Question 1

A tax on imported goods is called a(n)

Accepted Answer

A)   excise tax.
B)   tariff.
C)   import quota.
D)   None of the above is correct.E) None of the above
F) B) and D)

Question 2

In the open-economy macroeconomic model, the market for loanable funds identity can be written as

Accepted Answer

A)   S = I
B)   S = NCO
C)   S = I + NCO
D)   S + I = NCOE) A) and C)
F) None of the above

Question 3

If the Canadian government raises it budget deficit, then Canada's net capital outflows will

Accepted Answer

A)   increase, so its exchange rate will rise.
B)   increase, so its exchange rate will fall.
C)   decrease, so its exchange rate will rise.
D)   decrease, so its exchange rate will fall.E) A) and B)
F) A) and C)

Question 4

If the risk of holding assets in foreign countries rises relative to the risk of holding U.S assets, then

Accepted Answer

A)   U.S. net capital outflow rises which increases the U.S. exchange rate.
B)   U.S. net capital outflow rises which decreases the U.S. exchange rate.
C)   U.S. net capital outflow falls which increases the U.S. exchange rate.
D)   U.S. net capital outflow falls which decreases the U.S. exchange rate.E) C) and D)
F) A) and D)

Question 5

If the government of Venezuela made policy changes that increased national saving, the real exchange rate of the peso would

Accepted Answer

A)   depreciate and Venezuelan net exports would rise.
B)   depreciate and Venezuelan net exports would fall.
C)   appreciate and Venezuelan net exports would rise.
D)   appreciate and Venezuelan net exports would fall.E) B) and D)
F) None of the above

Question 6

If at a given exchange rate U.S. citizens wanted to buy more foreign bonds

Accepted Answer

A)   the demand for dollars in the market for foreign-currency exchange would shift right.
B)   the demand for dollars in the market for foreign-currency exchange would shift left.
C)   the supply of dollars in the market for foreign-currency exchange shifts right.
D)   the supply of dollars in the market for foreign-currency exchange shifts left.E) A) and B)
F) B) and D)

Question 7

Other things the same, if the U.S. interest rate rises, U.S. assets become ____ attractive. So, desired net capital outflow _____. This change in net capital outflow shifts the __________ curve in the market for foreign-currency exchange to the ______.

Accepted Answer

more, fall...

Question 8

If a tariff on beef were implemented, which of the following would rise?

Accepted Answer

A)   exports and net exports
B)   exports but not net exports
C)   net exports but not exports
D)   neither exports nor net exportsE) A) and D)
F) None of the above

Question 9

The slope of the supply of loanable funds is based on an increase in

Accepted Answer

A)   only national saving when the interest rate rises.
B)   both national saving and net capital outflow when the interest rate rises.
C)   only national saving when the interest rate falls.
D)   both national saving and net capital outflow when the interest rate falls.E) B) and C)
F) None of the above

Question 10

Other things the same an increase in the interest rate

Accepted Answer

A)   increases national saving, this is shown by moving along the demand for loanable funds curve.
B)   increases national saving, this is shown by moving along the supply of loanable funds curve.
C)   decreases national saving, this is shown by moving along the demand for loanable funds curve.
D)   decreases national saving, this is shown by moving along the supply of loanable funds curve.E) All of the above
F) C) and D)

Question 11

Refer to Budget in Recession. This change in the deficit causes the exchange rate to change. What does the change in the exchange rate do to net exports?

Accepted Answer

Because the exchange...

Question 12

An economy recently had 800 billion euros of saving and 600 billion euros of net capital outflow. What was its investment? What was its quantity of loanable funds supplied?

Accepted Answer

200 billio...

Question 13

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

Question 14

Which of the following is consistent with moving from a surplus to equilibrium in the market for foreign-currency exchange?

Accepted Answer

A)   the exchange rate appreciates making domestic goods relatively more expensive.
B)   the exchange rate appreciates making domestic goods relatively less expensive.
C)   the exchange rate depreciates making domestic goods relatively more expensive.
D)   the exchange rate depreciates making domestic goods relatively less expensive.E) None of the above
F) A) and C)

Question 15

What happens to net capital outflow as the real interest rate falls? Explain your answer.

Accepted Answer

As the real interest rate falls, domesti...

Question 16

When the U.S. real interest rate falls, purchasing U.S. assets becomes

Accepted Answer

A)   less attractive and so U.S. net capital outflow rises.
B)   less attractive and so U.S. net capital outflow falls.
C)   more attractive and so U.S. net capital outflow rises.
D)   more attractive and so U.S. net capital outflow falls.E) A) and B)
F) C) and D)

Question 17

Other things the same, an increase in the U.S. interest rate causes the quantity of loanable funds supplied to

Accepted Answer

A)   rise because national saving rises.
B)   rise because domestic investment rises.
C)   fall because national saving falls.
D)   fall because domestic investment falls.E) B) and D)
F) All of the above

Question 18

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

Question 19

In the open-economy macroeconomic model, the source of the supply of loanable funds is

Accepted Answer

A)   personal saving
B)   public saving
C)   public saving + personal saving
D)   public saving + personal saving + net capital outflowsE) A) and C)
F) A) and B)

Question 20

Which of the following would shift the supply of dollars in the market for foreign-currency exchange of the open- economy macroeconomic model to the left?

Accepted Answer

A)   the exchange rate rises
B)   the exchange rate falls
C)   the expected rate of return on U.S. assets rises
D)   the expected rate of return on U.S. assets fallsE) C) and D)
F) A) and B)

Exam 32: A Macroeconomic Theory of the Open Economy

Trade policies

Correct AnswerverifiedShow Answer

If at a given exchange rate U.S. citizens wanted to buy more foreign bonds

Correct AnswerverifiedShow Answer

Other things the same an increase in the interest rate

Correct AnswerverifiedShow Answer

Which of the following would shift the supply of dollars in the market for foreign-currency exchange of the open- economy macroeconomic model to the left?

Correct AnswerverifiedShow Answer

Which of the following is consistent with moving from a surplus to equilibrium in the market for foreign-currency exchange?

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

If a tariff on beef were implemented, which of the following would rise?

Correct AnswerverifiedShow Answer

When the U.S. real interest rate falls, purchasing U.S. assets becomes

Correct AnswerverifiedShow Answer

What happens to net capital outflow as the real interest rate falls? Explain your answer.

Correct AnswerverifiedAs the real interest rate falls, domesti...View AnswerShow Answer

In the open-economy macroeconomic model, the source of the supply of loanable funds is

Correct AnswerverifiedShow Answer

Other things the same, if the U.S. interest rate rises, U.S. assets become ____ attractive. So, desired net capital outflow _____. This change in net capital outflow shifts the __________ curve in the market for foreign-currency exchange to the ______.

Correct Answerverifiedmore, fall...View AnswerShow Answer

A tax on imported goods is called a(n)

Correct AnswerverifiedShow Answer

An economy recently had 800 billion euros of saving and 600 billion euros of net capital outflow. What was its investment? What was its quantity of loanable funds supplied?

Correct Answerverified200 billio...View AnswerShow Answer

Refer to Budget in Recession. This change in the deficit causes the exchange rate to change. What does the change in the exchange rate do to net exports?

Correct AnswerverifiedBecause the exchange...View AnswerShow Answer

If the government of Venezuela made policy changes that increased national saving, the real exchange rate of the peso would

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, the market for loanable funds identity can be written as

Correct AnswerverifiedShow Answer

If the Canadian government raises it budget deficit, then Canada's net capital outflows will

Correct AnswerverifiedShow Answer

If the risk of holding assets in foreign countries rises relative to the risk of holding U.S assets, then

Correct AnswerverifiedShow Answer

Other things the same, an increase in the U.S. interest rate causes the quantity of loanable funds supplied to

Correct AnswerverifiedShow Answer

The slope of the supply of loanable funds is based on an increase in

Correct AnswerverifiedShow Answer

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As the real interest rate falls, domesti...
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Other things the same, if the U.S. interest rate rises, U.S. assets become __ attractive. So, desired net capital outflow _. This change in net capital outflow shifts the __ curve in the market for foreign-currency exchange to the .

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more, fall...
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200 billio...
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Because the exchange...
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