Question 1

The open-economy macroeconomic model includes&#10;A)only the market for loanable funds.&#10;B)only the market for foreign-currency exchange.&#10;C)both the market for loanable funds and the market for foreign-currency exchange.&#10;D)neither the market for loanable funds nor the market for foreign-currency exchange.

Accepted Answer

The open-economy macroeconomic model includes both the market for loanable funds and the market for foreign-currency exchange. In the market for loanable funds, domestic savers lend to borrowers, and the interest rate is determined by the intersection of the supply of and demand for funds. In the market for foreign-currency exchange, domestic and foreign currencies are exchanged, and the exchange rate is determined by the intersection of the supply of and demand for currencies. These two markets are interdependent, as changes in interest rates can affect the exchange rate, and changes in the exchange rate can affect the demand and supply of loanable funds.

Question 2

The open-economy macroeconomic model examines the determination of&#10;A)the output growth rate and the real interest rate.&#10;B)unemployment and the exchange rate.&#10;C)the output growth rate and the inflation rate.&#10;D)the trade balance and the exchange rate.

Accepted Answer

The open-economy macroeconomic model primarily focuses on the determinants of the trade balance and exchange rate. While it also considers output growth and inflation rates, these variables are dependent on the trade balance and exchange rate in an open economy. Unemployment is not directly part of the model but can be indirectly affected through its impact on the trade balance and exchange rate. Therefore, the best choice is D as it reflects the primary focus of the open-economy macroeconomic model.

Question 3

Over the past three decades,the United States has&#10;A)generally had,or been very near to a trade balance.&#10;B)had trade deficits in about as many years as it has trade surpluses.&#10;C)persistently had a trade deficit.&#10;D)persistently had a trade surplus.

Accepted Answer

The statement "persistently had a trade deficit" reflects the fact that for the majority of the past three decades, the US has been importing more goods and services than it has been exporting, resulting in a trade deficit. Though there have been some years with trade surpluses, they are not as frequent as the deficits.

Deck 32: 0:sec 320 Mc a Macroeconomic Theory of the Open Economy