Deck 32: Essay

Question 1

If a country's exchange rate rises,what happens to its exports and what happens to its imports?

Answer 1

more,falls,supply,left

Question 2

A country recently had 500 billion euros of national saving and 200 billion euros of domestic investment.What was its net capital outflow? What was its quantity of loanable funds demanded?

Answer 2

net capital outflow

Question 3

Other things the same,which of the following would a rise in the real interest rate raise:
desired investment spending,desired national saving,desired net capital outflow?

Answer 3

net exports

Question 4

An economy recently had 800 billion euros of saving and 600 billion euros of net capital outflow.What was its investment? What was its quantity of loanable funds supplied?

Question 5

What happens to domestic investment as the real interest rate rises? Explain your answer.

Question 6

What is the source of the supply of loanable funds in the open-economy macroeconomic model?

Question 7

A country recently had 500 billion euros of national saving and -200 billion euros of net capital outflow.What was its domestic investment? What was its quantity of loanable funds supplied?

Question 8

If the exchange rate rises,foreign residents want to purchase ------ domestic goods and domestic residents want to purchase ----- foreign goods.In the market for foreign-currency exchange,these changes are shown as a ------- in the quantity of dollars ------.

Question 9

What are the sources of the demand for loanable funds? What happens to the quantity of loanable funds demanded when the interest rate rises?

Question 10

If there is a shortage in the market for foreign-currency exchange,what happens to the exchange rate and to net exports?

Question 11

In the market for foreign-currency exchange,the source of the supply of dollars is ---------.The supply curve is --------- because -------------.

Question 12

If the exchange rate falls,domestic goods become relatively ------ expensive.This change in the affordability of domestic goods makes domestic goods ----- attractive to domestic residents.So,------- ------.

Question 13

What is the source of the supply of dollars in the market for foreign-currency exchange?

Question 14

What happens to the quantity of loanable funds supplied when the interest rate rises? Explain why this change happens.

Question 15

Other things the same,if the U.S.interest rate rises,what happens to the net capital outflow of other countries?

Question 16

If the exchange rate rises,domestic goods become relatively ------ expensive.This change in the affordability of domestic goods makes domestic goods ----- attractive to foreigners.So,------- ------.

Question 17

What happens to net capital outflow as the real interest rate falls? Explain your answer.

Question 18

What is the source of the demand for loanable funds in the open-economy macroeconomic model ?

Question 19

Define net capital outflow.

Question 20

What is the source of the demand for dollars in the market for foreign-currency exchange?

Question 21

If a country's government moves from a budget deficit to a budget surplus,which curve in the market for loanable funds shifts and which direction does it shift? What happens to the interest rate?

Question 22

State what,if anything,each of the following does to the supply or demand of loanable funds.
a.net capital outflow increases at each interest rate
b.domestic investment increases at each interest rate
c.the government deficit increases
d.private saving increases

Question 23

What happens to each of the following if the supply of loanable funds shifts left?
A.the interest rate
B.net capital outflow
C.the exchange rate

Question 24

Suppose that U.S.savers decide that holding Brazilian assets has become riskier.What happens to U.S.net capital outflow? What happens to the U.S.real interest rate?

Question 25

How are the identities S = NCO + I and NCO = NX related to the foreign currency exchange market and the loanable funds market?

Question 26

If for some reason U.S.residents increase their purchases of foreign assets,then all else constant which curve in the market for foreign-currency exchange shifts and which direction does it shift? What happens to the exchange rate?

Question 27

Political events convince people that the assets of country x are now riskier.As a result of this change which curves in the open-economy macroeconomic model shift and which direction do they shift for country x?

Question 28

A country reduces its government budget deficit and also makes political reforms that lead people to believe this country's assets are less risky.Given the combination of a reduced deficit and lower asset risk,what happens to the interest rate?

Question 29

Explain how the relation between the real exchange rate and net exports explains the downward slope of the demand for foreign-currency exchange curve.

Question 30

Other things the same,which curve in the market for foreign-currency exchange shifts and which direction does it shift if net capital outflow rises?

Question 31

Why do higher real interest rates lead to lower net capital outflow?

Question 32

If a country removes an import quota,what happens to its exchange rate,its exports,and its net exports?

Question 33

What happens to each of the following if investment becomes less desirable at each interest rate?
A.the interest rate
B.net capital outflow
C.the exchange rate

Question 34

Which curve in the market for foreign-currency exchange shifts and which direction does it shift if the government budget deficit increases? Explain why an increase in the budget deficit shifts this curve.

Question 35

If people in the U.S.choose to save a smaller percentage of income,what will happen to the interest rate,net capital outflow,the exchange rate,and net exports?

Question 36

If the government budget deficit rises,what happens to the interest rate? What does this change in the interest rate do to net capital outflow? Provide a detailed explanation of why this change in the interest rate changes net capital outflow.

Question 37

If a country makes political reforms so that people now believe this country's assets are less risky,what happens to its interest rate,its exchange rate,and its net exports?

Question 38

What happens to each of the following if the supply of loanable funds shifts right?
A.the interest rate
B.net capital outflow
C.the exchange rate

Question 39

Other things the same,if the U.S.interest rate rises,U.S.assets become ---- attractive.So,desired net capital outflow -----.This change in net capital outflow,shifts the ---------- curve in the market for foreign-currency exchange to the ------.

Question 40

What happens to each of the following if investment becomes more desirable at each interest rate?
A.the interest rate
B.net capital outflow
C.the exchange rate

Question 41

What effect do protectionist policies have on the trade deficit?

Question 42

Suppose that the U.S.government budget deficit decreases.What curves in the open-economy macroeconomic model shift? Explain why each curve shifts the direction it does.

Question 43

Suppose the U.S.government institutes a "Buy American" campaign,in order to encourage spending on domestic goods.What effect will this have on the U.S.trade balance?

Question 44

Explain how a decrease in the demand for capital goods in the U.S.can lead to a change in the U.S.exchange rate.

Question 45

What do trade policies do to the standard of living?

Question 46

Suppose a presidential candidate promises to increase the government budget surplus and claims that doing so will stop U.S.citizens from investing in foreign companies and increase the value of the dollar.Evaluate this candidate's promise.

Question 47

Suppose that U.S.citizens start saving more.What does this imply about the supply of loanable funds and the equilibrium real interest rate? What happens to the real exchange rate?