Question 1

In the open-economy macroeconomic model,net capital outflow links the markets for loanable funds and foreign-currency exchange.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is included in the supply of dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

Accepted Answer

A)   A retail outlet in Afghanistan wants to buy watches from a Canadian manufacturer.
B)   A Canadian bank loans dollars to Blair,a Canadian resident,who wants to purchase a new car made in Canada.
C)   A Canadian-based mutual fund wants to purchase stock issued by a Polish company.
D)   A Canadian resident imports a car made in Japan.E) All of the above
F) A) and B)

Question 3

What is most likely to increase exports in the country of Lexburgh?

Accepted Answer

A)   a reduction in political instability
B)   ending investment tax credits
C)   a reduction in the size of the government's budget surplus
D)   an import quotaE) A) and B)
F) All of the above

Question 4

If the quantity of loanable funds supplied is greater than the quantity demanded,what are the excess funds used for?

Accepted Answer

A)   Canadians to purchase foreign assets
B)   Canadians to purchase domestic investments
C)   foreigners to purchase Canadian assets
D)   foreigners to purchase Canadian goodsE) B) and D)
F) None of the above

Question 5

Which statement best describes the effects of an increase in real interest rates in Canada?

Accepted Answer

A)   It discourages both Canadian and foreign residents from buying Canadian assets.
B)   It encourages both Canadian and foreign residents to buy Canadian assets.
C)   It encourages Canadian residents to buy Canadian assets,but discourages foreign residents from buying Canadian assets.
D)   It encourages foreign residents to buy Canadian assets,but discourages Canadian residents from buying Canadian assets.E) All of the above
F) A) and D)

Question 6

A drop in the Peruvian real interest rate reduces Peruvian net capital outflow.

Accepted Answer

A) True 
 B)False

Question 7

In an open economy,the supply of loanable funds comes from national saving.

Accepted Answer

A) True 
 B)False

Question 8

What are the main elements of our open-economy macroeconomic model?

Accepted Answer

A)   the market for loanable funds,the foreign-currency market,and the price level
B)   the market for goods and services,the price level,and GDP
C)   the market for goods and services,net exports,and GDP
D)   the market for loanable funds,net capital outflow,and the foreign-currency marketE) B) and D)
F) C) and D)

Question 9

The 1998 default by the Russian government had results that were predictable using the textbook model.Which statement best describes what happened?

Accepted Answer

A)   The event increased Russian interest rates and net exports.
B)   The event reduced Russian interest rates and net exports.
C)   The event increased Russian interest rates and reduced Russian net exports.
D)   The event reduced Russian interest rates and increased Russian net exports.E) A) and B)
F) C) and D)

Question 10

Which statement could be prompted by an interest rate that is temporarily higher in Canada than in the rest of the world?

Accepted Answer

A)   A Swiss bank purchases a Canadian bond instead of the German bond it had considered purchasing.
B)   Canadian firms decide,because interest rates are higher,to do more investment spending.
C)   Brad,a Canadian resident,decides to spend his savings on a trip to Hawaii.
D)   Canadian net capital outflow increases.E) A) and B)
F) B) and C)

Question 11

What is the real exchange rate equal to?

Accepted Answer

A)   the relative price of domestic and foreign currency
B)   the relative price of domestic and foreign goods
C)   the ratio between the domestic and foreign interest rates
D)   the nominal exchange rate minus the inflation rateE) B) and C)
F) A) and D)

Question 12

In the market for foreign-currency exchange in the open-economy macroeconomic model,which of the following results from a higher real exchange rate?

Accepted Answer

A)   It makes Canadian goods more expensive relative to foreign goods and reduces the quantity of dollars supplied.
B)   It makes Canadian goods more expensive relative to foreign goods and reduces the quantity of dollars demanded.
C)   It makes foreign goods more expensive relative to Canadian goods and reduces the quantity of dollars supplied.
D)   It makes foreign goods more expensive relative to Canadian goods and reduces the quantity of dollars demanded.E) B) and C)
F) All of the above

Question 13

In the open-economy macroeconomic model,where does the demand for loanable funds come from?

Accepted Answer

A)   domestic investment
B)   net exports
C)   net capital outflow
D)   the sum of net capital outflow and domestic investmentE) None of the above
F) B) and C)

Question 14

In an open economy,what are the determinants of the prevailing real interest rate?

Accepted Answer

A)   domestic supply and domestic demand for loanable funds
B)   world supply and domestic demand for loanable funds
C)   world supply and world demand for loanable funds
D)   domestic supply and world demand for loanable fundsE) C) and D)
F) All of the above

Question 15

Which statement best describes the effects of an increase in the real interest rate?

Accepted Answer

A)   It discourages people from saving and so increases the quantity of loanable funds demanded.
B)   It discourages people from saving and so decreases the quantity of loanable funds demanded.
C)   It encourages people to save and so increases the quantity of loanable funds supplied.
D)   It encourages people to save and so decreases the quantity of loanable funds supplied.E) A) and C)
F) None of the above

Question 16

In an open economy,where does the demand for loanable funds come from?

Accepted Answer

A)   from those who want to borrow funds to buy domestic capital goods
B)   from those who want to borrow funds to buy foreign assets
C)   from those who want to borrow funds to buy either domestic capital goods or foreign assets
D)   from those who want to borrow funds to buy Canadian bonds or shares of stock in Canadian companiesE) C) and D)
F) B) and C)

Question 17

Mexico suffered from capital flight in 1994.What happened to Mexico's real interest rate and the peso?

Accepted Answer

A)   The real interest rate fell,and the peso appreciated.
B)   The real interest rate fell,and the peso depreciated.
C)   The real interest rate rose,and the peso appreciated.
D)   The real interest rate rose,and the peso depreciated.E) B) and C)
F) B) and D)

Question 18

Which statement is consistent with a depreciation of the dollar?

Accepted Answer

A)   Canadian goods become less expensive relative to foreign goods,which makes exports rise and imports fall.
B)   Canadian goods become less expensive relative to foreign goods,which makes exports fall and imports rise.
C)   Canadian goods become more expensive relative to foreign goods,which makes exports rise and imports fall.
D)   Canadian goods become more expensive relative to foreign goods,which makes exports fall and imports rise.E) A) and B)
F) A) and C)

Question 19

What does the open-economy macroeconomic model examine?

Accepted Answer

A)   the determination of output growth rate and the real interest rate
B)   the determination of unemployment rates and the exchange rate
C)   the determination of output growth rate and the inflation rate
D)   the determination of the trade balance and the exchange rateE) A) and C)
F) B) and C)

Question 20

The law of one price assumes that trade take place at no cost,so that prices across borders equalize.The result of this assumption is that the real interest rate is always constant.
a)Draw a graph to show the demand for dollars in the foreign-currency exchange market under the assumption that purchasing-power parity holds.
b)On the other hand,our model of real exchange rate determination shows a downward sloping demand-for-dollars curve.What could determine how steep or flat the demand for dollars is?

Accepted Answer

a)The demand for dollars,which coincides...

Exam 13: A Macroeconomic Theory of the Small Open Economy

If the quantity of loanable funds supplied is greater than the quantity demanded,what are the excess funds used for?

Correct Answer
verified

Which of the following is included in the supply of dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

Correct Answer
verified

Which statement is consistent with a depreciation of the dollar?

Correct Answer
verified

Mexico suffered from capital flight in 1994.What happened to Mexico's real interest rate and the peso?

Correct Answer
verified

In an open economy,where does the demand for loanable funds come from?

Correct Answer
verified

The 1998 default by the Russian government had results that were predictable using the textbook model.Which statement best describes what happened?

Correct Answer
verified

What is most likely to increase exports in the country of Lexburgh?

Correct Answer
verified

Which statement best describes the effects of an increase in real interest rates in Canada?

Correct Answer
verified

Correct Answer
verified
a)The demand for dollars,which coincides...
View Answer

In the open-economy macroeconomic model,where does the demand for loanable funds come from?

Correct Answer
verified

In the market for foreign-currency exchange in the open-economy macroeconomic model,which of the following results from a higher real exchange rate?

Correct Answer
verified

Which statement could be prompted by an interest rate that is temporarily higher in Canada than in the rest of the world?

Correct Answer
verified

A drop in the Peruvian real interest rate reduces Peruvian net capital outflow.

Correct Answer
verified

In an open economy,what are the determinants of the prevailing real interest rate?

Correct Answer
verified

In the open-economy macroeconomic model,net capital outflow links the markets for loanable funds and foreign-currency exchange.

Correct Answer
verified

What does the open-economy macroeconomic model examine?

Correct Answer
verified

What is the real exchange rate equal to?

Correct Answer
verified

In an open economy,the supply of loanable funds comes from national saving.

Correct Answer
verified

What are the main elements of our open-economy macroeconomic model?

Correct Answer
verified

Which statement best describes the effects of an increase in the real interest rate?

Correct Answer
verified

Exam 13: A Macroeconomic Theory of the Small Open Economy

If the quantity of loanable funds supplied is greater than the quantity demanded,what are the excess funds used for?

Correct AnswerverifiedShow Answer

Which of the following is included in the supply of dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

Correct AnswerverifiedShow Answer

Which statement is consistent with a depreciation of the dollar?

Correct AnswerverifiedShow Answer

Mexico suffered from capital flight in 1994.What happened to Mexico's real interest rate and the peso?

Correct AnswerverifiedShow Answer

In an open economy,where does the demand for loanable funds come from?

Correct AnswerverifiedShow Answer

The 1998 default by the Russian government had results that were predictable using the textbook model.Which statement best describes what happened?

Correct AnswerverifiedShow Answer

What is most likely to increase exports in the country of Lexburgh?

Correct AnswerverifiedShow Answer

Which statement best describes the effects of an increase in real interest rates in Canada?

Correct AnswerverifiedShow Answer

Correct Answerverifieda)The demand for dollars,which coincides...View AnswerShow Answer

In the open-economy macroeconomic model,where does the demand for loanable funds come from?

Correct AnswerverifiedShow Answer

In the market for foreign-currency exchange in the open-economy macroeconomic model,which of the following results from a higher real exchange rate?

Correct AnswerverifiedShow Answer

Which statement could be prompted by an interest rate that is temporarily higher in Canada than in the rest of the world?

Correct AnswerverifiedShow Answer

A drop in the Peruvian real interest rate reduces Peruvian net capital outflow.

Correct AnswerverifiedShow Answer

In an open economy,what are the determinants of the prevailing real interest rate?

Correct AnswerverifiedShow Answer

In the open-economy macroeconomic model,net capital outflow links the markets for loanable funds and foreign-currency exchange.

Correct AnswerverifiedShow Answer

What does the open-economy macroeconomic model examine?

Correct AnswerverifiedShow Answer

What is the real exchange rate equal to?

Correct AnswerverifiedShow Answer

In an open economy,the supply of loanable funds comes from national saving.

Correct AnswerverifiedShow Answer

What are the main elements of our open-economy macroeconomic model?

Correct AnswerverifiedShow Answer

Which statement best describes the effects of an increase in the real interest rate?

Correct AnswerverifiedShow Answer

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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Correct Answer
verified
a)The demand for dollars,which coincides...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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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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