104. If at a given exchange rate foreign citizens want to buy fewer U.S bonds, then the
a.
supply of dollars in the market for foreign-currency exchange shifts right.
b.
supply of dollars in the market for foreign-currency exchange shifts left.
c.
demand for dollars in the market for foreign-currency exchange shifts right.
d.
demand for dollars in the market for foreign-currency exchange shifts left.
105. Which of the following is included in the demand for dollars in the market for foreign-currency exchange in the
open-economy macroeconomic model?
a.
a company in Canada wants to buy oranges from the U.S
b.
a Japanese banks want to buy bonds from the U.S. government
c.
a U.S. citizen wants to buy stock a German company is selling
d.
None of the above is correct.
106. The real exchange rate measures the
a.
b.
c.
d.
107. Which of the following make(s) demand for U.S. dollars in the market for foreign-currency exchange higher than
otherwise?
a.
a U.S. airline wanting to buy jets made in France and a Swedish hospital wanting to buy medical equipment
made in the U.S.
b.
a U.S. airline wanting to buy jets made in France, but not a Swedish hospital wanting to buy medical
equipment made in the U.S.
c.
a Swedish hospital wanting to buy medical equipment made in the U.S., but not a U.S. airline wanting to buy
jets made in France
d.
neither a U.S. bank wanting to lend money to a Canadian company nor a U.S. firm wanting to buy computers
made in South Korea
108. When the real exchange rate for the dollar appreciates, U.S. goods become
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.
109. When the real exchange rate for the dollar depreciates, U.S. goods become
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.
110. When the U.S. real exchange rate appreciates, U.S. goods become
a.
more attractive to consumers in the U.S. and abroad.
b.
more attractive to consumers in the U.S. and less attractive to consumers abroad.
c.
less attractive to consumers in the U.S. and abroad.
d.
less attractive to consumers in the U.S. and more attractive to consumers abroad.
111. In the open-economy macroeconomic model, as the exchange rate rises,
a.
desired net exports fall, so the quantity of dollars supplied rise.
b.
desired net exports fall, so the quantity of dollars demanded falls.
c.
desired net exports rise ,so the quantity of dollars supplied falls.
d.
desired net exports rise, so the quantity of dollars demanded rises.
112. Other things the same, if the U.S. real exchange rate depreciated, then U.S. net exports would
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.
113. The theory of purchasing-power parity implies that the demand curve for foreign-currency exchange is
a.
downward sloping.
b.
upward sloping.
c.
horizontal.
d.
vertical.
114. In the open-economy macroeconomic model, if for some reason foreign citizens want to purchase more U.S. goods
and services at each exchange rate, then
a.
the demand for dollars in the market for foreign-currency exchange shifts right.
b.
the demand for dollars in the market for foreign-currency exchange shifts left.
c.
the supply of dollars in the market for foreign-currency exchange shifts right.
d.
the supply of dollars in the market for foreign-currency exchange shifts left.
115. Which of the following would shift the demand for dollars in the market for foreign currency exchange to the right?
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. bonds
116. In the open-economy macroeconomic model, the demand for dollars shifts right if at any given exchange rate
a.
foreign residents want to buy more U.S. goods and services.
b.
U.S. residents want to buy fewer foreign goods and services.
c.
Both A and B are correct.
d.
None of the above is correct.
117. In the open economy macroeconomic model, the amount of dollars demanded in the market for foreign-currency
exchange at a given real exchange rate increases if
a.
either U.S. imports or exports increase.
b.
either U.S. imports or exports decrease.
c.
either U.S. imports increase or U.S. exports decrease.
d.
either U.S. imports decrease or U.S. exports increase.
118. In the open-economy macroeconomic model, the quantity of dollars demanded in the market for foreign-currency
exchange
a.
depends on the real exchange rate. The quantity of dollars supplied in the foreign-exchange market depends on
the real interest rate.
b.
depends on the real interest rate. The quantity of dollars supplied in the foreign-exchange market depends on
the real exchange rate.
c.
and the quantity of dollars supplied in the market for foreign-currency exchange depend on the real exchange
rate.
d.
and the quantity of dollars supplied in the market for foreign-currency exchange depend on the real interest
rate.
119. In the open-economy macroeconomic model, a higher U.S. real exchange rate makes
a.
U.S. goods more expensive relative to foreign goods and reduces the quantity of dollars supplied.
b.
U.S. goods more expensive relative to foreign goods and reduces the quantity of dollars demanded.
c.
foreign goods more expensive relative to U.S. goods and reduces the quantity of dollars supplied.
d.
foreign goods more expensive relative to U.S. goods and reduces the quantity of dollars demanded.
120. In the open-economy macroeconomic model, equilibrium in the market for foreign-currency exchange is determined
by the equality between the supply of dollars which comes from
a.
U.S. national saving and the demand for dollars for U.S. net exports.
b.
U.S. net capital outflow and the demand for dollars for U.S. net exports.
c.
domestic investment and the demand for U.S. net exports.
d.
foreign demand for U.S. goods and services and U.S. demand for foreign goods and services.
121. In the open economy macroeconomic model, the price that balances supply and demand in the market for foreign–
currency exchange model is the
a.
nominal exchange rate.
b.
nominal interest rate.
c.
real exchange rate.
d.
real interest rate.
122. Other things the same, in the open-economy macroeconomic model, if the exchange rate rises,
a.
the demand for dollars shifts left.
b.
the demand for dollars shifts right.
c.
the quantity of dollars demanded falls.
d.
the quantity of dollars demanded rises.
123. In the open-economy macroeconomic model, the
a.
exchange rate adjusts to equate private saving with the sum of investment, net exports, and net capital outflow.
b.
exchange rate adjusts to equate national saving with the sum of investment and net capital outflow.
c.
interest rate adjusts to equate private saving with the sum of investment, net exports, and net capital outflow.
d.
interest rate adjusts to equate national saving with the sum of investment and net capital outflow.
124. Suppose the real exchange rate is such that the market for foreign-currency exchange has a surplus. This surplus will
lead to
a.
an appreciation of the dollar, an increase in U.S. net exports, and so an increase in the quantity of dollars
demanded in the foreign exchange market.
b.
an appreciation of the dollar, a decrease in U.S. net exports, and so a decrease in the quantity of dollars
demanded in the foreign exchange market.
c.
a depreciation of the dollar, an increase in U.S. net exports, and so an increase in the quantity of dollars
demanded in the foreign exchange market.
d.
a depreciation of the dollar, a decrease in U.S. net exports, and so a decrease in the quantity of dollars
demanded in the foreign exchange market.
125. If the real exchange rate for the dollar is above the equilibrium level, the quantity of dollars supplied in the market
for foreign-currency exchange is
a.
greater than the quantity demanded and the dollar will appreciate.
b.
greater than the quantity demanded and the dollar will depreciate.
c.
less than the quantity demanded and the dollar will appreciate.
d.
less than the quantity demanded and the dollar will depreciate.
126. If the real exchange rate for the dollar is below the equilibrium level, the quantity of dollars supplied in the market
for foreign-currency exchange is
a.
less than the quantity demanded and the dollar will appreciate.
b.
less than the quantity demanded and the dollar will depreciate.
c.
greater than the quantity demanded and the dollar will appreciate.
d.
greater than the quantity demanded and the dollar will depreciate.
127. In the open-economy macroeconomic model, if there is a surplus in the market for foreign-currency exchange, which
of the following will move the market to equilibrium?
a.
the real exchange rate depreciates and net exports fall.
b.
the real exchange rate depreciates and net exports rise.
c.
the real exchange rate appreciates and net exports fall.
d.
the real exchange rate appreciates and net exports rise.
128. Which of the following is consistent with moving from a shortage to equilibrium in the market for foreign currency
exchange?
a.
the exchange rate falls so foreign residents want to buy more U.S. goods and services
b.
the exchange rate falls so foreign residents want to buy fewer U.S. goods and services
c.
the exchange rate rises so foreign residents want to buy more U.S. goods and services
d.
the exchange rate rises so foreign residents want to buy fewer U.S. goods and services
129. Which of the following is consistent with moving from a surplus to equilibrium in the market for foreign currency
exchange?
a.
the exchange rate falls causing U.S. residents to import more
b.
the exchange rate falls causing U.S. residents to import less
c.
the exchange rate rises causing U.S. residents to import more
d.
the exchange rate rises causing U.S. residents to import less
130. Which of the following is consistent with moving from a surplus to equilibrium in the market for foreign-currency
exchange?
a.
the exchange rate appreciates making domestic goods relatively more expensive.
b.
the exchange rate appreciates making domestic goods relatively less expensive.
c.
the exchange rate depreciates making domestic goods relatively more expensive.
d.
the exchange rate depreciates making domestic goods relatively less expensive.
Figure 32-2
131. Refer to Figure 32–2. What are the equilibrium values of the real exchange rate and net exports?
a.
1, 300
b.
.8, 400
c.
.6, 500
d.
None of the above are correct.
132. Refer to Figure 32–2. If the real exchange rate is 1, then there is a
a.
surplus of 100 so the real exchange rate will fall.
b.
surplus of 100 so the real exchange rate will rise.
c.
shortage of 100 so the real exchange rate will fall.
d.
shortage of 100 so the real exchange rate will rise.
133. Refer to Figure 32–2. At what real exchange rate is the quantity of dollars demanded equal to 500?
a.
1
b.
.8
c.
.6
d.
None of the above are correct.
134. If the demand for dollars in the market for foreign-currency exchange shifts left, then the exchange rate
a.
rises and the quantity of dollars exchanged rises.
b.
rises and the quantity of dollars exchanged does not change.
c.
falls and the quantity of dollars exchanged falls.
d.
falls and the quantity of dollars exchanged does not change.
135. If the demand for dollars in the market for foreign-currency exchange shifts right, then the exchange rate
a.
rises and the quantity of dollars exchanged rises.
b.
rises and the quantity of dollars exchanged does not change.
c.
falls and the quantity of dollars exchanged falls.
d.
falls and the quantity of dollars exchanged does not change.
136. If the supply of dollars in the market for foreign-currency exchange shifts left, then the exchange rate
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.
137. If the supply of dollars in the market for foreign-currency exchange shifts right, then the exchange rate
a.
rises and the quantity of dollars exchanged falls.
b.
rises and the quantity of dollars exchanged does not change.
c.
falls and the quantity of dollars exchanged rises.
d.
falls and the quantity of dollars exchanged does not change.
138. If for some reason Americans desired to increase their purchases of foreign assets, then other things the same
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.
139. If for some reason Americans desired to decrease their purchases of foreign assets, then other things the same
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.
140. If at a given exchange rate U.S. citizens wanted to buy more foreign bonds
a.
the demand for dollars in the market for foreign-currency exchange would shift right.
b.
the demand for dollars in the market for foreign-currency exchange would shift left.
c.
the supply of dollars in the market for foreign-currency exchange shifts right.
d.
the supply of dollars in the market for foreign-currency exchange shifts left.
141. If at a given exchange rate U.S. citizens wanted to buy more foreign bonds
a.
the demand for dollars in the market for foreign-currency exchange would shift right.
b.
the demand for dollars in the market for foreign-currency exchange would shift left.
c.
the supply of dollars in the market for foreign-currency exchange shifts right.
d.
the supply of dollars in the market for foreign-currency exchange shifts left.
142. An open economy has GDP of $1,000 billion, consumption of $650 billion, government expenditures of $150 billion,
and domestic investment of $40 billion. What is its demand for loanable funds?
a.
$40 billion
b.
$120 billion
c.
$160 billion
d.
$200 billion
143. An open economy has GDP of $1,200 billion, consumption expenditures of $900 billion government expenditures of
$400 billion, domestic investment of $100 billion, and net exports of –$200 billion. What is its demand for loanable
funds?
a.
–$200 billion
b.
–$100 billion
c.
$100 billion
d.
$200 billion
144. In the open-economy macroeconomic model, the market for loanable funds identity can be written as
a.
S = NCO – I
b.
S = NCO
c.
S = I – NCO
d.
S = I + NCO