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47. If interest rates rise in the U.S., then other things the same
a. foreigners would buy more U.S. bonds which increases the quantity of loanable funds
demanded in the U.S.
b. foreigners would buy more U.S. bonds which reduces the quantity of loanable funds demanded
in the U.S.
c. foreigners would buy fewer U.S. bonds which increases the quantity of loanable funds
demanded in the U.S.
d. foreigners would buy fewer U.S. bonds which reduces the quantity of loanable funds demanded
in the U.S.
48. Other things the same, if the U.S. interest rate falls, then U.S. residents will want to purchase
a. more foreign assets, which increases the quantity of loanable funds demanded.
b. fewer foreign assets, which decreases the quantity of loanable funds demanded.
c. more foreign assets, which increase the quantity of loanable funds supplied.
d. fewer foreign assets, which decreases the quantity of loanable funds supplied.
49. An increase in real interest rates in the United States
a. discourages both U.S. and foreign residents from buying U.S. assets.
b. encourages both U.S. and foreign residents to buy U.S. assets.
c. encourages U.S. residents to buy U.S. assets, but discourages foreign residents from buying
U.S. assets.
d. encourages foreign residents to buy U.S. assets, but discourages U.S. residents from buying
U.S. assets.
50. Other things the same, a decrease in the real interest rate
a. increases the quantity of loanable funds demanded.
b. shifts the demand for loanable funds curve to the right.
c. decreases the quantity of loanable funds demanded.
d. shifts the demand for loanable funds curve to the left.
51. An increase in the real interest rate in the United States changes the quantity of loanable funds
demanded because
a. U.S. residents will want to buy more foreign assets.
b. Foreign residents will want to buy more U.S. goods and services.
c. U.S. firms will want to purchase fewer U.S. capital goods.
d. All of the above are correct.
52. Which of the following is the most likely response to an increase in the U.S. real interest rate?
a. a London bank purchases a U.S. bond instead of a Japanese bond it had considered purchasing
b. U.S. firms decide to buy more capital goods
c. a U.S. citizen decides to put less money in his savings account than he had planned.
d. All of the above are consistent.
53. Which of the following is the most likely response to a decrease in the U.S. real interest rate?
a. a U.S. company decides to expand its factory
b. a U.S. citizen decides to purchase fewer foreign bonds
c. a German mutual fund decides to increase its deposits at a U.S. bank
d. All of the above are consistent.
54. If interest rates rose more in Japan than in the U.S., then other things the same
a. U.S. citizens would buy more Japanese bonds and Japanese citizens would buy more U.S.
bonds.
b. U.S. citizens would buy more Japanese bonds and Japanese citizens would buy fewer U.S.
bonds.
c. U.S. citizens would buy fewer Japanese bonds and Japanese citizens would buy more U.S.
bonds.
d. U.S. citizens would buy fewer Japanese bonds and Japanese citizens would buy fewer U.S.
bonds.
55. If interest rates rose more in the U.S. than in France, then other things the same
a. U.S. citizens would buy more French bonds and French citizens would buy more U.S. bonds.
b. U.S. citizens would buy more French bonds and French citizens would buy fewer U.S. bonds.
c. U.S. citizens would buy fewer French bonds and French citizens would buy more U.S. bonds.
d. U.S. citizens would buy fewer French bonds and French citizens would buy fewer U.S. bonds.
56. Other things the same, if the real interest rate in a country falls, domestic residents will desire to
purchase
a. more capital goods and more foreign bonds.
b. more capital goods but fewer foreign bonds.
c. more foreign bonds but fewer capital goods.
d. fewer capital goods and fewer foreign bonds.
57. At the equilibrium real interest rate in the open-economy macroeconomic model, the amount that
people want to save equals the desired quantity of
a. net capital outflow.
b. domestic investment.
c. net capital outflow plus domestic investment.
d. foreign currency supplied.
58. At the equilibrium real interest rate in the open-economy macroeconomic model, the equilibrium
quantity of loanable funds equals
a. net capital outflow.
b. domestic investment.
c. foreign currency supplied.
d. national saving.
59. At the equilibrium real interest rate in the open-economy macroeconomic model
a. saving = domestic investment
b. saving = net capital outflow
c. net capital outflow = domestic investment
d. net capital outflow + domestic investment = saving
60. In equilibrium a country has a net capital outflow of $200 billion and domestic investment of $150
billion. What is the quantity of loanable funds demanded?
a. $50 billion
b. $150 billion
c. $200 billion
d. $350 billion
61. If there is a surplus of loanable funds, the quantity demanded is
a. greater than the quantity supplied and the interest rate will rise.
b. greater than the quantity supplied and the interest rate will fall.
c. less than the quantity supplied and the interest rate will rise.
d. less than the quantity supplied and the interest rate will fall.
62. If there is a surplus in the market for loanable funds, then the interest rate
a. rises, so national saving rises.
b. rises, so national saving falls.
c. falls, so national saving rises.
d. falls, so national saving falls.
63. If the quantity of loanable funds supplied is greater than the quantity demanded, then there is a
a. shortage of loanable funds and the interest rate will fall.
b. shortage of loanable funds and the interest rate will rise.
c. surplus of loanable funds and the interest rate will fall.
d. surplus of loanable funds and the interest rate will rise.
64. If the quantity of loanable funds supplied is less than the quantity demanded, then there is a
a. shortage of loanable funds and the interest rate will fall.
b. shortage of loanable funds and the interest rate will rise.
c. surplus of loanable funds and the interest rate will fall.
d. surplus of loanable funds and the interest rate will rise.
65. If there is a shortage of loanable funds, then
a. the demand for loanable funds will shift right so the real interest rate rises.
b. the supply of loanable funds will shift left so the real interest rate falls.
c. there will be no shifts of the curves, but the real interest rate rises.
d. there will be no shifts of the curves, but the real interest rate falls.
66. If there is a surplus in the U.S. loanable funds market, then
a. NCO > I.
b. NCO < I.
c. NCO + I > S.
d. NCO + I < S.
67. If there is a surplus in the market for loanable funds, the resulting change in the real interest rate
a. reduces both the quantity of loanable funds supplied and the quantity of loanable funds
demanded.
b. reduces the quantity of loanable funds supplied and raises the quantity of loanable funds
demanded
c. raises both the quantity of loanable funds supplied and the quantity of loanable funds demanded.
d. raises the quantity of loanable funds supplied and reduces the quantity of loanable funds
demanded.
68. If there is a surplus in the U.S. loanable funds market, then the interest rate
a. rises, which increases quantity of loanable funds demanded.
b. rises, which decreases the quantity of loanable funds demanded.
c. falls, which increases the quantity of loanable funds demanded.
d. falls, which decreases the quantity of loanable funds demanded.
69. If at a given real interest rate desired national saving is $60 billion, domestic investment is $30
billion, and net capital outflow is $20 billion, then at that real interest rate in the loanable funds
market there is a
a. surplus. The real interest rate will rise.
b. surplus. The real interest rate will fall.
c. shortage. The real interest rate will rise.
d. shortage. The real interest rate will fall.
70. If at a given real interest rate desired national saving is $140 billion, domestic investment is $90
billion, and net capital outflow is $60 billion, then at that real interest rate in the loanable funds
market there is a
a. surplus. The real interest rate will rise.
b. surplus. The real interest rate will fall.
c. shortage. The real interest rate will rise.
d. shortage. The real interest rate will fall.
71. If at a given real interest rate desired national saving is $200 billion, domestic investment is $100
billion, and net capital outflow is $80 billion, then at that real interest rate in the loanable funds
market there is a
a. surplus. The real interest rate will rise.
b. surplus. The real interest rate will fall.
c. shortage. The real interest rate will rise.
d. shortage. The real interest rate will fall.
72. If the demand for loanable funds shifts right, then
a. the real interest rate and the equilibrium quantity of loanable funds both fall.
b. the real interest rate falls and the equilibrium quantity of loanable funds rises.
c. the real interest rate and the equilibrium quantity of loanable funds both rise.
d. the real interest rate rises and the equilibrium quantify of loanable funds falls.
73. If the demand for loanable funds shifts left, then
a. the real interest rate and the equilibrium quantity of loanable funds both fall.
b. the real interest rate falls and the equilibrium quantity of loanable funds rises.
c. the real interest rate and the equilibrium quantity of loanable funds both rise.
d. the real interest rate rises and the equilibrium quantity of loanable funds falls.
74. If the supply of loanable funds shifts right, then the equilibrium
a. interest rate falls, so domestic residents will want to purchase more foreign assets.
b. interest rate falls, so domestic residents will want to purchase fewer foreign assets.
c. interest rate rises, so domestic residents will want to purchase more foreign assets.
d. interest rate rises, so domestic residents will want to purchase fewer foreign assets.
75. If the supply of loanable funds shifts right, then
a. the real interest rate and the equilibrium quantity of loanable funds both fall.
b. the real interest rate falls and the equilibrium quantity of loanable funds rises.
c. the real interest rate and the equilibrium quantity of loanable funds both rise.
d. the real interest rate rises and the equilibrium quantity of loanable funds falls.
76. If the supply of loanable funds curve shifts right, then the equilibrium
a. interest rate and level of net capital outflows rise.
b. interest rate rises and the equilibrium level of net capital outflow falls.
c. interest rate falls and the equilibrium level of net capital outflow rises.
d. interest rate and level of net capital outflows fall.
77. If the supply of loanable funds shifts left, then
a. the real interest rate and the equilibrium quantity of loanable funds both fall.
b. the real interest rate falls and the equilibrium quantity of loanable funds rises.
c. the real interest rate and the equilibrium quantity of loanable funds both rise.
d. the real interest rate rises and the equilibrium quantity of loanable funds falls.
78. Which of the following would make both the equilibrium real interest rate and the equilibrium
quantity of loanable funds increase?
a. The demand for loanable funds shifts right.
b. The demand for loanable funds shifts left.
c. The supply of loanable funds shifts right.
d. The supply of loanable funds shifts left.
79. Which of the following would make both the equilibrium real interest rate and the equilibrium
quantity of loanable funds decrease?
a. The demand for loanable funds shifts right.
b. The demand for loanable funds shifts left.
c. The supply of loanable funds shifts right.
d. The supply of loanable funds shifts left.
80. Which of the following would make the equilibrium real interest rate decrease and the equilibrium
quantity of loanable funds increase?
a. The demand for loanable funds shifts right.
b. The demand for loanable funds shifts left
c. The supply of loanable funds shifts right.
d. The supply of loanable funds shifts left.
81. Which of the following would make the equilibrium real interest rate increase and the equilibrium
quantity of funds decrease?
a. The demand for loanable funds shifts right.
b. The demand for loanable funds shifts left.
c. The supply of loanable funds shifts right.
d. The supply of loanable funds shifts left.
82. Suppose the U.S. supply of loanable funds shifts left. This will
a. increase U.S. net capital outflow and increase the quantity of loanable funds demanded.
b. increase U.S. net capital outflow and decrease the quantity of loanable funds demanded.
c. decrease U.S. net capital outflow and increase the quantity of loanable funds demanded.
d. decrease U.S. net capital outflow and decrease the quantity of loanable funds demanded.
83. If the supply of loanable funds shifts right, then the equilibrium
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.
Figure 32-1
84. Refer to Figure 32-1. The loanable funds market is in equilibrium at
a. 2 percent, $20 billion.
b. 4 percent, $40 billion.
c. 6 percent, $60 billion.
d. None of the above is correct.
85. Refer to Figure 32-1. If the real interest rate is 6 percent, the quantity of loanable funds
demanded is
a. $20 billion, and the quantity supplied is $40 billion.
b. $20 billion, and the quantity supplied is $60 billion.
c. $60 billion, and the quantity supplied is $20 billion.
d. $60 billion, and the quantity supplied is $40 billion.
86. Refer to Figure 32-1. If the real interest rate is 2 percent, there will be a
a. surplus of $20 billion.
b. surplus of $40 billion.
c. shortage of $20 billion.
d. shortage of $40 billion.
87. Refer to Figure 32-1. If the real interest rate is 6 percent, there will be pressure for
a. the real interest rate to fall.
b. the demand for loanable funds curve to shift left.
c. the supply for loanable funds curve to shift right.
d. All of the above are correct.
88. The value of net exports equals the value of
a. national saving.
b. public saving.
c. national saving - net capital outflow.
d. national saving - domestic investment.
89. In an open economy,
a. net capital outflow = imports.
b. net capital outflow = net exports.
c. net capital outflow = exports.
d. None of the above is correct.
90. If net exports are positive, then
a. exports are greater than imports.
b. net capital outflow is negative.
c. Both of the above are correct.
d. Neither of the above is correct.
91. If U.S. net exports are negative, then net capital outflow is
a. positive, so foreign assets bought by Americans are greater than American assets bought by
foreigners.
b. positive, so American assets bought by foreigners are greater than foreign assets bought by
Americans.
c. negative, so foreign assets bought by Americans are greater than American assets bought by
foreigners.
d. negative, so American assets bought by foreigners are greater than foreign assets bought by
Americans.
92. If U.S. net exports are positive, then net capital outflow is
a. positive, so foreign assets bought by Americans are greater than American assets bought by
foreigners.
b. positive, so American assets bought by foreigners are greater than foreign assets bought by
Americans.
c. negative, so foreign assets bought by Americans are greater than American assets bought by
foreigners.
d. negative, so American assets bought by foreigners are greater than foreign assets bought by
Americans.
93. In the open-economy macroeconomic model, the amount of net capital outflow represents the
quantity of dollars
a. supplied for the purpose of selling assets domestically.
b. supplied for the purpose of buying foreign assets.
c. demanded for the purpose of buying U.S. net exports of goods and services.
d. demanded for the purpose of importing foreign goods and services.
94. In the open-economy macroeconomic model, the supply of dollars in the market for foreign-
currency exchange comes from
a. net exports
b. net capital outflow
c. net exports + net capital outflow
d. net exports - net capital outflow
95. In the open-economy macroeconomic model, the supply of dollars in the market for foreign-
currency exchange comes from
a. national saving
b. domestic investment
c. net exports
d. net capital outflow
96. Which of the following is included in the supply of U.S. dollars in the market for foreign-currency
exchange in the open-economy macroeconomic model?
a. a U.S. bank loans dollars to Tom to buy a U.S. made motorcycle
b. a U.S. tire maker wants to build a new factory in China
c. a U.S. company wants to import goods to sell in its retail stores
d. All of the above are correct.
97. Which of the following is considered part of the supply of U.S. dollars in the market for foreign-
currency exchange in the open-economy macroeconomic model?
a. both a U.S. bank wanting to lend money to a Canadian company and a U.S. firm wanting to
buy computers made in South Korea
b. a U.S. bank wanting to lend money to a Canadian company, but not a U.S. firm wanting to buy
computers made in South Korea
c. a U.S. firm wanting to buy computers made in South Korea, but not a U.S.bank wanting to lend
money to a Canadian company
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
