Question 1

In which case(s)does(do)a country's demand for loanable funds shift right?

Accepted Answer

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Question 2

In which case(s)does(do)a country's supply of loanable funds shift left?

Accepted Answer

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Question 3

In which case(s)does(do)a country's supply of loanable funds shift right?

Accepted Answer

The answer of In which case(s)does(do)a country's supply of loanable...

Question 4

Which of the following would both make a country's real exchange rate rise?

Accepted Answer

An import quota can increase the demand for domestic currency, and a budget deficit can lead to higher interest rates, both of which can cause the real exchange rate to rise.

Question 5

Which of the following would both raise the U.S.exchange rate?

Accepted Answer

The answer of Which of the following would both raise...

Question 6

Which of the following can explain a decrease in the U.S.real exchange rate?

Accepted Answer

A decrease in the U.S. government budget deficit can lead to a decrease in the real exchange rate by reducing the demand for U.S. dollars, as less borrowing may lead to lower interest rates and less foreign investment in U.S. assets.

Question 7

If the risk of buying U.S.assets rises because it is discovered that lending institutions had not carefully evaluated borrowers prior to lending them funds,then

Accepted Answer

If lending institutions have not carefully evaluated borrowers, it increases the risk of default, thus increasing the risk of buying U.S. assets. This will lead to a higher cost of borrowing, which will lead to a rise in the interest rate. Additionally, investors will prefer to buy assets in countries with less risk, which will lead to a fall in demand for U.S. assets and a fall in the value of the U.S. dollar. This will result in a fall in the real exchange rate. Therefore, the correct option is C: the real exchange rate will fall, and the interest rate will rise.

Question 8

Which of the following is most likely to increase exports?

Accepted Answer

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Question 9

Which of the following is most likely to increase the exports of a country?

Accepted Answer

The answer of Which of the following is most likely...

Question 10

Which of the following leads to an increase in net exports in the long run?

Accepted Answer

A decrease in the budget deficit can lead to an increase in net exports in the long run by reducing the government's demand for domestic goods and freeing up resources for export-oriented industries. Imposing an import quota may lead to a short-term increase in net exports, but in the long run, it can result in retaliatory measures by trading partners and reduce the competitiveness of domestic firms. Therefore, the best choice is a decrease in the budget deficit but not imposing an import quota.

Question 11

Which of the following is correct?

Accepted Answer

None of the given options are correct. 
A) Capital flight refers to the movement of large sums of money out of a country due to political or economic instability. This will increase net capital outflow, not decrease it.
B) An increase in government budget deficit can lead to an increase in borrowing from foreign countries, which would increase net capital outflow.
C) Restriction on imports would decrease imports and increase exports, leading to an increase in net capital inflow.

Question 12

Which of the following is most likely to increase U.S.exports?

Accepted Answer

The answer of Which of the following is most likely...

Question 13

Which of the following would cause the real exchange rate of the U.S.dollar to depreciate?

Accepted Answer

A decrease in the U.S. government budget deficit can lead to lower interest rates, reducing foreign investment demand for U.S. dollars, causing the real exchange rate to depreciate.

Question 14

Which of the following will not change the U.S.real interest rate?

Accepted Answer

The imposition of import quotas will not directly affect the U.S. real interest rate. Capital flight and an increase in government budget deficit can both lead to a decrease in the U.S. real interest rate.

Question 15

Which of the following will decrease U.S.net capital outflow?

Accepted Answer

Increasing government budget deficit will lead to an increase in interest rates, which will encourage foreign investors to invest in the United States, thereby decreasing net capital outflow. Capital flight from the United States will increase net capital outflow, and the imposition of import quotas will not have any direct effect on net capital outflow.

Question 16

Figure 32-7
Refer to this diagram of the open-economy macroeconomic model of the Mexican economy to answer the questions below. 
-Refer to Figure 32-7.Suppose the Mexican economy starts at r2 and e2.Which of the following new equilibrium is consistent with capital flight?

Accepted Answer

Capital flight typically leads to an increase in interest rates (r) and a depreciation of the currency (lower e), which is consistent with moving from r2 and e2 to r3 and e1.

Question 17

Which of the following would cause the real exchange rate of the U.S.dollar to appreciate?

Accepted Answer

Imposing import quotas reduces the supply of dollars in the foreign exchange market, leading to an appreciation of the real exchange rate.

Question 18

In which case(s)does(do)a country's demand for loanable funds shift left?

Accepted Answer

The answer of In which case(s)does(do)a country's demand for loanable...

Question 19

Figure 32-7
Refer to this diagram of the open-economy macroeconomic model of the Mexican economy to answer the questions below. 
-Refer to Figure 32-7.Suppose that the Mexican economy starts at r2 and e3.Which of the following is consistent with the effects of capital flight?

Accepted Answer

Capital flight refers to the movement of capital out of a country due to economic or political instability. This results in a decrease in the supply of loanable funds and an increase in the demand for foreign currency, which in turn, leads to a higher exchange rate and a lower level of net capital outflow (NCO). Therefore, the shift from NCO1 to NCO2 in Panel B is consistent with the effects of capital flight. Choices A and C are not correct as they refer to shifts in the domestic demand for loanable funds, which are not directly affected by capital flight.

Question 20

If after a country experiences capital flight,people become more confident about the safety of its assets,then in that country

Accepted Answer

Capital flight often leads to a decrease in demand for the country's currency, causing the real exchange rate to fall. However, if people become more confident about the safety of assets in the country after capital flight, demand for the currency will increase, causing its value to rise. At the same time, an increase in confidence in the safety of assets could lead to a decrease in the real interest rate, as investors may be willing to accept lower returns to invest in the country. Therefore, the real exchange rate will rise and the real interest rate will fall.

Quiz 19: A Macroeconomic Theory of the Open Economy: How Policies and Events Affect an Open Economy

In which case(s) does(do) a country's demand for loanable funds shift right?

In which case(s) does(do) a country's supply of loanable funds shift left?

In which case(s) does(do) a country's supply of loanable funds shift right?

Which of the following would both make a country's real exchange rate rise?

Which of the following would both raise the U.S.exchange rate?

Which of the following can explain a decrease in the U.S.real exchange rate?

If the risk of buying U.S.assets rises because it is discovered that lending institutions had not carefully evaluated borrowers prior to lending them funds,then

Which of the following is most likely to increase exports?

Which of the following is most likely to increase the exports of a country?

Which of the following leads to an increase in net exports in the long run?

Which of the following is correct?

Which of the following is most likely to increase U.S.exports?

Which of the following would cause the real exchange rate of the U.S.dollar to depreciate?

Which of the following will not change the U.S.real interest rate?

Which of the following will decrease U.S.net capital outflow?

Figure 32-7 Refer to this diagram of the open-economy macroeconomic model of the Mexican economy to answer the questions below. -Refer to Figure 32-7.Suppose the Mexican economy starts at r2 and e2.Which of the following new equilibrium is consistent with capital flight?

Which of the following would cause the real exchange rate of the U.S.dollar to appreciate?

In which case(s) does(do) a country's demand for loanable funds shift left?

Figure 32-7 Refer to this diagram of the open-economy macroeconomic model of the Mexican economy to answer the questions below. -Refer to Figure 32-7.Suppose that the Mexican economy starts at r2 and e3.Which of the following is consistent with the effects of capital flight?

If after a country experiences capital flight,people become more confident about the safety of its assets,then in that country