Question 1

In the open-economy macroeconomic model, which of the following increases net capital outflow?

Accepted Answer

A)   a fall in the real exchange rate, but not a fall in the real interest rate
B)   a fall in the real interest rate, but not a fall in the real exchange rate
C)   both a fall in the real exchange rate and a fall in the real interest rate
D)   neither a fall in the real exchange rate nor a fall in the real interest rateE) C) and D)
F) A) and B)

Question 2

Which of the following contains a list only of things that increase when the budget deficit of the U.S. decreases?

Accepted Answer

A)   U.S. supply of loanable funds, U.S. net capital outflow, U.S. domestic investment
B)   U.S. supply of loanable funds, U.S. exports, the real exchange rate of the dollar
C)   U.S. interest rates, the real exchange rate of the dollar, U.S. domestic investment
D)   the real exchange rate of the dollar, U.S. net capital outflow, U.S. net exportsE) C) and D)
F) All of the above

Question 3

If the U.S. government increased its deficit, then

Accepted Answer

A)   U.S. bonds would pay higher interest but a dollar would purchase fewer foreign goods.
B)   U.S. bonds would pay higher interest and a dollar would purchase more foreign goods.
C)   U.S. bonds would pay lower interest and a dollar would purchase fewer foreign goods.
D)   U.S. bonds would pay lower interest but a dollar would purchase more foreign goods.E) A) and B)
F) A) and C)

Question 4

If interest rates rose more in the U.S. than in France, then other things the same

Accepted Answer

A)   U.S. citizens would buy more French bonds and French citizens would buy more U.S. bonds.
B)   U.S. citizens would buy more French bonds and French citizens would buy fewer U.S. bonds.
C)   U.S. citizens would buy fewer French bonds and French citizens would buy more U.S. bonds.
D)   U.S. citizens would buy fewer French bonds and French citizens would buy fewer U.S. bonds.E) All of the above
F) B) and D)

Question 5

If China experienced capital flight, the supply of Chinese yuan in the market for foreign-currency exchange would shift

Accepted Answer

A)   left, which would make the real exchange rate of the Chinese yuan appreciate.
B)   left, which would make the real exchange rate of the Chinese yuan depreciate.
C)   right, which would make the real exchange rate of the Chinese yuan appreciate.
D)   right, which would make the real exchange rate of the Chinese yuan depreciate.E) B) and C)
F) C) and D)

Question 6

In the 1980s, the U.S. government budget deficit rose. At the same time the U.S. trade deficit grew larger, the real exchange rate of the dollar appreciated, and U.S. net capital outflow decreased. Which of these events is contrary to what the open-economy macroeconomic model predicts concerning the effects of an increase in the budget deficit?

Accepted Answer

A)   the U.S. trade deficit grew
B)   the real exchange rate of the dollar appreciated
C)   U.S. net capital outflow fell
D)   None of the above is contrary to the predictions of the model.E) None of the above
F) A) and B)

Question 7

If U.S. citizens decide to save a smaller fraction of their incomes, U.S. domestic investment

Accepted Answer

A)   increases, and U.S. net capital outflow increases.
B)   increases, and U.S. net capital outflow decreases.
C)   decreases, and U.S. net capital outflow increases.
D)   decreases, and U.S. net capital outflow decreases.E) A) and B)
F) C) and D)

Question 8

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

Question 9

If the U.S. imposed an import quota on furniture, U.S. net exports of furniture

Accepted Answer

A)   and net exports of other U.S. goods and services would rise.
B)   would rise but net exports of other goods and services would fall.
C)   would fall but net exports of other goods and services would rise.
D)   and net exports of other U.S. goods and services would fall.E) All of the above
F) B) and D)

Question 10

The primary focus of the open-economy macroeconomic model is the determination of GDP and the price level.

Accepted Answer

A) True 
 B)False

Question 11

Other things the same, a higher real exchange rate raises net exports.

Accepted Answer

A) True 
 B)False

Question 12

In the open-economy macroeconomic model, the supply of loanable funds comes from

Accepted Answer

A)   national saving. Demand comes from only domestic investment.
B)   national saving. Demand comes from domestic investment and net capital outflow.
C)   Only net capital outflow. Demand for loanable funds comes from national saving.
D)   domestic investment and net capital outflow. Demand for loanable funds comes from national saving.E) A) and B)
F) All of the above

Question 13

In the open-economy macroeconomic model, the real exchange rate does not affect net capital outflow.

Accepted Answer

A) True 
 B)False

Question 14

What is the source of the supply of dollars in the market for foreign-currency exchange?

Accepted Answer

The answer of What is the source of the supply...

Question 15

When a country experiences capital flight, the interest rate

Accepted Answer

A)   falls because the demand for loanable funds shifts left.
B)   falls because the supply for loanable funds shifts right.
C)   rises because the demand for loanable funds shifts right.
D)   rises because the supply for loanable funds shifts left.E) A) and C)
F) C) and D)

Question 16

In the long run, import quotas increase net exports.

Accepted Answer

A) True 
 B)False

Question 17

If the people thought that many banks in a certain country were at or near the point of bankruptcy, then that country's real exchange rate

Accepted Answer

A)   and net exports would rise.
B)   would rise and its net exports would fall.
C)   would fall and its net exports would rise.
D)   and its net exports would fall.E) B) and C)
F) A) and B)

Question 18

When a country imposes a trade restriction, the real exchange rate of that country's currency appreciates.

Accepted Answer

A) True 
 B)False

Question 19

Capital flight raises a country's real exchange rate.

Accepted Answer

A) True 
 B)False

Question 20

Other things the same, when the real exchange rate of the dollar appreciates, U.S. goods become more desirable to U.S. residents, but less desirable to foreign residents.

Accepted Answer

A) True 
 B)False

Exam 14: A Macroeconomic Theory of the Open Economy

Correct Answer
verified

If the people thought that many banks in a certain country were at or near the point of bankruptcy, then that country's real exchange rate

Correct Answer
verified

If U.S. citizens decide to save a smaller fraction of their incomes, U.S. domestic investment

Correct Answer
verified

In the open-economy macroeconomic model, which of the following increases net capital outflow?

Correct Answer
verified

Other things the same, a higher real exchange rate raises net exports.

Correct Answer
verified

In the long run, import quotas increase net exports.

Correct Answer
verified

Which of the following contains a list only of things that increase when the budget deficit of the U.S. decreases?

Correct Answer
verified

When a country experiences capital flight, the interest rate

Correct Answer
verified

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 Answer
verified

Capital flight raises a country's real exchange rate.

Correct Answer
verified

In the open-economy macroeconomic model, the real exchange rate does not affect net capital outflow.

Correct Answer
verified

If the U.S. imposed an import quota on furniture, U.S. net exports of furniture

Correct Answer
verified

If China experienced capital flight, the supply of Chinese yuan in the market for foreign-currency exchange would shift

Correct Answer
verified

Other things the same, when the real exchange rate of the dollar appreciates, U.S. goods become more desirable to U.S. residents, but less desirable to foreign residents.

Correct Answer
verified

In the open-economy macroeconomic model, the supply of loanable funds comes from

Correct Answer
verified

When a country imposes a trade restriction, the real exchange rate of that country's currency appreciates.

Correct Answer
verified

If the U.S. government increased its deficit, then

Correct Answer
verified

The primary focus of the open-economy macroeconomic model is the determination of GDP and the price level.

Correct Answer
verified

What is the source of the supply of dollars in the market for foreign-currency exchange?

Correct Answer
verified

If interest rates rose more in the U.S. than in France, then other things the same

Correct Answer
verified

Exam 14: A Macroeconomic Theory of the Open Economy

Correct AnswerverifiedShow Answer

If the people thought that many banks in a certain country were at or near the point of bankruptcy, then that country's real exchange rate

Correct AnswerverifiedShow Answer

If U.S. citizens decide to save a smaller fraction of their incomes, U.S. domestic investment

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, which of the following increases net capital outflow?

Correct AnswerverifiedShow Answer

Other things the same, a higher real exchange rate raises net exports.

Correct AnswerverifiedShow Answer

In the long run, import quotas increase net exports.

Correct AnswerverifiedShow Answer

Which of the following contains a list only of things that increase when the budget deficit of the U.S. decreases?

Correct AnswerverifiedShow Answer

When a country experiences capital flight, the interest rate

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

Capital flight raises a country's real exchange rate.

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, the real exchange rate does not affect net capital outflow.

Correct AnswerverifiedShow Answer

If the U.S. imposed an import quota on furniture, U.S. net exports of furniture

Correct AnswerverifiedShow Answer

If China experienced capital flight, the supply of Chinese yuan in the market for foreign-currency exchange would shift

Correct AnswerverifiedShow Answer

Other things the same, when the real exchange rate of the dollar appreciates, U.S. goods become more desirable to U.S. residents, but less desirable to foreign residents.

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, the supply of loanable funds comes from

Correct AnswerverifiedShow Answer

When a country imposes a trade restriction, the real exchange rate of that country's currency appreciates.

Correct AnswerverifiedShow Answer

If the U.S. government increased its deficit, then

Correct AnswerverifiedShow Answer

The primary focus of the open-economy macroeconomic model is the determination of GDP and the price level.

Correct AnswerverifiedShow Answer

What is the source of the supply of dollars in the market for foreign-currency exchange?

Correct AnswerverifiedShow Answer

If interest rates rose more in the U.S. than in France, then other things the same

Correct AnswerverifiedShow Answer

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