Question 1

If the exchange rate falls, U.S. residents pay

Accepted Answer

A)   more dollars for foreign bonds and get more dollars from interest payments.
B)   more dollars for foreign bonds but get fewer dollars from interest payments.
C)   fewer dollars for foreign bonds and also get fewer dollars from interest payments.
D)   fewer dollars for foreign bonds but get more dollars from interest payments.E) A) and D)
F) B) and D)

Question 2

A firm produces construction equipment, some of which it sells to domestic businesses and some of which it exports. Which of the following effects of capital flight in the country where it produces would likely increase the quantity of equipment it sells?

Accepted Answer

A)   both what happens to the interest rate and what happens to the exchange rate
B)   what happens to the interest rate but not what happens to the exchange rate
C)   what happens to the exchange rate but not what happens to the interest rate
D)   neither what happens to the interest rate nor what happens to the interest rate.E) A) and B)
F) A) and C)

Question 3

Figure 32-2 
-Refer to Figure 32-2. If the real exchange rate is 1, then there is a

Accepted Answer

A)   surplus of 100 so the real exchange rate will fall.
B)   surplus of 100 so the real exchange rate will rise.
C)   shortage of 100 so the real exchange rate will fall.
D)   shortage of 100 so the real exchange rate will rise.E) A) and D)
F) All of the above

Question 4

Capital flight refers to

Accepted Answer

A)   the movement of workers across international borders in response to exchange rate changes.
B)   the movement of funds between financial intermediaries when interest rates change.
C)   the ability of foreign direct investment to lift a country out of poverty.
D)   a large and sudden movement of funds out of a country.E) None of the above
F) All of the above

Question 5

When a country imposes an import quota, its exchange rate

Accepted Answer

A)   rises because the supply of dollars in the market for foreign-currency exchange falls.
B)   falls because the supply of dollars in the market for foreign-currency exchange rises.
C)   rises because the demand for dollars in the market for foreign-currency exchange rises.
D)   falls because the demand for dollars in the market for foreign-currency exchange falls.E) B) and D)
F) B) and C)

Question 6

According to the open-economy macroeconomic model, if the United States moved from a government budget deficit to a government budget surplus, U.S. real interest rates would increase and the real exchange rate of the U.S. dollar would appreciate.

Accepted Answer

A) True 
 B)False

Question 7

If a country's government moves from a budget deficit to a budget surplus, which curve in the market for loanable funds shifts and which direction does it shift? What happens to the interest rate?

Accepted Answer

The supply of loanab...

Question 8

If the supply of dollars in the market for foreign-currency exchange shifts right, 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)   falls and the quantity of dollars exchanged rises.
D)   falls and the quantity of dollars exchanged does not change.E) C) and D)
F) None of the above

Question 9

Many U.S. business leaders argue that the current state of U.S. net exports is the result of

Accepted Answer

A)   U.S. export subsidies.
B)   free trade policies of foreign governments.
C)   unproductive U.S. workers.
D)   unfair foreign competition.E) A) and D)
F) B) and C)

Question 10

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 outflowE) A) and B)
F) A) and C)

Question 11

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

Question 12

U.S. corporation Wright Air Conditions borrows funds to build a factory in the U.S. and a factory in Mexico. Borrowing for factories in which locations)  is included in the U.S. demand for loanable funds?

Accepted Answer

A)   only the U.S.
B)   only Mexico
C)   Mexico and the U.S.
D)   neither Mexico nor the U.S.E) A) and B)
F) A) and C)

Question 13

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 14

If a government increases its budget deficit, then interest rates

Accepted Answer

A)   rise and the real exchange rate appreciates.
B)   fall and the real exchange rate depreciates.
C)   rise and the real exchange rate depreciates.
D)   fall and the real exchange rate appreciates.E) None of the above
F) All of the above

Question 15

In the open-economy macroeconomic model, if the supply of loanable funds shifts right, then

Accepted Answer

A)   net capital outflow increases so the demand for dollars in the market for foreign-currency exchange shifts right.
B)   net capital outflow increases so the supply of dollars in the market for foreign-currency exchange shifts right.
C)   net capital outflow decreases so the demand for dollars in the market for foreign-currency exchange shifts left.
D)   net capital outflow decreases so the supply of dollars in the market for foreign-currency exchange shifts right.E) A) and B)
F) A) and C)

Question 16

Other things the same, a decrease in the U.S. real interest rate induces

Accepted Answer

A)   Americans to buy more foreign assets, which increases U.S. net capital outflow.
B)   Americans to buy more foreign assets, which reduces U.S. net capital outflow.
C)   foreigners to buy more U.S. assets, which reduces U.S. net capital outflow.
D)   foreigners to buy more U.S. assets, which increases U.S. net capital outflow.E) B) and C)
F) All of the above

Question 17

In the open-economy macroeconomic model, at the equilibrium real interest rate, the amount that people including government) want to save exactly balances desired domestic investment.

Accepted Answer

A) True 
 B)False

Question 18

An increase in the budget deficit causes domestic interest rates

Accepted Answer

A)   and investment to rise.
B)   to rise and investment to fall.
C)   to fall and investment to rise.
D)   and investment to fall.E) All of the above
F) C) and D)

Exam 14: A Macroeconomic Theory of the Open Economy

Many U.S. business leaders argue that the current state of U.S. net exports is the result of

Correct Answer
verified

According to the open-economy macroeconomic model, if the United States moved from a government budget deficit to a government budget surplus, U.S. real interest rates would increase and the real exchange rate of the U.S. dollar would appreciate.

Correct Answer
verified

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

Correct Answer
verified

Figure 32-2 -Refer to Figure 32-2. If the real exchange rate is 1, then there is a

Correct Answer
verified

Capital flight refers to

Correct Answer
verified

If the exchange rate falls, U.S. residents pay

Correct Answer
verified

If a country's government moves from a budget deficit to a budget surplus, which curve in the market for loanable funds shifts and which direction does it shift? What happens to the interest rate?

Correct Answer
verified
The supply of loanab...
View Answer

When a country imposes an import quota, its exchange rate

Correct Answer
verified

Other things the same, a decrease in the U.S. real interest rate induces

Correct Answer
verified

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

Correct Answer
verified

If a government increases its budget deficit, then interest rates

Correct Answer
verified

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

Correct Answer
verified

In the open-economy macroeconomic model, at the equilibrium real interest rate, the amount that people including government) want to save exactly balances desired domestic investment.

Correct Answer
verified

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 Answer
verified
The interest rate will rise, n...
View Answer

A firm produces construction equipment, some of which it sells to domestic businesses and some of which it exports. Which of the following effects of capital flight in the country where it produces would likely increase the quantity of equipment it sells?

Correct Answer
verified

U.S. corporation Wright Air Conditions borrows funds to build a factory in the U.S. and a factory in Mexico. Borrowing for factories in which locations) is included in the U.S. demand for loanable funds?

Correct Answer
verified

An increase in the budget deficit causes domestic interest rates

Correct Answer
verified

In the open-economy macroeconomic model, if the supply of loanable funds shifts right, then

Correct Answer
verified

Exam 14: A Macroeconomic Theory of the Open Economy

Many U.S. business leaders argue that the current state of U.S. net exports is the result of

Correct AnswerverifiedShow Answer

According to the open-economy macroeconomic model, if the United States moved from a government budget deficit to a government budget surplus, U.S. real interest rates would increase and the real exchange rate of the U.S. dollar would appreciate.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 32-2 -Refer to Figure 32-2. If the real exchange rate is 1, then there is a

Correct AnswerverifiedShow Answer

Capital flight refers to

Correct AnswerverifiedShow Answer

If the exchange rate falls, U.S. residents pay

Correct AnswerverifiedShow Answer

If a country's government moves from a budget deficit to a budget surplus, which curve in the market for loanable funds shifts and which direction does it shift? What happens to the interest rate?

Correct AnswerverifiedThe supply of loanab...View AnswerShow Answer

When a country imposes an import quota, its exchange rate

Correct AnswerverifiedShow Answer

Other things the same, a decrease in the U.S. real interest rate induces

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

If a government increases its budget deficit, then interest rates

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, at the equilibrium real interest rate, the amount that people including government) want to save exactly balances desired domestic investment.

Correct AnswerverifiedShow 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

A firm produces construction equipment, some of which it sells to domestic businesses and some of which it exports. Which of the following effects of capital flight in the country where it produces would likely increase the quantity of equipment it sells?

Correct AnswerverifiedShow Answer

U.S. corporation Wright Air Conditions borrows funds to build a factory in the U.S. and a factory in Mexico. Borrowing for factories in which locations) is included in the U.S. demand for loanable funds?

Correct AnswerverifiedShow Answer

An increase in the budget deficit causes domestic interest rates

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, if the supply of loanable funds shifts right, then

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The supply of loanab...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The interest rate will rise, n...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified