Question 1

What is the source of the demand for loanable funds in the open-economy macroeconomic model ?

Accepted Answer

investment...

Question 2

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 B)
F) All of the above

Question 3

What happens to each of the following if investment becomes less desirable at each interest rate?
a. the interest rate
b. net capital outflow
c. the exchange rate

Accepted Answer

The interest rate fa...

Question 4

In the open-economy macroeconomic model, the market for loanable funds equates national saving with

Accepted Answer

A)   domestic investment.
B)   net capital outflow.
C)   national consumption minus domestic investment.
D)   None of the above is correct.E) A) and C)
F) A) and D)

Question 5

When the government budget deficit increases, national saving decreases.

Accepted Answer

A) True 
 B)False

Question 6

In the open­economy macroeconomic model, if a country's interest rate rises, then its

Accepted Answer

A)   net capital outflow and net exports rise.
B)   net capital outflow rises and its net exports fall.
C)   net capital outflow falls and its net exports rise.
D)   net capital outflow and net exports fall.E) None of the above
F) C) and D)

Question 7

Depositors Move Funds out of Greek Banks.
In 2011 Greek citizens were concerned about the size of government debt. Fearful that the government might be unable to fulfill its promise to insure depositors in Greek banks against losses created by bank failures, depositors moved funds out of Greek banks.
-Refer to Depositors Move Funds Out of Greek Banks. What happened to the domestic equilibrium interest rate and quantity of loanable funds supplied?

Accepted Answer

Both the equilibrium...

Question 8

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 D)
F) A) and C)

Question 9

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) C) and D)
F) B) and D)

Question 10

Other things the same, if the interest rate falls, then

Accepted Answer

A)   firms will want to borrow more, which increases the quantity of loanable funds demanded.
B)   firms will want to borrow less, which decreases the quantity of loanable funds demanded.
C)   firms will want to borrow more, which increase the quantity of loanable funds supplied.
D)   firms will want to borrow less, which decreases the quantity of loanable funds supplied.E) All of the above
F) C) and D)

Question 11

A German company wants to buy dollars to purchase U.S. bonds. In the open-economy macroeconomic model of the U.S., this transaction would be accounted for in

Accepted Answer

A)   the supply of currency in the foreign exchange market, and the supply of loanable funds.
B)   the supply of currency in the foreign exchange market, and the demand for loanable funds.
C)   the demand for currency in the foreign exchange market, and the supply of loanable funds.
D)   the demand for currency in the foreign exchange market, and the demand for loanable funds.E) None of the above
F) B) and C)

Question 12

What is the source of the supply of loanable funds in the open-economy macroeconomic model?

Accepted Answer

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

Question 13

Which of the following is most likely to increase the exports of a country?

Accepted Answer

A)   The government gives subsidies to firms that export goods or services.
B)   The government reduces the size of the budget surplus.
C)   Political instability within the country increases modestly.
D)   None of the above will increase exports.E) A) and B)
F) C) and D)

Question 14

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) None of the above
F) C) and D)

Question 15

Capital flight shifts the NCO curve to the left.

Accepted Answer

A) True 
 B)False

Question 16

Which curve in the market for foreign-currency exchange shifts and which direction does it shift if the government budget deficit increases? Explain why an increase in the budget deficit shifts this curve.

Accepted Answer

The supply curve in the market for forei...

Question 17

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

Question 18

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 B)
F) C) and D)

Question 19

In the United States in the early 1980s, there was a government budget

Accepted Answer

A)   surplus and a trade surplus.
B)   deficit and a trade deficit.
C)   surplus and a trade deficit.
D)   deficit and a trade surplus.E) None of the above
F) All of the above

Question 20

Other things the same, if the U.S. interest rate falls, then U.S. residents will want to purchase

Accepted Answer

A)   more foreign assets, which increases the quantity of loanable funds demanded.
B)   fewer foreign assets, which decreases the quantity of loanable funds demanded.
C)   more foreign assets, which increase the quantity of loanable funds supplied.
D)   fewer foreign assets, which decreases the quantity of loanable funds supplied.E) B) and C)
F) None of the above

Exam 14: A Macroeconomic Theory of the Open Economy

What is the source of the demand for loanable funds in the open-economy macroeconomic model ?

Correct Answer
verified
investment...
View Answer

In the openeconomy macroeconomic model, if a country's interest rate rises, then its

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified
Both the equilibrium...
View Answer

When the government budget deficit increases, national saving decreases.

Correct Answer
verified

Other things the same, if the U.S. interest rate falls, then U.S. residents will want to purchase

Correct Answer
verified

In the open-economy macroeconomic model, the market for loanable funds equates national saving with

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

What happens to each of the following if investment becomes less desirable at each interest rate? a. the interest rate b. net capital outflow c. the exchange rate

Correct Answer
verified
The interest rate fa...
View Answer

Other things the same, if the interest rate falls, then

Correct Answer
verified

Which curve in the market for foreign-currency exchange shifts and which direction does it shift if the government budget deficit increases? Explain why an increase in the budget deficit shifts this curve.

Correct Answer
verified
The supply curve in the market for forei...
View Answer

What is the source of the supply of loanable funds in the open-economy macroeconomic model?

Correct Answer
verified

In the United States in the early 1980s, there was a government budget

Correct Answer
verified

Capital flight shifts the NCO curve to the left.

Correct Answer
verified

Which of the following is most likely to increase the exports of a country?

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

A German company wants to buy dollars to purchase U.S. bonds. In the open-economy macroeconomic model of the U.S., this transaction would be accounted for in

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Exam 14: A Macroeconomic Theory of the Open Economy

What is the source of the demand for loanable funds in the open-economy macroeconomic model ?

Correct Answerverifiedinvestment...View AnswerShow Answer

In the open­economy macroeconomic model, if a country's interest rate rises, then its

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedBoth the equilibrium...View AnswerShow Answer

When the government budget deficit increases, national saving decreases.

Correct AnswerverifiedShow Answer

Other things the same, if the U.S. interest rate falls, then U.S. residents will want to purchase

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, the market for loanable funds equates national saving with

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

What happens to each of the following if investment becomes less desirable at each interest rate? a. the interest rate b. net capital outflow c. the exchange rate

Correct AnswerverifiedThe interest rate fa...View AnswerShow Answer

Other things the same, if the interest rate falls, then

Correct AnswerverifiedShow Answer

Which curve in the market for foreign-currency exchange shifts and which direction does it shift if the government budget deficit increases? Explain why an increase in the budget deficit shifts this curve.

Correct AnswerverifiedThe supply curve in the market for forei...View AnswerShow Answer

What is the source of the supply of loanable funds in the open-economy macroeconomic model?

Correct AnswerverifiedShow Answer

In the United States in the early 1980s, there was a government budget

Correct AnswerverifiedShow Answer

Capital flight shifts the NCO curve to the left.

Correct AnswerverifiedShow Answer

Which of the following is most likely to increase the exports of a country?

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

A German company wants to buy dollars to purchase U.S. bonds. In the open-economy macroeconomic model of the U.S., this transaction would be accounted for in

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified
investment...
View Answer

In the openeconomy macroeconomic model, if a country's interest rate rises, then its

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Both the equilibrium...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The interest rate fa...
View Answer

Correct Answer
verified

Correct Answer
verified
The supply curve in the market for forei...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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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