Deck 32: True False

Question 1

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.

Answer 1

True

Question 2

In an open economy,the demand for loanable funds comes from both domestic investment and net capital outflow.

Answer 2

True

Question 3

If the real interest rate were above the equilibrium rate,there would be a shortage of loanable funds.

Answer 3

False

Question 4

Other things the same,a higher real exchange rate raises net exports.

Question 5

Over the past two decades,the U.S.has persistently exported more goods and services than it has imported.

Question 6

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.

Question 7

Net capital outflow represents the quantity of dollars supplied in the foreign-currency exchange market.

Question 8

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.

Question 9

The primary focus of the open-economy macroeconomic model is the determination of GDP and the price level.

Question 10

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.

Question 11

In the open-economy macroeconomic model,the supply of dollars in the market for foreign-currency exchange is upward sloping.

Question 12

In the open economy model,the supply of loanable funds comes from national saving and net capital outflow.

Question 13

In the open-economy macroeconomic model,a higher domestic interest rate reduces the quantity of loanable funds demanded

Question 14

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

Question 15

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.

Question 16

In the open-economy macroeconomic model,net exports equal the quantity of dollars demanded in the market for foreign currency exchange.

Question 17

An increase in a country's real interest rate reduces that country's net capital outflow.

Question 18

Over the past two decades the U.S.has persistently had trade deficits.

Question 19

Other things the same,if foreigners desire to purchase more U.S.bonds,then the demand for loanable funds shifts left.

Question 20

The purchase of a capital asset adds to the demand for loanable funds only if that asset is a domestic one.

Question 21

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.

Question 22

The key determinant of net capital outflow is the real interest rate.

Question 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.

Question 24

In the open-economy macroeconomic model,if there were a surplus in the market for foreign-currency exchange,the real exchange rate would appreciate.

Question 25

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.

Question 26

An increase in the U.S.interest rate discourages Americans from buying foreign assets and encourages foreigners to buy U.S.assets.

Question 27

When a country imposes a trade restriction,the real exchange rate of that country's currency appreciates.

Question 28

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.

Question 29

In the 1980s,both the U.S.government budget and U.S.trade deficits increased.

Question 30

If C+I+G>Y,then net exports and net capital outflow are both greater than zero.

Question 31

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.

Question 32

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

Question 33

When the government budget deficit increases,national saving decreases.

Question 34

An increase in the government budget deficit shifts the demand for loanable funds to the right.

Question 35

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.

Question 36

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.

Question 37

An increase in the government budget deficit shifts the supply of loanable funds to the left.

Question 38

As the interest rate rises,it is possible that net capital outflow could move from a positive to a negative value.

Question 39

In the open-economy macroeconomic model,the real exchange rate does not affect net capital outflow.

Question 40

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.

Question 41

Capital flight raises both a country's exchange rate and its interest rate.

Question 42

A tax credit for purchases of capital goods causes the interest rate to increase and the exchange rate to appreciate.

Question 43

In the long run,import quotas increase net exports.

Question 44

Capital flight shifts the demand for loanable funds to the left.

Question 45

Capital flight raises a country's interest rate.

Question 46

Although trade policies do not affect a country's overall trade balance,they do affect specific firms and industries.

Question 47

In the long run import quotas do not affect the size of net exports.

Question 48

Capital flight shifts the NCO curve to the left.

Question 49

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.

Question 50

An import quota imposed by the U.S.would reduce U.S.imports,but have no impact on U.S.exports.

Question 51

Capital flight raises a country's real exchange rate.

Question 52

An increase in national saving reduces the interest rate and so reduces net capital outflow.

Question 53

An increase in the government budget deficit shifts the supply of domestic currency in the market for foreign exchange to the right.

Question 54

If policymakers impose import restrictions on clothing,the U.S.trade deficit will shrink.

Question 55

If Argentina suffers from capital flight,Argentinean domestic investment and Argentinean net exports will both decline.

Question 56

When a country imposes a trade quota,the demand for currency in the market for foreign exchange shifts to the right