funds equates national saving with

Accepted Answer

A)   domestic investment.
B)   net capital outflow.
C)   the sum of national consumption and government spending.
D)   the sum of domestic investment and net capital outflow.

Question 16

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

Accepted Answer

A)   net capital outflow and 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 net exports fall.

Question 17

In the open economy macroeconomic model, the amount of dollars demanded in the market for foreign-currency exchange at a given real exchange rate increases if

Accepted Answer

A)   either U.S. imports or exports increase.
B)   either U.S. imports or exports decrease.
C)   either U.S. imports increase or U.S. exports decrease.
D)   either U.S. imports decrease or U.S. exports increase.

Question 18

If a country removed an import quota on cotton, then overall that country's

Accepted Answer

A)   exports and imports would rise.
B)   exports would rise and imports would fall.
C)   exports would fall and imports would rise.
D)   exports and imports would fall.

Question 19

If the supply of loanable funds curve shifts right, then the equilibrium

Accepted Answer

A)   interest rate and level of net capital outflows rise.
B)   interest rate rises and the equilibrium level of net capital outflow falls.
C)   interest rate falls and the equilibrium level of net capital outflow rises.
D)   interest rate and level of net capital outflows fall.

Question 20

A U.S.-imposed quota on automobiles would shift

Accepted Answer

A)   both the demand and supply curves in the market for foreign-currency exchange right.
B)   both the demand and supply curves in the market for foreign-currency exchange right.
C)   only the demand curve in the market for foreign-currency exchange right.
D)   only the supply curve in the market for foreign-currency exchange right.

Exam 32: A Macroeconomic Theory of the Open Economy

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

Correct AnswerverifiedWhen the domestic real exchange rate app...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Refer to Depositors Move Funds Out of Greek Banks. Because of depositors reactions what happened to net capital outflow?

Correct AnswerverifiedGreece's n...View AnswerShow Answer

According to the open-economy macroeconomic model, import quotas increase which of the following

Correct AnswerverifiedShow Answer

If a country removed an import quota on cotton, then overall that country's

Correct AnswerverifiedShow Answer

Which of the following is correct concerning the open-economy macroeconomic model?

Correct AnswerverifiedShow Answer

Figure 32-7 Refer to this diagram of the open-economy macroeconomic model of the Mexican economy to answer the questions below. -Refer to Figure 32-7. Suppose that the Mexican economy starts at r2 and e3. Which of the following is consistent with the effects of capital flight?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the supply of loanable funds curve shifts right, then the equilibrium

Correct AnswerverifiedShow Answer

A U.S.-imposed quota on automobiles would shift

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

Other things the same, a lower real interest rate decreases the quantity of

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, the market for loanable funds equates national saving with

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Refer to Depositors Move Funds Out of Greek Banks. Which curve in the domestic loanable funds market shifted and which direction did it shift?

Correct AnswerverifiedThe demand...View AnswerShow Answer

If a government has a budget surplus, then public saving

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Other things the same, in the open-economy macroeconomic model, which of the following would make China's net capital outflow increase?

Correct AnswerverifiedShow Answer

In the open economy macroeconomic model, the amount of dollars demanded in the market for foreign-currency exchange at a given real exchange rate increases if

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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When the domestic real exchange rate app...
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In the openeconomy macroeconomic model, if a country's interest rate rises, then its

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Greece's n...
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The supply of domestic currenc...
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The demand...
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