Question 1

An increase in the budget deficit

Accepted Answer

A)   raises net exports and domestic investment.
B)   raises net exports and reduces domestic investment.
C)   reduces net exports and raises domestic investment.
D)   reduces net exports and domestic investment.E) C) and D)
F) B) and D)

Question 2

A country has output of $900 billion,consumption of $600 billion,government expenditures of $150 billion and investment of $120 billion.What is its supply of loanable funds?

Accepted Answer

A)   $30 billion
B)   $90 billion
C)   $120 billion
D)   $150 billionE) A) and D)
F) A) and C)

Question 3

If at a given real interest rate desired national saving were $140 billion,domestic investment were $90 billion,and net capital outflow were $40 billion,then at that real interest rate in the loanable funds market there would be a

Accepted Answer

A)   surplus;the real interest rate would rise.
B)   surplus;the real interest rate would fall.
C)   shortage;the real interest rate would rise.
D)   shortage;the real interest rate would fall.E) A) and B)
F) A) and C)

Question 4

Which of the following would shift the demand for dollars in the market for foreign currency exchange to the right?

Accepted Answer

A)   foreign citizens want to buy more U.S.goods and services at a given exchange rate
B)   foreign citizens want to buy fewer U.S.goods and services at a given exchange rate
C)   foreign citizens want to buy more U.S.bonds
D)   foreign citizens want to by fewer U.S.bondsE) None of the above
F) B) and D)

Question 5

Other things the same,an increase in the U.S.interest rate

Accepted Answer

A)   raises net capital outflow which decreases the quantity of loanable funds demanded.
B)   raises net capital outflow which increases the quantity of loanable funds demanded.
C)   lowers net capital outflow which decreases the quantity of loanable funds demanded.
D)   lowers net capital outflow which increases the quantity of loanable funds demanded.E) All of the above
F) A) and B)

Question 6

If there is capital flight from the United States,then the demand for loanable funds

Accepted Answer

A)   and the supply of dollars in the foreign-exchange market shift right.
B)   and the supply of dollars in the foreign-exchange market shift left.
C)   shifts left while the supply of dollars in the foreign-exchange market shifts right.
D)   shifts right while the supply of dollars in the foreign-exchange market shifts left.E) B) and C)
F) None of the above

Question 7

In the open-economy macroeconomic model,if the supply of loanable funds shifts right

Accepted Answer

A)   the interest rate rises and the demand for dollars in the market for foreign currency exchange shifts right.
B)   the interest rate rises and the demand for dollars in the market for foreign currency exchange shifts left.
C)   the interest rate falls and the supply of dollars in the market for foreign-currency exchange shifts right.
D)   the interest rate falls and the supply of dollars in the market for foreign currency exchange shifts left.E) A) and B)
F) All of the above

Question 8

Which of the following is the most likely result from an increase in a country's government budget surplus?

Accepted Answer

A)   higher interest rates
B)   lower imports
C)   lower net capital outflows
D)   lower domestic investmentE) C) and D)
F) A) and C)

Question 9

If a government has a budget surplus,then public saving

Accepted Answer

A)   is positive and increases national saving.
B)   is positive but decreases national saving.
C)   is negative and decreases national saving.
D)   is negative but increases national saving.E) A) and D)
F) C) and D)

Question 10

A U.S.company wants to buy yen in order to buy Japanese bonds.In the open-economy macroeconomic model,this transaction would be part of

Accepted Answer

A)   the supply of currency in the foreign exchange market,and part of the supply of loanable funds.
B)   the demand for currency in the foreign exchange market,and part of the supply of loanable funds.
C)   the supply of currency in the foreign exchange market,and part of the demand for loanable funds.
D)   the demand for currency in the foreign exchange market,and part of the demand for loanable funds.E) C) and D)
F) All of the above

Question 11

In an open economy,

Accepted Answer

A)   net capital outflow = imports.
B)   net capital outflow = net exports.
C)   net capital outflow = exports.
D)   None of the above is correct.E) A) and C)
F) A) and B)

Question 12

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) A) and B)

Question 13

If the supply of loanable funds shifts right,then the equilibrium

Accepted Answer

A)   levels of net capital outflow and domestic investment decrease.
B)   level of net capital outflow increases and the equilibrium level of domestic investment decreases.
C)   level of net capital outflow decreases and the equilibrium level of domestic investment increases.
D)   levels of net capital outflow and domestic investment increase.E) B) and D)
F) B) and C)

Question 14

Other things the same,if the U.S.real exchange rate depreciated,then U.S.net exports would

Accepted Answer

A)   fall and the quantity of dollars demanded in the market for foreign-currency exchange would fall.
B)   fall and the quantity of dollars demanded in the market for foreign-currency exchange would rise.
C)   rise and the quantity of dollars demanded in the market for foreign-currency exchange would fall.
D)   rise and the quantity of dollars demanded in the market for foreign-currency exchange would rise.E) None of the above
F) C) and D)

Question 15

In the open-economy macroeconomic model,if the supply of loanable funds increases,then the interest rate

Accepted Answer

A)   and the real exchange rate increase.
B)   and the real exchange rate decrease.
C)   increases and the real exchange rate decreases.
D)   decreases and the real exchange rate increases.E) All of the above
F) A) and C)

Question 16

In an open economy,the source for the demand for loanable funds is

Accepted Answer

A)   national saving.
B)   national saving + net capital outflow.
C)   investment
D)   investment + net capital outflowE) A) and B)
F) A) and C)

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

In the open-economy macroeconomic model,at the equilibrium real interest rate,the amount that people (including government)want to save exactly balances desired domestic investment.

Accepted Answer

A) True 
 B)False

Question 19

In the open-economy macroeconomic model,if investment demand increases,then

Accepted Answer

A)   net exports and the real exchange rate rise.
B)   net exports rise and the real exchange rate falls.
C)   net exports fall and the real exchange rate rises.
D)   net exports and the real exchange rate fall.E) A) and D)
F) B) and D)

Question 20

Figure 19-4 
-Refer to Figure 19-4.Suppose that U.S.firms desire to purchase more capital in the U.S.The effects of this could be illustrated by

Accepted Answer

A)   shifting the demand curve in panel a to the right and the demand curve in panel c to the left.
B)   shifting the demand curve in panel a to the right and the supply curve in panel c to the left.
C)   shifting the supply curve in panel a to the right and the demand curve in panel c to the left.
D)   shifting the supply curve in panel a to the right and the supply curve in panel c to the right.E) B) and D)
F) All of the above

Exam 32: A Macroeconomic Theory of the Open Economy

A country has output of $900 billion,consumption of $600 billion,government expenditures of $150 billion and investment of $120 billion.What is its supply of loanable funds?

Correct AnswerverifiedShow Answer

Which of the following would shift the demand for dollars in the market for foreign currency exchange to the right?

Correct AnswerverifiedShow Answer

If there is capital flight from the United States,then the demand for loanable funds

Correct AnswerverifiedShow Answer

If the supply of loanable funds shifts right,then the equilibrium

Correct AnswerverifiedShow Answer

If a government has a budget surplus,then public saving

Correct AnswerverifiedShow Answer

Which of the following is the most likely result from an increase in a country's government budget surplus?

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model,if the supply of loanable funds increases,then the 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

In the open-economy macroeconomic model,if the supply of loanable funds shifts right

Correct AnswerverifiedShow Answer

A U.S.company wants to buy yen in order to buy Japanese bonds.In the open-economy macroeconomic model,this transaction would be part of

Correct AnswerverifiedShow Answer

Other things the same,an increase in the U.S.interest rate

Correct AnswerverifiedShow Answer

In an open economy,the source for the demand for loanable funds is

Correct AnswerverifiedShow Answer

In an open economy,

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model,if investment demand increases,then

Correct AnswerverifiedShow Answer

Other things the same,if the U.S.real exchange rate depreciated,then U.S.net exports would

Correct AnswerverifiedShow Answer

An increase in the budget deficit

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model,at the equilibrium real interest rate,the amount that people (including government)want to save exactly balances desired domestic investment.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 19-4 -Refer to Figure 19-4.Suppose that U.S.firms desire to purchase more capital in the U.S.The effects of this could be illustrated by

Correct AnswerverifiedShow Answer

If at a given real interest rate desired national saving were $140 billion,domestic investment were $90 billion,and net capital outflow were $40 billion,then at that real interest rate in the loanable funds market there would be a

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified