Question 1

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 D)
F) A) and C)

Question 2

If for some reason Americans desired to increase their purchases of foreign assets, then other things the same

Accepted Answer

A)  both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency exchange would fall.
B)  both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency would rise.
C)  the real exchange rate would rise and the quantity of dollars exchanged in the market for foreign-currency would fall.
D)  the real exchange rate would fall and the quantity of dollars exchanged in the market for foreign-currency would rise.E) A) and D)
F) A) and C)

Question 3

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

Question 4

Suppose that the Turkish government budget deficit increases. What curves in the open-economy macroeconomic model shift? Explain why each curve shifts the direction it does.

Accepted Answer

The supply of Turkish loanable funds cur...

Question 5

When the U.S. real interest rate falls, owning 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) All of the above
F) B) and D)

Question 6

What effect do protectionist policies have on the trade deficit?

Accepted Answer

Protectionist policies increase the dema...

Question 7

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

Question 8

If a tariff on lumber were implemented, for the country as a whole 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 B)
F) None of the above

Question 9

If a government increases its budget deficit, then domestic interest rates

Accepted Answer

A)  and net exports rise.
B)  rise and net exports fall.
C)  fall and net exports rise.
D)  and net exports fall.E) C) and D)
F) All of the above

Question 10

Which of the following increases if the U.S. imposes an import quota on computer components?

Accepted Answer

A)  U.S. exports
B)  U.S. imports
C)  U.S. net exports
D)  None of the above increases.E) B) and C)
F) A) and C)

Question 11

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

Question 12

If the U.S. imposed an import quota on corn, then in the U.S.

Accepted Answer

A)  exports and imports would rise.
B)  exports and imports would fall.
C)  exports would rise and imports would fall.
D)  exports would fall and imports would rise.E) B) and D)
F) A) and B)

Question 13

In 2002, the United States imposed restrictions on the importation of steel into the United States. The open-economy macroeconomic model shows that such a policy would

Accepted Answer

A)  lower the real exchange rate and increase net exports.
B)  lower the real exchange rate and have no effect on net exports.
C)  raise the real exchange rate and decrease net exports.
D)  raise the real exchange rate and have no effect on net exports.E) B) and C)
F) A) and D)

Question 14

If the United States imposes an import quota on clothing, then U.S. exports

Accepted Answer

A)  increase, U.S. imports increase, and U.S. net exports will not change.
B)  increase, U.S. imports decrease, and U.S. net exports increase.
C)  decrease, U.S. imports increase, and U.S. net exports decrease.
D)  decrease, U.S. imports decrease, and U.S. net exports will not change.E) All of the above
F) C) and D)

Question 15

When the U.S. real interest rate falls

Accepted Answer

A)  U.S. purchases of foreign assets and foreign purchases of U.S. assets rise
B)  U.S. purchases of foreign assets rise and foreign purchases of U.S. assets fall
C)  U.S. purchases of foreign assets fall and foreign purchases of U.S. assets rise
D)  U.S. purchases of foreign assets and foreign purchases of U.S. assets fallE) A) and B)
F) None of the above

Question 16

If a country had capital flight, then the real exchange rate would

Accepted Answer

A)  fall. To offset this fall the government could increase the budget deficit.
B)  fall. To offset this fall the government could decrease the budget deficit.
C)  rise. To offset this rise the government could increase the budget deficit.
D)  rise. To offset this rise the government could decrease the budget deficit.E) B) and C)
F) A) and D)

Question 17

If the government of a country with a zero trade balance started with a budget deficit and moved to a budget surplus, domestic investment would

Accepted Answer

A)  rise and there would be a trade surplus.
B)  rise and there would be a trade deficit.
C)  fall and there would be a trade surplus.
D)  fall and there would be a trade deficit.E) None of the above
F) All of the above

Question 18

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 19

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) None of the above

Question 20

A firm produces manufacturing equipment, some of which it exports. Which of the following effects of a budget deficit would likely reduce the quantity of equipment it sells?

Accepted Answer

A)  the change in the interest rate and the change in the exchange rate
B)  the change in the interest rate but not the change in the exchange rate
C)  the change in the exchange rate but not the change in the interest rate
D)  neither the change in the interest rate nor the change in the exchange rateE) B) and C)
F) All of the above

Exam 19: A Macroeconomic Theory of the Open Economy

In 2002, the United States imposed restrictions on the importation of steel into the United States. The open-economy macroeconomic model shows that such a policy would

Correct AnswerverifiedShow Answer

An increase in the budget deficit

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If a tariff on lumber were implemented, for the country as a whole which of the following would rise?

Correct AnswerverifiedShow Answer

Which of the following increases if the U.S. imposes an import quota on computer components?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the government of a country with a zero trade balance started with a budget deficit and moved to a budget surplus, domestic investment would

Correct AnswerverifiedShow Answer

If a government has a budget surplus, then public saving

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A firm produces manufacturing equipment, some of which it exports. Which of the following effects of a budget deficit would likely reduce the quantity of equipment it sells?

Correct AnswerverifiedShow Answer

Suppose that the Turkish government budget deficit increases. What curves in the open-economy macroeconomic model shift? Explain why each curve shifts the direction it does.

Correct AnswerverifiedThe supply of Turkish loanable funds cur...View AnswerShow Answer

A tax on imported goods is called a(n)

Correct AnswerverifiedShow Answer

If the United States imposes an import quota on clothing, then U.S. exports

Correct AnswerverifiedShow Answer

If the U.S. imposed an import quota on corn, then in the U.S.

Correct AnswerverifiedShow Answer

If a government increases its budget deficit, then domestic interest rates

Correct AnswerverifiedShow Answer

What effect do protectionist policies have on the trade deficit?

Correct AnswerverifiedProtectionist policies increase the dema...View AnswerShow 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

If for some reason Americans desired to increase their purchases of foreign assets, then other things the same

Correct AnswerverifiedShow Answer

When the U.S. real interest rate falls

Correct AnswerverifiedShow Answer

If a country had capital flight, then the real exchange rate would

Correct AnswerverifiedShow Answer

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The supply of Turkish loanable funds cur...
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Protectionist policies increase the dema...
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