Question 1

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?

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Question 2

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 ______.

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Question 3

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

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Question 4

Fill in the table below with the direction of the variables that change in response to the events in the first column.

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Question 5

Define net capital outflow.

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Question 6

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

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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?

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Question 8

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

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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?

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Question 10

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, _______ ______.

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Question 11

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

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Question 12

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?

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Question 13

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

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Question 14

If a county becomes less likely to default on its bonds, what happens to that country's interest rate and exchange rate? Explain.

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Question 15

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

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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, _______ ______.

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Question 17

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

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Question 18

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

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Question 19

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

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Question 20

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?

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