Question 1

Which of the following is most likely to increase U.S. exports?

Accepted Answer

A)  The government gives subsidies to U.S. firms that export goods or services.
B)  The government reduces the size of the budget surplus.
C)  The United States unilaterally reduces its restrictions on foreign imports.
D)  Taxes on domestic saving rise.

Question 2

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 3

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

Accepted Answer

Because the exchange...

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

The open-economy macroeconomic model examines the determination of

Accepted Answer

A)  the output growth rate and the real interest rate.
B)  unemployment and the exchange rate.
C)  the output growth rate and the inflation rate.
D)  the trade balance and the exchange rate.

Question 6

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

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 falls

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

In the long run import quotas do not affect the size of net exports.

Accepted Answer

A) True 
 B)False

Question 9

Capital flight increases a country's interest rate. This increase in the interest rate makes net capital outflow lower than it would be had the interest rate stayed the same.

Accepted Answer

A) True 
 B)False

Question 10

When the real exchange rate for the dollar depreciates, 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.

Question 11

In the open economy model, the supply of loanable funds comes from national saving and net capital outflow.

Accepted Answer

A) True 
 B)False

Question 12

When a country imposes an import quota, its

Accepted Answer

A)  net exports rise and its real exchange rate appreciates.
B)  net exports rise and its real exchange rate depreciates.
C)  net exports fall and its real exchange rate depreciates
D)  None of the above is correct.

Question 13

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.

Question 14

In the open-economy macroeconomic model, if a country's interest rate rises, its net capital outflow

Accepted Answer

A)  rises and the real exchange rate rises.
B)  falls and the real exchange rate falls.
C)  rises and the real exchange rate falls.
D)  falls and the real exchange rate rises.

Question 15

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 16

Refer to U.S. Investment Tax Credit. In the market for loanable funds which curve shifts and which direction does it shift?

Accepted Answer

The demand...

Question 17

Which of the following results if the U.S. removes an import quota on computer components?

Accepted Answer

A)  U.S. exports and U.S. imports both increase
B)  U.S. exports increase but U.S. imports are unchanged
C)  U.S. imports increase but U.S. exports are unchanged
D)  None of the above are correct

Question 18

Imposing an import quota causes the domestic real exchange rate to

Accepted Answer

A)  appreciate, which increases foreign demand for domestic goods.
B)  appreciate, which decreases foreign demand for domestic goods.
C)  depreciate, which increases foreign demand for domestic goods.
D)  depreciate, which decreases foreign demand for domestic goods.

Question 19

In which case(s)  does(do)  a country's demand for loanable funds shift right?

Accepted Answer

A)  both an increase in the budget deficit and capital flight
B)  an increase in the budget deficit, but not capital flight
C)  capital flight, but not an increase in the budget deficit
D)  neither an increase in the budget deficit nor capital flight

Question 20

Other things the same, people in the U.S. would want to save more if the real interest rate in the U.S.

Accepted Answer

A)  fell. The increased saving would increase the quantity of loanable funds demanded.
B)  fell. The increased saving would increase the quantity of loanable funds supplied.
C)  rose. The increased saving would increase the quantity of loanable funds demanded.
D)  rose. The increased saving would increase the quantity of loanable funds supplied.

Exam 32: A Macroeconomic Theory of the Open Economy

Refer to U.S. Investment Tax Credit. In the market for loanable funds which curve shifts and which direction does it shift?

Correct AnswerverifiedThe demand...View AnswerShow Answer

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

Correct AnswerverifiedBecause the exchange...View AnswerShow Answer

Which of the following is most likely to increase U.S. exports?

Correct AnswerverifiedShow Answer

Capital flight increases a country's interest rate. This increase in the interest rate makes net capital outflow lower than it would be had the interest rate stayed the same.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The open-economy macroeconomic model examines the determination of

Correct AnswerverifiedShow Answer

When a country imposes an import quota, its

Correct AnswerverifiedShow Answer

Other things the same, people in the U.S. would want to save more if the real interest rate in the U.S.

Correct AnswerverifiedShow Answer

Which of the following results if the U.S. removes an import quota on computer components?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

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

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

Correct AnswerverifiedShow Answer

In which case(s) does(do) a country's demand for loanable funds shift right?

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model, if a country's interest rate rises, its net capital outflow

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Imposing an import quota causes the domestic real exchange rate to

Correct AnswerverifiedShow Answer

In the open economy model, the supply of loanable funds comes from national saving and net capital outflow.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the long run import quotas do not affect the size of net exports.

Correct AnswerverifiedShow Answer

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The demand...
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Because the exchange...
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The supply curve in the market for forei...
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