Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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) B) and C)
F) All of the above

Question 3

When a country suffers from capital flight,the demand for loanable funds in that country shifts

Accepted Answer

A)   right,which increases interest rates in that country.
B)   right,which decreases interest rates in that country.
C)   left,which increases interest rates in that country.
D)   left,which decreases interest rates in that country.E) All of the above
F) A) and D)

Question 4

If there is a surplus in the market for loanable funds,the resulting change in the real interest rate

Accepted Answer

A)   reduces both the quantity of loanable funds supplied and the quantity of loanable funds demanded.
B)   reduces the quantity of loanable funds supplied and raises the quantity of loanable funds demanded
C)   raises both the quantity of loanable funds supplied and the quantity of loanable funds demanded.
D)   raises the quantity of loanable funds supplied and reduces the quantity of loanable funds demanded.E) A) and B)
F) A) and C)

Question 5

When a country experiences capital flight its

Accepted Answer

A)   net capital outflow increases and its real exchange rate rises.
B)   net capital outflow increases and its real exchange rate falls.
C)   net capital outflow decreases and its real exchange rate rises.
D)   net capital outflow decreases and its real exchange rate falls.E) B) and C)
F) A) and B)

Question 6

From 2001 to 2004,the U.S.government went from a budget surplus to a budget deficit.According to the open-economy macroeconomic model,this should have decreased

Accepted Answer

A)   both the supply of loanable funds and the supply of dollars in the market for foreign-currency exchange.
B)   neither the supply of loanable funds nor the supply of dollars in the market for foreign-currency exchange.
C)   the supply of loanable funds but not the supply of dollars in the market for foreign-currency exchange.
D)   the supply of dollars in the market for foreign-currency exchange,but not the supply of loanable funds.E) A) and B)
F) None of the above

Question 7

If foreigners want to buy more U.S.bonds,then in the market for foreign-currency exchange the exchange rate

Accepted Answer

A)   and the quantity of dollars traded rises.
B)   rises and the quantity of dollars traded falls.
C)   falls and the quantity of dollars traded rises.
D)   and the quantity of dollars traded falls.E) All of the above
F) A) and B)

Question 8

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 9

At a given real exchange rate,which of the following,by itself,would increase the supply of dollars in the market for foreign-currency exchange?

Accepted Answer

A)   foreign citizens want to buy more U.S.bonds
B)   U.S.citizens want to buy more foreign bonds
C)   foreign citizens want to buy more U.S.goods
D)   U.S.citizens want to buy more foreign goodsE) A) and D)
F) None of the above

Question 10

When a country experiences capital flight,which of the following rise?

Accepted Answer

A)   its real interest rate and its real exchange rate
B)   its real interest rate but not its real exchange rate
C)   its real exchange rate but not its real interest rate
D)   neither its real interest rate nor its foreign exchange rateE) A) and C)
F) All of the above

Question 11

If the government of a country with a zero trade balances increases its budget deficit,then interest rates

Accepted Answer

A)   rise and the trade balance moves to a surplus.
B)   rise and the trade balance moves to a deficit.
C)   fall and the trade balance moves to a surplus.
D)   fall and the trade balance moves to a deficit.E) A) and D)
F) B) and C)

Question 12

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

Question 13

If the demand for loanable funds shifts right,then

Accepted Answer

A)   the real interest rate and the equilibrium quantity of loanable funds both fall.
B)   the real interest rate falls and the equilibrium quantity of loanable funds rises.
C)   the real interest rate and the equilibrium quantity of loanable funds both rise.
D)   the real interest rate rises and the equilibrium quantify of loanable funds falls.E) C) and D)
F) None of the above

Question 14

If the quantity of loanable funds supplied is less than the quantity demanded,then

Accepted Answer

A)   there is a shortage of loanable funds and the interest rate will fall.
B)   there is a shortage of loanable funds and the interest rate will rise.
C)   there is a surplus of loanable funds and the interest rate will fall.
D)   there is a surplus of loanable funds and the interest rate will rise.E) B) and C)
F) A) and B)

Question 15

Figure 32-4 2 and E3,an increase in the budget surplus can be illustrated as a move to A)  r3 and E4. B)  r3 and E2. C)  r1 and E4. D)  r1 and E2." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 32-5.Starting from r2 and E3,an increase in the budget surplus can be illustrated as a move to

Accepted Answer

A)   r3 and E4.
B)   r3 and E2.
C)   r1 and E4.
D)   r1 and E2.E) A) and B)
F) A) and C)

Question 16

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 D)
F) B) and C)

Question 17

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

Accepted Answer

A)   decreased.
B)   did not change.
C)   increased.
D)   decreased until the peso appreciated,then increased.E) A) and C)
F) All of the above

Question 18

Figure 32-7 0 and E1.Which of the following is consistent with the effects of capital flight? A)  the shift from D0 to D1 in Panel A B)  the shift from NCO0 to NCO1 in Panel B C)  the shift from S0 to S1 in Panel C D)  All of the above shifts are consistent with the effects of capital flight." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 32-7.Supposing that the Mexican economy starts at r0 and E1.Which of the following is consistent with the effects of capital flight?

Accepted Answer

A)   the shift from D0 to D1 in Panel A
B)   the shift from NCO0 to NCO1 in Panel B
C)   the shift from S0 to S1 in Panel C
D)   All of the above shifts are consistent with the effects of capital flight.E) None of the above
F) All of the above

Question 19

If the supply of dollars in the market for foreign-currency exchange shifts left,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)   rises and the quantity of dollars exchanged rises.
D)   falls and the quantity of dollars exchanged does not change.E) C) and D)
F) B) and C)

Question 20

U.S.corporation Well's Petroleum borrows money to build an oil well in Texas and to build another in Venezuela.Borrowing for which well is included in the demand for loanable funds in the U.S.?

Accepted Answer

A)   The U.S.and Venezuela.
B)   The U.S.only.
C)   Venezuela only.
D)   Neither the U.S.or Venezuela.E) A) and B)
F) C) and D)

Exam 32: A Macroeconomic Theory of the Open Economy

When a country experiences capital flight its

Correct Answer
verified

If the government of a country with a zero trade balances increases its budget deficit,then interest rates

Correct Answer
verified

If the quantity of loanable funds supplied is less than the quantity demanded,then

Correct Answer
verified

At a given real exchange rate,which of the following,by itself,would increase the supply of dollars in the market for foreign-currency exchange?

Correct Answer
verified

When a country suffers from capital flight,the demand for loanable funds in that country shifts

Correct Answer
verified

If the demand for loanable funds shifts right,then

Correct Answer
verified

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

Correct Answer
verified

If foreigners want to buy more U.S.bonds,then in the market for foreign-currency exchange the exchange rate

Correct Answer
verified

Figure 32-7 -Refer to Figure 32-7.Supposing that the Mexican economy starts at r₀ and E₁.Which of the following is consistent with the effects of capital flight?

Correct Answer
verified

If there is a surplus in the market for loanable funds,the resulting change in the real interest rate

Correct Answer
verified

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

Correct Answer
verified

From 2001 to 2004,the U.S.government went from a budget surplus to a budget deficit.According to the open-economy macroeconomic model,this should have decreased

Correct Answer
verified

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

Correct Answer
verified

U.S.corporation Well's Petroleum borrows money to build an oil well in Texas and to build another in Venezuela.Borrowing for which well is included in the demand for loanable funds in the U.S.?

Correct Answer
verified

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

Correct Answer
verified

Figure 32-4 -Refer to Figure 32-5.Starting from r₂ and E₃,an increase in the budget surplus can be illustrated as a move to

Correct Answer
verified

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 Answer
verified

Correct Answer
verified

An increase in the budget deficit causes domestic interest rates

Correct Answer
verified

When a country experiences capital flight,which of the following rise?

Correct Answer
verified

Exam 32: A Macroeconomic Theory of the Open Economy

When a country experiences capital flight its

Correct AnswerverifiedShow Answer

If the government of a country with a zero trade balances increases its budget deficit,then interest rates

Correct AnswerverifiedShow Answer

If the quantity of loanable funds supplied is less than the quantity demanded,then

Correct AnswerverifiedShow Answer

At a given real exchange rate,which of the following,by itself,would increase the supply of dollars in the market for foreign-currency exchange?

Correct AnswerverifiedShow Answer

When a country suffers from capital flight,the demand for loanable funds in that country shifts

Correct AnswerverifiedShow Answer

If the demand for loanable funds shifts right,then

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If foreigners want to buy more U.S.bonds,then in the market for foreign-currency exchange the exchange rate

Correct AnswerverifiedShow Answer

Figure 32-7 -Refer to Figure 32-7.Supposing that the Mexican economy starts at r0 and E1.Which of the following is consistent with the effects of capital flight?

Correct AnswerverifiedShow Answer

If there is a surplus in the market for loanable funds,the resulting change in the real interest rate

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

From 2001 to 2004,the U.S.government went from a budget surplus to a budget deficit.According to the open-economy macroeconomic model,this should have decreased

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

U.S.corporation Well's Petroleum borrows money to build an oil well in Texas and to build another in Venezuela.Borrowing for which well is included in the demand for loanable funds in the U.S.?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 32-4 -Refer to Figure 32-5.Starting from r2 and E3,an increase in the budget surplus can be illustrated as a move to

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

Correct AnswerverifiedShow Answer

An increase in the budget deficit causes domestic interest rates

Correct AnswerverifiedShow Answer

When a country experiences capital flight,which of the following rise?

Correct AnswerverifiedShow Answer

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Figure 32-7 -Refer to Figure 32-7.Supposing that the Mexican economy starts at r₀ and E₁.Which of the following is consistent with the effects of capital flight?

Correct Answer
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Correct Answer
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Figure 32-4 -Refer to Figure 32-5.Starting from r₂ and E₃,an increase in the budget surplus can be illustrated as a move to

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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