True / False
1. Over the past two decades, the U.S. has persistently exported more goods and services than it has imported.
a.
True
b.
False
2. Over the past two decades the U.S. has persistently had trade deficits.
a.
True
b.
False
3. The primary focus of the open-economy macroeconomic model is the determination of GDP and the price level.
a.
True
b.
False
4. In an open economy, the supply of loanable funds comes from national saving.
a.
True
b.
False
5. In the open economy model, the supply of loanable funds comes from national saving and net capital outflow.
a.
True
b.
False
6. In an open economy, the demand for loanable funds comes from both domestic investment and net capital outflow.
a.
True
b.
False
7. Other things the same, if foreigners desire to purchase more U.S. bonds, then the demand for loanable funds shifts left.
a.
True
b.
False
8. The purchase of a capital asset adds to the demand for loanable funds only if that asset is a domestic one.
a.
True
b.
False
9. An increase in a country’s real interest rate reduces that country’s net capital outflow.
a.
True
b.
False
10. 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.
a.
True
b.
False
11. In the open-economy macroeconomic model, at the equilibrium real interest rate, the amount that people (including
government) want to save equals desired quantities of domestic investment and net capital outflow.
a.
True
b.
False
12. In the open-economy macroeconomic model, a higher domestic interest rate reduces the quantity of loanable funds
demanded
a.
True
b.
False
13. If the real interest rate were above the equilibrium rate, there would be a shortage of loanable funds.
a.
True
b.
False
14. Net capital outflow represents the quantity of dollars supplied in the foreign-currency exchange market.
a.
True
b.
False
15. In the open-economy macroeconomic model, net exports equal the quantity of dollars demanded in the market for
foreign currency exchange.
a.
True
b.
False
16. Other things the same, when the real exchange rate of the dollar appreciates, U.S. goods become more desirable to
U.S. residents, but less desirable to foreign residents.
a.
True
b.
False
17. Other things the same, a higher real exchange rate raises net exports.
a.
True
b.
False
18. In the open-economy macroeconomic model, the supply of dollars in the market for foreign-currency exchange is
upward sloping.
a.
True
b.
False
19. Because depreciation of the real exchange rate of the dollar increases U.S. net exports, the demand curve for dollars in
the foreign-currency exchange market is downward sloping.
a.
True
b.
False
20. In the open-economy macroeconomic model, the supply curve of currency is vertical because the quantity of currency
supplied does not depend on the real exchange rate.
a.
True
b.
False
21. In the open-economy macroeconomic model, if there were a surplus in the market for foreign-currency exchange, the
real exchange rate would appreciate.
a.
True
b.
False
22. In the open-economy macroeconomic model, if there is currently a surplus in the foreign exchange market, the
quantity of desired net exports will increase as the market moves to equilibrium.
a.
True
b.
False
23. In the open-economy macroeconomic model, other things the same, when a U.S. resident imports a foreign good, the
demand for dollars in the foreign-currency exchange market decreases.
a.
True
b.
False
24. If C+I+G>Y, then net exports and net capital outflow are both greater than zero.
a.
True
b.
False
25. The key determinant of net capital outflow is the real interest rate.
a.
True
b.
False
26. An increase in the U.S. interest rate discourages Americans from buying foreign assets and encourages foreigners to
buy U.S. assets.
a.
True
b.
False
27. As the interest rate rises, it is possible that net capital outflow could move from a positive to a negative value.
a.
True
b.
False
28. In the open-economy macroeconomic model, net capital outflow links the markets for loanable funds and foreign-
currency exchange.
a.
True
b.
False
29. In the open-economy macroeconomic model, the real exchange rate does not affect net capital outflow.
a.
True
b.
False
30. In the open-economy macroeconomic model, other things the same, an increase in the exchange rate raises the
quantity of dollars supplied in the market for foreign-currency exchange.
a.
True
b.
False
31. Other things the same, when a Canadian company imports bicycles from the U.S., the open-economy macroeconomic
model treats this transaction as part of the demand for dollars in the U.S. foreign-currency exchange market.
a.
True
b.
False
32. When the government budget deficit increases, national saving decreases.
a.
True
b.
False
33. An increase in the government budget deficit shifts the demand for loanable funds to the right.
a.
True
b.
False
34. An increase in the government budget deficit shifts the supply of loanable funds to the left.
a.
True
b.
False
35. According to the open-economy macroeconomic model, if the U.S. government budget deficit increases, then both
U.S. domestic investment and U.S. net capital outflow decrease.
a.
True
b.
False
36. According to the open-economy macroeconomic model, if the U.S. government budget deficit decreases, then both
U.S. domestic investment and net capital outflow increase.
a.
True
b.
False
37. According to the open-economy macroeconomic model, a decrease in the U.S. government budget deficit increases
U.S. net capital outflow, causes the real exchange rate of the dollar to depreciate, and increases U.S. net exports.
a.
True
b.
False
38. According to the open-economy macroeconomic model, if the United States moved from a government budget deficit
to a government budget surplus, U.S. real interest rates would increase and the real exchange rate of the U.S. dollar would
appreciate.
a.
True
b.
False
39. In the 1980s, both the U.S. government budget and U.S. trade deficits increased.
a.
True
b.
False
40. When a country imposes a trade restriction, the real exchange rate of that country’s currency appreciates.
a.
True
b.
False
41. In the long run, import quotas increase net exports.
a.
True
b.
False
42. In the long run import quotas do not affect the size of net exports.
a.
True
b.
False
43. An import quota imposed by the U.S. would reduce U.S. imports, but have no impact on U.S. exports.
a.
True
b.
False
44. Although trade policies do not affect a country’s overall trade balance, they do affect specific firms and industries.
a.
True
b.
False
45. If policymakers impose import restrictions on clothing, the U.S. trade deficit will shrink.
a.
True
b.
False
46. Capital flight raises a country’s interest rate.
a.
True
b.
False
47. Capital flight shifts the NCO curve to the left.
a.
True
b.
False
48. 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.
a.
True
b.
False
49. Capital flight raises a country’s real exchange rate.
a.
True
b.
False
50. If Argentina suffers from capital flight, Argentinean domestic investment and Argentinean net exports will both
decline.
a.
True
b.
False
51. A tax credit for purchases of capital goods causes the interest rate to increase and the exchange rate to appreciate.
a.
True
b.
False
52. Capital flight raises both a country‘s exchange rate and its interest rate.
a.
True
b.
False
53. An increase in national saving reduces the interest rate and so reduces net capital outflow.
a.
True
b.
False
54. An increase in the government budget deficit shifts the supply of domestic currency in the market for foreign
exchange to the right.
a.
True
b.
False
55. When a country imposes a trade quota, the demand for currency in the market for foreign exchange shifts to the right
a.
True
b.
False
56. Capital flight shifts the demand for loanable funds to the left.
a.
True
b.
False