Question 1

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.E) A) and D)
F) C) and D)

Question 2

A country recently had 500 billion euros of national saving and -200 billion euros of net capital outflow. What was its domestic investment? What was its quantity of loanable funds supplied?

Accepted Answer

700 billio...

Question 3

When the real exchange rate for the dollar appreciates, U.S. goods become

Accepted Answer

A)  less expensive relative to foreign goods, which makes exports rise and imports fall.
B)  less expensive relative to foreign goods, which makes exports fall and imports rise.
C)  more expensive relative to foreign goods, which makes exports rise and imports fall.
D)  more expensive relative to foreign goods, which makes exports fall and imports rise.E) A) and B)
F) A) and C)

Question 4

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.E) B) and D)
F) B) and C)

Question 5

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 appreciates making domestic goods relatively more expensive.
B)  the exchange rate appreciates making domestic goods relatively less expensive.
C)  the exchange rate depreciates making domestic goods relatively more expensive.
D)  the exchange rate depreciates making domestic goods relatively less expensive.E) None of the above
F) A) and D)

Question 6

If government policy encouraged households to save more at each interest rate, then

Accepted Answer

A)  the real exchange rate and net exports would rise.
B)  the real exchange rate and net exports would fall.
C)  the real exchange rate would rise and net exports would fall.
D)  the real exchange rate would fall and net exports would rise.E) All of the above
F) A) and D)

Question 7

Which of the following is correct?

Accepted Answer

A)  capital flight from the United States decreases net capital outflow
B)  an increase in the government budget deficit creates no change in net capital outflow
C)  if the U.S. imposes a restriction on imports, net capital outflow increases
D)  None of the above is correct.E) B) and C)
F) A) and B)

Question 8

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.E) A) and B)
F) B) and C)

Question 9

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

Accepted Answer

A)  levels of net capital outflow and domestic investment decrease.
B)  level of net capital outflow increases and the equilibrium level of domestic investment decreases.
C)  level of net capital outflow decreases and the equilibrium level of domestic investment increases.
D)  levels of net capital outflow and domestic investment increase.E) C) and D)
F) A) and C)

Question 10

If U.S. citizens decide to save a larger fraction of their incomes, the real interest rate

Accepted Answer

A)  decreases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases.
B)  decreases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases.
C)  increases, the real exchange rate of the dollar appreciates, and U.S. net capital outflow decreases.
D)  increases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases.E) A) and B)
F) A) and C)

Question 11

Other things the same, if foreigners desire to purchase more U.S. bonds, then the demand for loanable funds shifts left.

Accepted Answer

A) True 
 B)False

Question 12

If the budget deficit increases, then

Accepted Answer

A)  U.S. residents will want to purchase more foreign assets and foreign residents will want to purchase more U.S. assets
B)  U.S. residents will want to purchase more foreign assets and foreign residents will want to purchase fewer U.S. assets
C)  U.S. residents will want to purchase fewer foreign assets and foreign residents will want to purchase more U.S. assets
D)  U.S. residents will want to purchase fewer foreign assets and foreign residents will want to purchase fewer U.S. assetsE) None of the above
F) A) and C)

Question 13

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.E) A) and B)
F) B) and C)

Question 14

If net exports are positive, then

Accepted Answer

A)  exports are greater than imports.
B)  net capital outflow is negative.
C)  Both of the above are correct.
D)  Neither of the above is correct.E) All of the above
F) A) and B)

Question 15

If a country places tariffs on imported goods, then

Accepted Answer

A)  its currency appreciates which reduces exports.
B)  its currency appreciates which increases exports.
C)  its currency depreciates which reduces exports.
D)  its currency depreciates which increases exports.E) C) and D)
F) B) and D)

Question 16

At the equilibrium real interest rate in the open-economy macroeconomic model

Accepted Answer

A)  saving = domestic investment
B)  saving = net capital outflow
C)  net capital outflow = domestic investment
D)  net capital outflow + domestic investment = savingE) C) and D)
F) All of the above

Question 17

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 18

Why do higher real interest rates lead to lower net capital outflow?

Accepted Answer

Higher domestic interest rates make dome...

Question 19

The value of net exports equals the value of

Accepted Answer

A)  national saving.
B)  public saving.
C)  national saving - net capital outflow.
D)  national saving - domestic investment.E) C) and D)
F) A) and C)

Question 20

The key determinant of net capital outflow is the real interest rate.

Accepted Answer

A) True 
 B)False

Exam 32: A Macroeconomic Theory of the Open Economy

At the equilibrium real interest rate in the open-economy macroeconomic model

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

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If U.S. citizens decide to save a larger fraction of their incomes, the real interest rate

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The key determinant of net capital outflow is the real interest rate.

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Which of the following is correct?

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A country recently had 500 billion euros of national saving and -200 billion euros of net capital outflow. What was its domestic investment? What was its quantity of loanable funds supplied?

Correct Answerverified700 billio...View AnswerShow Answer

When the real exchange rate for the dollar appreciates, U.S. goods become

Correct AnswerverifiedShow Answer

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

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

If government policy encouraged households to save more at each interest rate, then

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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

If a government has a budget surplus, then public saving

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If net exports are positive, then

Correct AnswerverifiedShow Answer

Other things the same, if foreigners desire to purchase more U.S. bonds, then the demand for loanable funds shifts left.

Correct AnswerverifiedShow Answer

Why do higher real interest rates lead to lower net capital outflow?

Correct AnswerverifiedHigher domestic interest rates make dome...View AnswerShow Answer

The value of net exports equals the value of

Correct AnswerverifiedShow Answer

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 the budget deficit increases, then

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If a country places tariffs on imported goods, then

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700 billio...
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Higher domestic interest rates make dome...
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