Question 1

According to the open-economy macroeconomic model,an increase in the U.S.government budget surplus increases U.S.net capital outflow,causes the real exchange rate of the dollar to depreciate,and increases U.S.net exports.

Accepted Answer

A) True 
 B)False

Question 2

Trade policies

Accepted Answer

A)  affect a country's overall trade balance, but affect all firms and industries the same.
B)  affect a country's overall trade balance, but affect some firms or industries differently than others.
C)  do not affect a country's overall trade balance, but affect some firms or industries differently than others.
D)  do not affect either a country's overall trade balance or specific firms or industries.E) C) and D)
F) All of the above

Question 3

If net exports are positive,then

Accepted Answer

A)  net capital outflow is positive, so foreign assets bought by Americans are greater than American assets bought by foreigners.
B)  net capital outflow is positive, so American assets bought by foreigners are greater than foreign assets bought by Americans.
C)  net capital outflow is negative, so foreign assets bought by Americans are greater than American assets bought by foreigners.
D)  net capital outflow is negative, so American assets bought by foreigners are greater than foreign assets bought by Americans.E) A) and B)
F) None of the above

Question 4

Which of the following is correct in an open economy?

Accepted Answer

A)  S = I
B)  S = NX + NCO
C)  S = NCO
D)  S = I + NCOE) A) and C)
F) A) and D)

Question 5

When Mexico suffered from capital flight in 1994,Mexico's net capital outflow

Accepted Answer

A)  and net exports decreased.
B)  and net exports increased.
C)  increased while net exports decreased.
D)  decreased while net exports increased.E) B) and C)
F) B) and D)

Question 6

If U.S.citizens decide to purchase more foreign assets at each interest rate,the U.S.real interest rate

Accepted Answer

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

Question 7

Over the past decade,the United States has persistently exported more goods and services than it has imported.

Accepted Answer

A) True 
 B)False

Question 8

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) B) and D)
F) A) and D)

Question 9

The diagram below represents the market for loanable funds and the market for foreign-currency exchange in Mexico. Use the diagram to answer the following questions.
Figure 32-6
 
-Refer to Figure 32-6.Which of the following is consistent with capital flight from Mexico?

Accepted Answer

A)  The real exchange rate of the peso appreciates from E₀ to E₁.
B)  The real exchange rate of the peso depreciates from E₀ to E₁.
C)  The real exchange rate of the peso appreciates from E₁ to E₀.
D)  The real exchange rate of the peso depreciates from E₁ to E₀.E) None of the above
F) B) and C)

Question 10

If the real interest rate were above the equilibrium rate,there would be a shortage of loanable funds.

Accepted Answer

A) True 
 B)False

Question 11

In 1995 House Speaker Newt Gingrich threatened to send the United States into default on its debt.During the day of this announcement,U.S.interest rates rose and the real exchange rate of the U.S.dollar depreciated.Which of these changes is consistent with the results of the open-economy macroeconomic model?

Accepted Answer

A)  the increase in U.S.interest rates
B)  the depreciation of the real exchange rate of the U.S.dollar
C)  Both a and b are consistent.
D)  Neither a nor b are consistent.E) A) and D)
F) B) and D)

Question 12

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

Question 13

If a government started with a budget deficit and moved to a surplus,domestic investment

Accepted Answer

A)  and the real exchange rate would rise.
B)  and the real exchange rate would fall.
C)  would rise and the real exchange rate would fall.
D)  would fall and the real exchange rate would rise.E) B) and D)
F) B) and C)

Question 14

What do trade policies do to the standard of living?

Accepted Answer

Trade policies reduce both imports and e...

Question 15

Which of the following would make the equilibrium interest rate decrease and the equilibrium quantity of loanable funds increase?

Accepted Answer

A)  The supply of loanable funds shifts right.
B)  The supply of loanable funds shifts left.
C)  The demand for loanable funds shifts right.
D)  The demand for loanable funds shifts left.E) B) and D)
F) A) and B)

Question 16

From 2001 to 2004 the U.S.budget went from surplus to deficit.This should have

Accepted Answer

A)  increased U.S.interest rates and increased the real exchange rate of the dollar.
B)  increased U.S.interest rates and decreased the real exchange rate of the dollar.
C)  decreased U.S.interest rates and increased the real exchange rate of the dollar.
D)  decreased U.S.interest rates and decreased the real exchange rate of the dollar.E) B) and C)
F) A) and D)

Question 17

If a government increases its budget deficit,then interest rates

Accepted Answer

A)  and domestic investment rise.
B)  and domestic investment falls.
C)  rise and domestic investment falls.
D)  fall and domestic investment rises.E) B) and C)
F) A) and D)

Exam 32: A Macroeconomic Theory of the Open Economy

If a government increases its budget deficit,then interest rates

Correct Answer
verified

According to the open-economy macroeconomic model,an increase in the U.S.government budget surplus increases U.S.net capital outflow,causes the real exchange rate of the dollar to depreciate,and increases U.S.net exports.

Correct Answer
verified

The diagram below represents the market for loanable funds and the market for foreign-currency exchange in Mexico. Use the diagram to answer the following questions. Figure 32-6 -Refer to Figure 32-6.Which of the following is consistent with capital flight from Mexico?

Correct Answer
verified

If a government started with a budget deficit and moved to a surplus,domestic investment

Correct Answer
verified

From 2001 to 2004 the U.S.budget went from surplus to deficit.This should have

Correct Answer
verified

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

Correct Answer
verified

The real exchange rate measures the

Correct Answer
verified

Correct Answer
verified

If the real interest rate were above the equilibrium rate,there would be a shortage of loanable funds.

Correct Answer
verified

If U.S.citizens decide to purchase more foreign assets at each interest rate,the U.S.real interest rate

Correct Answer
verified

Which of the following is correct in an open economy?

Correct Answer
verified

What do trade policies do to the standard of living?

Correct Answer
verified
Trade policies reduce both imports and e...
View Answer

Which of the following would make the equilibrium interest rate decrease and the equilibrium quantity of loanable funds increase?

Correct Answer
verified

If net exports are positive,then

Correct Answer
verified

Over the past decade,the United States has persistently exported more goods and services than it has imported.

Correct Answer
verified

When Mexico suffered from capital flight in 1994,Mexico's net capital outflow

Correct Answer
verified

Trade policies

Correct Answer
verified

Exam 32: A Macroeconomic Theory of the Open Economy

If a government increases its budget deficit,then interest rates

Correct AnswerverifiedShow Answer

According to the open-economy macroeconomic model,an increase in the U.S.government budget surplus increases U.S.net capital outflow,causes the real exchange rate of the dollar to depreciate,and increases U.S.net exports.

Correct AnswerverifiedShow Answer

The diagram below represents the market for loanable funds and the market for foreign-currency exchange in Mexico. Use the diagram to answer the following questions. Figure 32-6 -Refer to Figure 32-6.Which of the following is consistent with capital flight from Mexico?

Correct AnswerverifiedShow Answer

If a government started with a budget deficit and moved to a surplus,domestic investment

Correct AnswerverifiedShow Answer

From 2001 to 2004 the U.S.budget went from surplus to deficit.This should have

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The real exchange rate measures the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the real interest rate were above the equilibrium rate,there would be a shortage of loanable funds.

Correct AnswerverifiedShow Answer

If U.S.citizens decide to purchase more foreign assets at each interest rate,the U.S.real interest rate

Correct AnswerverifiedShow Answer

Which of the following is correct in an open economy?

Correct AnswerverifiedShow Answer

What do trade policies do to the standard of living?

Correct AnswerverifiedTrade policies reduce both imports and e...View AnswerShow Answer

Which of the following would make the equilibrium interest rate decrease and the equilibrium quantity of loanable funds increase?

Correct AnswerverifiedShow Answer

If net exports are positive,then

Correct AnswerverifiedShow Answer

Over the past decade,the United States has persistently exported more goods and services than it has imported.

Correct AnswerverifiedShow Answer

When Mexico suffered from capital flight in 1994,Mexico's net capital outflow

Correct AnswerverifiedShow Answer

Trade policies

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Trade policies reduce both imports and e...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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