Quiz 525

Quiz 525
Related: Economics, Microeconomics
144 Questions
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Quiz 525
1. In an open economy, national saving equals

a. domestic investment plus net capital outflow.
b. domestic investment minus net capital outflow.
c. domestic investment.
d. net capital outflow.
2. In the open-economy macroeconomic model, the market for loanable funds equates national
saving with
a. domestic investment.
b. net capital outflow.
c. the sum of national consumption and government spending.
d. the sum of domestic investment and net capital outflow.
3. In the open-economy macroeconomic model, the market for loanable funds equates national
saving with
c. national consumption minus domestic investment.
d. None of the above is correct.
4. In the open-economy macroeconomic model, the market for loanable funds identity can be
written as
a. S = I
b. S = NCO
c. S = I + NCO
d. S + I = NCO
5. In the open-economy macroeconomic model, the supply of loanable funds comes from
a. national saving.
b. private saving.
d. the sum of domestic investment and net capital outflow.
a. the sum of domestic investment and net capital outflow.
b. the sum of national saving and net capital outflow.
c. national saving.
d. net exports
a. the sum of domestic investment and net capital outflow.
b. net capital outflow alone.
c. domestic investment alone.
8. In the open-economy macroeconomic model, the source of the supply of loanable funds is
a. personal saving
b. public saving
c. public saving + personal saving
d. public saving + personal saving + net capital outflows
9. Other things the same, a higher real interest rate raises the quantity of
c. loanable funds demanded.
d. loanable funds supplied.
10. Other things the same, a lower real interest rate decreases the quantity of
a. loanable funds demanded.
b. loanable funds supplied.
d. net capital outflow.
11. Other things the same, people in the U.S. would want to save more if the real interest rate in
the U.S.
a. fell. The increased saving would increase the quantity of loanable funds demanded.
b. fell. The increased saving would increase the quantity of loanable funds supplied.
c. rose. The increased saving would increase the quantity of loanable funds demanded.
d. rose. The increased saving would increase the quantity of loanable funds supplied.
12. Other things the same an increase in the interest rate

a. increases national saving, this is shown by moving along the demand for loanable funds curve.
b. increases national saving, this is shown by moving along the supply of loanable funds curve.
c. decreases national saving, this is shown by moving along the demand for loanable funds curve.
d. decreases national saving, this is shown by moving along the supply of loanable funds curve.
13. Other things the same, an increase in the U.S. interest rate causes the quantity of loanable
funds supplied to
a. rise because net capital outflow and domestic investment rise.
b. rise because national saving rises.
c. fall because net capital outflow and domestic investment rise.
d. fall because national saving falls.
14. Other things the same, an increase in the U.S. interest rate causes the quantity of loanable
funds supplied to
a. rise because national saving rises.
b. rise because domestic investment rises.
c. fall because national saving falls.
d. fall because domestic investment falls.
15. The explanation for the slope of

a. the supply of loanable funds curve is based on the logic that a higher real interest rate leads to
higher saving.
b. the demand for loanable funds curve is based on the logic that a higher interest rate leads to
higher saving.
c. the supply of loanable funds curve is based on the logic that a higher real interest rate leads to
lower saving.
d. the demand for loanable funds curve is based on the logic that a higher interest rate leads to
lower saving.
16. The slope of the supply of loanable funds is based on an increase in

a. only national saving when the interest rate rises.
b. both national saving and net capital outflow when the interest rate rises.
c. only national saving when the interest rate falls.
d. both national saving and net capital outflow when the interest rate falls.
17. A country has national saving of $50 billion, government expenditures of $30 billion,
domestic investment of $10 billion, and net capital outflow of $40 billion. What is its supply of
loanable funds?
a. $20 billion
b. $30 billion
c. $50 billion
d. $60 billion
domestic investment of $50 billion, and net capital outflow of $30 billion. What is its supply of
loanable funds?
a. $30 billion
b. $40 billion
c. $50 billion
d. $80 billion
19. A country has private saving of $100 billion, public saving of -$30 billion, domestic
investment of $50 billion, and net capital outflow of $20 billion. What is its supply of loanable
funds?
a. $50 billion
b. $70 billion
c. $90 billion
d. $120 billion
20. A country has output of $600 billion, consumption of $350 billion, government expenditures
of $90 billion and investment of $60 billion. What is its supply of loanable funds?
a. $160 billion
b. $150 billion
c. $60 billion
d. $30 billion
21. A country has output of $900 billion, consumption of $600 billion, government expenditures
of $150 billion and investment of $120 billion. What is its supply of loanable funds?
a. $30 billion
b. $90 billion
c. $120 billion
d. $150 billion
22. In an open economy, the source for the demand for loanable funds is
a. national saving.
b. national saving + net capital outflow.
c. investment
d. investment + net capital outflow
23. In an open economy, the source of the demand for loanable funds is
a. national saving
b. national saving + net capital outflow
c. investment + the government budget deficit
d. investment + net capital outflow
24. In an open economy, the demand for loanable funds comes from
a. only those who want to buy domestic capital goods.
b. only those who want to buy foreign assets.
c. those who want to buy either domestic capital goods or foreign assets.
25. Other things the same, a decrease in the real interest rate
a. decreases the quantity of loanable funds demanded.
b. increases the quantity of loanable funds demand
c. shifts the demand for loanable funds to the right.
d. shifts the demand for loanable funds to the left.
26. In the open-economy macroeconomic model, the supply of loanable funds equals
a. national saving. The demand for loanable funds comes from domestic investment + net capital
outflow.
b. national saving. The demand for loanable funds comes only from domestic investment.
c. private saving. The demand for loanable funds comes from domestic investment + net capital
outflow.
d. private saving. The demand for loanable funds comes only from domestic investment.
a. national saving. Demand comes from only domestic investment.
b. national saving. Demand comes from domestic investment and net capital outflow.
c. Only net capital outflow. Demand for loanable funds comes from national saving.
d. domestic investment and net capital outflow. Demand for loanable funds comes from national
saving.
28. In the open-economy macroeconomic model, the purchase of a capital asset by domestic
residents adds to the demand for loanable funds
a. only if the asset is located at home.
b. only if the asset is located abroad.
c. whether the asset is located at home or abroad.
29. If a country has a positive net capital outflow, then

a. on net it is purchasing assets from abroad. This adds to its demand for domestically generated
loanable funds.
b. on net it is purchasing assets from abroad. This subtracts from its demand for domestically
generated loanable funds.
c. on net other countries are purchasing assets from it. This adds to its demand for domestically
d. on net other countries are purchasing assets from it. This subtracts from its demand for
domestically generated loanable funds.
30. If a country has a negative net capital outflow, then

a. on net it is purchasing assets from abroad. This adds to its demand for domestically generated
loanable funds.
b. on net it is purchasing assets from abroad. This subtracts from its demand for domestically
c. on net other countries are purchasing assets from it. This adds to its demand for domestically
d. on net other countries are purchasing assets from it. This subtracts from its demand for
domestically generated loanable funds.
31. A U.S. grocery chain borrows money to buy a warehouse in Ohio and another in Italy.
Borrowing for which warehouse(s) is included in the demand for loanable funds in the U.S.?
a. both the one in Ohio and the one in Italy
b. only the one in Ohio
c. only the one in Italy
d. neither the one in Ohio nor the one in Italy
32. U.S. corporation Wright Air Conditions borrows funds to build a factory in the U.S. and a
factory in Mexico. Borrowing for factories in which location(s) is included in the U.S. demand
for loanable funds?
a. only the U.S.
b. only Mexico
c. Mexico and the U.S.
d. neither Mexico nor the U.S.
domestic investment of $80 billion, and net capital outflow of $20 billion. What is its demand for
loanable funds?
a. $60 billion
b. $70 billion
c. $100 billion
d. $120 billion
domestic investment of $50 billion, and net capital outflow of $40 billion. What is its demand for
loanable funds?
a. $40 billion
b. $60 billion
c. $90 billion
d. $130 billion
35. A country has domestic investment of $200 billion. Its citizens purchase $600 of foreign
assets and foreign citizens purchase $300 of its assets. What is national saving?
a. $400 billion
b. $500 billion
c. $600 billion
d. $800 billion
36. A country has private saving of $500 billion, public saving of -$100 billion, domestic
investment of $150 billion, and net capital outflow of $250 billion. What is its supply of loanable
funds?
a. $650 billion
b. $600 billion
c. $400 billion
d. $350 billion
37. A country has GDP of $700 billion, consumption of $450 billion, government expenditures
of $100 billion, and domestic investment of $200 billion. What is its supply of loanable funds?
a. $350 billion
b. $250 billion
c. $200 billion
d. $150 billion
38. Other things the same, an increase in the U.S. real interest rate induces
a. Americans to buy more foreign assets, which increases U.S. net capital outflow.
b. Americans to buy more foreign assets, which reduces U.S. net capital outflow.
c. foreigners to buy more U.S. assets, which reduces U.S. net capital outflow.
d. foreigners to buy more U.S. assets, which increases U.S. net capital outflow.
39. A country has I = $200 billion, S = $400 billion, and purchased $600 billion of foreign
assets, how many of its assets did foreigners purchase?
a. $0
b. $200 billion
c. $400 billion
d. $800 billion
40. Other things the same, a decrease in the interest rate

a. reduces domestic investment which reduces the quantity of loanable funds supplied.
b. reduces domestic investment which reduces the quantity of loan funds demanded.
c. raises domestic investment which raises the quantity of loanable funds supplied.
d. raises domestic investment which raises the quantity of loanable funds demanded.
41. Other things the same, a decrease in the U.S. real interest rate induces
a. Americans to buy more foreign assets, which increases U.S. net capital outflow.
b. Americans to buy more foreign assets, which reduces U.S. net capital outflow.
c. foreigners to buy more U.S. assets, which reduces U.S. net capital outflow.
d. foreigners to buy more U.S. assets, which increases U.S. net capital outflow.
42. Other things the same, as the real interest rate rises
a. domestic investment and net capital outflow both rise.
b. domestic investment and net capital outflow both fall.
c. domestic investment rises and net capital outflow falls.
d. domestic investment falls and net capital outflow rises.
43. Other things the same, as the real interest rate falls
a. domestic investment and net capital outflow both rise.
b. domestic investment and net capital outflow both fall.
c. domestic investment rises and net capital outflow falls.
d. domestic investment falls and net capital outflow rises.
44. Other things the same, a decrease in the real interest rate raises the quantity of
a. domestic investment and net capital outflow.
b. domestic investment but not net capital outflow.
c. net capital outflow but not domestic investment.
d. neither domestic investment nor net capital outflow.
45. Other things the same, if the interest rate falls, then
a. firms will want to borrow more, which increases the quantity of loanable funds demanded.
b. firms will want to borrow less, which decreases the quantity of loanable funds demanded.
c. firms will want to borrow more, which increase the quantity of loanable funds supplied.
d. firms will want to borrow less, which decreases the quantity of loanable funds supplied.
46. Other things the same, an increase in the U.S. interest rate
a. raises net capital outflow which decreases the quantity of loanable funds demanded.
b. raises net capital outflow which increases the quantity of loanable funds demanded.
c. lowers net capital outflow which decreases the quantity of loanable funds demanded.
d. lowers net capital outflow which increases the quantity of loanable funds demanded.
47. If interest rates rise in the U.S., then other things the same
a. foreigners would buy more U.S. bonds which increases the quantity of loanable funds
demanded in the U.S.
b. foreigners would buy more U.S. bonds which reduces the quantity of loanable funds
c. foreigners would buy fewer U.S. bonds which increases the quantity of loanable funds
d. foreigners would buy fewer U.S. bonds which reduces the quantity of loanable funds
48. Other things the same, if the U.S. interest rate falls, then U.S. residents will want to purchase
a. more foreign assets, which increases the quantity of loanable funds demanded.
b. fewer foreign assets, which decreases the quantity of loanable funds demanded.
c. more foreign assets, which increase the quantity of loanable funds supplied.
d. fewer foreign assets, which decreases the quantity of loanable funds supplied.
49. An increase in real interest rates in the United States

a. discourages both U.S. and foreign residents from buying U.S. assets.
b. encourages both U.S. and foreign residents to buy U.S. assets.
c. encourages U.S. residents to buy U.S. assets, but discourages foreign residents from buying
U.S. assets.
d. encourages foreign residents to buy U.S. assets, but discourages U.S. residents from buying
U.S. assets.
50. Other things the same, a decrease in the real interest rate
a. increases the quantity of loanable funds demanded.
b. shifts the demand for loanable funds curve to the right.
c. decreases the quantity of loanable funds demanded.
d. shifts the demand for loanable funds curve to the left.
51. An increase in the real interest rate in the United States changes the quantity of loanable
funds demanded because
a. U.S. residents will want to buy more foreign assets.
b. Foreign residents will want to buy more U.S. goods and services.
c. U.S. firms will want to purchase fewer U.S. capital goods.
d. All of the above are correct.
52. Which of the following is the most likely response to an increase in the U.S. real interest
rate?
a. a London bank purchases a U.S. bond instead of a Japanese bond it had considered purchasing
b. U.S. firms decide to buy more capital goods
c. a U.S. citizen decides to put less money in his savings account than he had planned.
d. All of the above are consistent.
53. Which of the following is the most likely response to a decrease in the U.S. real interest rate?
a. a U.S. company decides to expand its factory
b. a U.S. citizen decides to purchase fewer foreign bonds
c. a German mutual fund decides to increase its deposits at a U.S. bank
d. All of the above are consistent.
54. If interest rates rose more in Japan than in the U.S., then other things the same
a. U.S. citizens would buy more Japanese bonds and Japanese citizens would buy more U.S.
bonds.
b. U.S. citizens would buy more Japanese bonds and Japanese citizens would buy fewer U.S.
bonds.
c. U.S. citizens would buy fewer Japanese bonds and Japanese citizens would buy more U.S.
bonds.
d. U.S. citizens would buy fewer Japanese bonds and Japanese citizens would buy fewer U.S.
bonds.
55. If interest rates rose more in the U.S. than in France, then other things the same
a. U.S. citizens would buy more French bonds and French citizens would buy more U.S. bonds.
b. U.S. citizens would buy more French bonds and French citizens would buy fewer U.S. bonds.
c. U.S. citizens would buy fewer French bonds and French citizens would buy more U.S. bonds.
d. U.S. citizens would buy fewer French bonds and French citizens would buy fewer U.S. bonds.
56. Other things the same, if the real interest rate in a country falls, domestic residents will desire
to purchase
a. more capital goods and more foreign bonds.
b. more capital goods but fewer foreign bonds.
c. more foreign bonds but fewer capital goods.
d. fewer capital goods and fewer foreign bonds.
57. At the equilibrium real interest rate in the open-economy macroeconomic model, the amount
that people want to save equals the desired quantity of
a. net capital outflow.
b. domestic investment.
c. net capital outflow plus domestic investment.
d. foreign currency supplied.
58. At the equilibrium real interest rate in the open-economy macroeconomic model, the
equilibrium quantity of loanable funds equals
a. net capital outflow.
b. domestic investment.
c. foreign currency supplied.
d. national saving.
59. At the equilibrium real interest rate in the open-economy macroeconomic model
a. saving = domestic investment
b. saving = net capital outflow
c. net capital outflow = domestic investment
d. net capital outflow + domestic investment = saving
60. In equilibrium a country has a net capital outflow of $200 billion and domestic investment of
$150 billion. What is the quantity of loanable funds demanded?
a. $50 billion
b. $150 billion
c. $200 billion
d. $350 billion
61. If there is a surplus of loanable funds, the quantity demanded is

a. greater than the quantity supplied and the interest rate will rise.
b. greater than the quantity supplied and the interest rate will fall.
c. less than the quantity supplied and the interest rate will rise.
d. less than the quantity supplied and the interest rate will fall.
62. If there is a surplus in the market for loanable funds, then the interest rate
a. rises, so national saving rises.
b. rises, so national saving falls.
c. falls, so national saving rises.
d. falls, so national saving falls.
63. If the quantity of loanable funds supplied is greater than the quantity demanded, then there is
a
a. shortage of loanable funds and the interest rate will fall.
b. shortage of loanable funds and the interest rate will rise.
c. surplus of loanable funds and the interest rate will fall.
d. surplus of loanable funds and the interest rate will rise.
64. If the quantity of loanable funds supplied is less than the quantity demanded, then there is a
a. shortage of loanable funds and the interest rate will fall.
b. shortage of loanable funds and the interest rate will rise.
c. surplus of loanable funds and the interest rate will fall.
d. surplus of loanable funds and the interest rate will rise.
65. If there is a shortage of loanable funds, then
a. the demand for loanable funds will shift right so the real interest rate rises.
b. the supply of loanable funds will shift left so the real interest rate falls.
c. there will be no shifts of the curves, but the real interest rate rises.
d. there will be no shifts of the curves, but the real interest rate falls.
66. If there is a surplus in the U.S. loanable funds market, then

a. NCO > I.
b. NCO < I.
c. NCO + I > S.
d. NCO + I < S.
67. If there is a surplus in the market for loanable funds, the resulting change in the real interest
rate
a. reduces both the quantity of loanable funds supplied and the quantity of loanable funds
demanded.
b. reduces the quantity of loanable funds supplied and raises the quantity of loanable funds
demanded
c. raises both the quantity of loanable funds supplied and the quantity of loanable funds
demanded.
d. raises the quantity of loanable funds supplied and reduces the quantity of loanable funds
demanded.
68. If there is a surplus in the U.S. loanable funds market, then the interest rate
a. rises, which increases quantity of loanable funds demanded.
b. rises, which decreases the quantity of loanable funds demanded.
c. falls, which increases the quantity of loanable funds demanded.
d. falls, which decreases the quantity of loanable funds demanded.
69. If at a given real interest rate desired national saving is $60 billion, domestic investment is
$30 billion, and net capital outflow is $20 billion, then at that real interest rate in the loanable
funds market there is a
a. surplus. The real interest rate will rise.
b. surplus. The real interest rate will fall.
c. shortage. The real interest rate will rise.
d. shortage. The real interest rate will fall.
72. If the demand for loanable funds shifts right, then

a. the real interest rate and the equilibrium quantity of loanable funds both fall.
b. the real interest rate falls and the equilibrium quantity of loanable funds rises.
c. the real interest rate and the equilibrium quantity of loanable funds both rise.
d. the real interest rate rises and the equilibrium quantify of loanable funds falls.
73. If the demand for loanable funds shifts left, then

d. the real interest rate rises and the equilibrium quantity of loanable funds falls.
74. If the supply of loanable funds shifts right, then the equilibrium
a. interest rate falls, so domestic residents will want to purchase more foreign assets.
b. interest rate falls, so domestic residents will want to purchase fewer foreign assets.
c. interest rate rises, so domestic residents will want to purchase more foreign assets.
d. interest rate rises, so domestic residents will want to purchase fewer foreign assets.
75. If the supply of loanable funds shifts right, then

76. If the supply of loanable funds curve shifts right, then the equilibrium
a. interest rate and level of net capital outflows rise.
b. interest rate rises and the equilibrium level of net capital outflow falls.
c. interest rate falls and the equilibrium level of net capital outflow rises.
d. interest rate and level of net capital outflows fall.
77. If the supply of loanable funds shifts left, then

78. Which of the following would make both the equilibrium real interest rate and the
equilibrium quantity of loanable funds increase?
a. The demand for loanable funds shifts right.
b. The demand for loanable funds shifts left.
c. The supply of loanable funds shifts right.
d. The supply of loanable funds shifts left.
79. Which of the following would make both the equilibrium real interest rate and the
equilibrium quantity of loanable funds decrease?
80. Which of the following would make the equilibrium real interest rate decrease and the
equilibrium quantity of loanable funds increase?
b. The demand for loanable funds shifts left
81. Which of the following would make the equilibrium real interest rate increase and the
equilibrium quantity of funds decrease?
82. Suppose the U.S. supply of loanable funds shifts left. This will
a. increase U.S. net capital outflow and increase the quantity of loanable funds demanded.
b. increase U.S. net capital outflow and decrease the quantity of loanable funds demanded.
c. decrease U.S. net capital outflow and increase the quantity of loanable funds demanded.
d. decrease U.S. net capital outflow and decrease the quantity of loanable funds demanded.
83. If the supply of loanable funds shifts right, then the equilibrium
a. levels of net capital outflow and domestic investment decrease.
b. level of net capital outflow increases and the equilibrium level of domestic investment
decreases.
c. level of net capital outflow decreases and the equilibrium level of domestic investment
increases.
d. levels of net capital outflow and domestic investment increase.
Figure 32-1
84. Refer to Figure 32-1. The loanable funds market is in equilibrium at

a. 2 percent, $20 billion.
b. 4 percent, $40 billion.
c. 6 percent, $60 billion.
85. Refer to Figure 32-1. If the real interest rate is 6 percent, the quantity of loanable funds
demanded is
a. $20 billion, and the quantity supplied is $40 billion.
b. $20 billion, and the quantity supplied is $60 billion.
c. $60 billion, and the quantity supplied is $20 billion.
d. $60 billion, and the quantity supplied is $40 billion.
86. Refer to Figure 32-1. If the real interest rate is 2 percent, there will be a
a. surplus of $20 billion.
b. surplus of $40 billion.
c. shortage of $20 billion.
d. shortage of $40 billion.
87. Refer to Figure 32-1. If the real interest rate is 6 percent, there will be pressure for
a. the real interest rate to fall.
b. the demand for loanable funds curve to shift left.
c. the supply for loanable funds curve to shift right.
88. The value of net exports equals the value of

a. national saving.
b. public saving.
c. national saving - net capital outflow.
d. national saving - domestic investment.
89. In an open economy,

a. net capital outflow = imports.
b. net capital outflow = net exports.
c. net capital outflow = exports.
90. If net exports are positive, then

a. exports are greater than imports.
b. net capital outflow is negative.
c. Both of the above are correct.
d. Neither of the above is correct.
91. If U.S. net exports are negative, then net capital outflow is
a. positive, so foreign assets bought by Americans are greater than American assets bought by
foreigners.
b. positive, so American assets bought by foreigners are greater than foreign assets bought by
Americans.
c. negative, so foreign assets bought by Americans are greater than American assets bought by
foreigners.
d. negative, so American assets bought by foreigners are greater than foreign assets bought by
Americans.
92. If U.S. net exports are positive, then net capital outflow is
a. positive, so foreign assets bought by Americans are greater than American assets bought by
foreigners.
b. positive, so American assets bought by foreigners are greater than foreign assets bought by
Americans.
c. negative, so foreign assets bought by Americans are greater than American assets bought by
foreigners.
d. negative, so American assets bought by foreigners are greater than foreign assets bought by
Americans.
93. In the open-economy macroeconomic model, the amount of net capital outflow represents the
quantity of dollars
a. supplied for the purpose of selling assets domestically.
b. supplied for the purpose of buying foreign assets.
c. demanded for the purpose of buying U.S. net exports of goods and services.
d. demanded for the purpose of importing foreign goods and services.
94. In the open-economy macroeconomic model, the supply of dollars in the market for foreign-
currency exchange comes from
a. net exports
b. net capital outflow
c. net exports + net capital outflow
d. net exports - net capital outflow
95. In the open-economy macroeconomic model, the supply of dollars in the market for foreign-
currency exchange comes from
a. national saving
b. domestic investment
c. net exports
d. net capital outflow
96. Which of the following is included in the supply of U.S. dollars in the market for foreign-
currency exchange in the open-economy macroeconomic model?
a. a U.S. bank loans dollars to Tom to buy a U.S. made motorcycle
b. a U.S. tire maker wants to build a new factory in China
c. a U.S. company wants to import goods to sell in its retail stores
97. Which of the following is considered part of the supply of U.S. dollars in the market for
foreign-currency exchange in the open-economy macroeconomic model?
a. both a U.S. bank wanting to lend money to a Canadian company and a U.S. firm wanting to
buy computers made in South Korea
b. a U.S. bank wanting to lend money to a Canadian company, but not a U.S. firm wanting to
c. a U.S. firm wanting to buy computers made in South Korea, but not a U.S.bank wanting to
lend money to a Canadian company
d. neither a U.S. bank wanting to lend money to a Canadian company nor a U.S. firm wanting to
98. In the open-economy macroeconomic model, if net capital outflow increases then
a. the demand for dollars in the market for foreign-currency exchange shifts right.
b. the demand for dollars in the market for foreign-currency exchange shifts left.
c. the supply of dollars in the market for foreign-currency exchange shifts right.
d. the supply of dollars in the market for foreign-currency exchange shifts left.
99. Which of the following would tend to shift the supply of dollars in the market for foreign-
currency exchange in the open-economy macroeconomic model to the right?
a. the exchange rate rises
b. the exchange rate falls
c. the expected rate of return on U.S. assets rises
d. the expected rate of return on U.S. assets falls
100. Other things the same, which of the following would shift the supply of dollars in the
market for foreign exchange to the right?
a. foreigners want to buy more U.S. bonds
b. foreigners want to buy fewer U.S. bonds
c. foreigners want to buy more U.S. goods and services.
d. foreigners want to buy fewer U.S. goods and services.
101. Which of the following would shift the supply of dollars in the market for foreign-currency
exchange of the open-economy macroeconomic model to the left?
a. the exchange rate rises
b. the exchange rate falls
c. the expected rate of return on U.S. assets rises
d. the expected rate of return on U.S. assets falls
102. Other things the same, if the expected return on U.S. assets increases, the
a. supply of dollars in the market for foreign-currency exchange shifts right.
b. supply of dollars in the market for foreign-currency exchange shifts left.
c. demand for dollars in the market for foreign-currency exchange shifts right
d. demand for dollars in the market for foreign-currency exchange shifts left.
103. At a given real exchange rate, which of the following, by itself, would increase the supply
of dollars in the market for foreign-currency exchange?
a. foreign citizens want to buy more U.S. bonds
b. U.S. citizens want to buy more foreign bonds
c. foreign citizens want to buy more U.S. goods
d. U.S. citizens want to buy more foreign goods
104. If at a given exchange rate foreign citizens want to buy fewer U.S bonds, then the
a. supply of dollars in the market for foreign-currency exchange shifts right.
b. supply of dollars in the market for foreign-currency exchange shifts left.
c. demand for dollars in the market for foreign-currency exchange shifts right.
d. demand for dollars in the market for foreign-currency exchange shifts left.
105. Which of the following is included in the demand for dollars in the market for foreign-
currency exchange in the open-economy macroeconomic model?
a. a company in Canada wants to buy oranges from the U.S
b. a Japanese banks want to buy bonds from the U.S. government
c. a U.S. citizen wants to buy stock a German company is selling
106. The real exchange rate measures the

a. price of domestic currency relative to foreign currency.
b. price of domestic goods relative to the price of foreign goods.
c. rate of domestic and foreign interest.
107. Which of the following make(s) demand for U.S. dollars in the market for foreign-currency
exchange higher than otherwise?
a. a U.S. airline wanting to buy jets made in France and a Swedish hospital wanting to buy
medical equipment made in the U.S.
b. a U.S. airline wanting to buy jets made in France, but not a Swedish hospital wanting to buy
medical equipment made in the U.S.
c. a Swedish hospital wanting to buy medical equipment made in the U.S., but not a U.S. airline
wanting to buy jets made in France
d. neither a U.S. bank wanting to lend money to a Canadian company nor a U.S. firm wanting to
108. When the real exchange rate for the dollar appreciates, U.S. goods become
a. less expensive relative to foreign goods, which makes exports rise and imports fall.
b. less expensive relative to foreign goods, which makes exports fall and imports rise.
c. more expensive relative to foreign goods, which makes exports rise and imports fall.
d. more expensive relative to foreign goods, which makes exports fall and imports rise.
109. When the real exchange rate for the dollar depreciates, U.S. goods become
a. less expensive relative to foreign goods, which makes exports rise and imports fall.
b. less expensive relative to foreign goods, which makes exports fall and imports rise.
c. more expensive relative to foreign goods, which makes exports rise and imports fall.
d. more expensive relative to foreign goods, which makes exports fall and imports rise.
110. When the U.S. real exchange rate appreciates, U.S. goods become
a. more attractive to consumers in the U.S. and abroad.
b. more attractive to consumers in the U.S. and less attractive to consumers abroad.
c. less attractive to consumers in the U.S. and abroad.
d. less attractive to consumers in the U.S. and more attractive to consumers abroad.
111. In the open-economy macroeconomic model, as the exchange rate rises,

a. desired net exports fall, so the quantity of dollars supplied rise.
b. desired net exports fall, so the quantity of dollars demanded falls.
c. desired net exports rise ,so the quantity of dollars supplied falls.
d. desired net exports rise, so the quantity of dollars demanded rises.
112. Other things the same, if the U.S. real exchange rate depreciated, then U.S. net exports
would
a. fall and the quantity of dollars demanded in the market for foreign-currency exchange would
fall.
b. fall and the quantity of dollars demanded in the market for foreign-currency exchange would
rise.
c. rise and the quantity of dollars demanded in the market for foreign-currency exchange would
fall.
d. rise and the quantity of dollars demanded in the market for foreign-currency exchange would
rise.
113. The theory of purchasing-power parity implies that the demand curve for foreign-currency
exchange is
a. downward sloping.
b. upward sloping.
c. horizontal.
d. vertical.
114. In the open-economy macroeconomic model, if for some reason foreign citizens want to
purchase more U.S. goods and services at each exchange rate, then
a. the demand for dollars in the market for foreign-currency exchange shifts right.
b. the demand for dollars in the market for foreign-currency exchange shifts left.
115. Which of the following would shift the demand for dollars in the market for foreign
currency exchange to the right?
a. foreign citizens want to buy more U.S. goods and services at a given exchange rate
b. foreign citizens want to buy fewer U.S. goods and services at a given exchange rate
c. foreign citizens want to buy more U.S. bonds
d. foreign citizens want to by fewer U.S. bonds
116. In the open-economy macroeconomic model, the demand for dollars shifts right if at any
given exchange rate
a. foreign residents want to buy more U.S. goods and services.
b. U.S. residents want to buy fewer foreign goods and services.
c. Both A and B are correct.
117. In the open economy macroeconomic model, the amount of dollars demanded in the market
for foreign-currency exchange at a given real exchange rate increases if
a. either U.S. imports or exports increase.
b. either U.S. imports or exports decrease.
c. either U.S. imports increase or U.S. exports decrease.
d. either U.S. imports decrease or U.S. exports increase.
118. In the open-economy macroeconomic model, the quantity of dollars demanded in the
market for foreign-currency exchange
a. depends on the real exchange rate. The quantity of dollars supplied in the foreign-exchange
market depends on the real interest rate.
b. depends on the real interest rate. The quantity of dollars supplied in the foreign-exchange
market depends on the real exchange rate.
c. and the quantity of dollars supplied in the market for foreign-currency exchange depend on the
real exchange rate.
d. and the quantity of dollars supplied in the market for foreign-currency exchange depend on the
real interest rate.
119. In the open-economy macroeconomic model, a higher U.S. real exchange rate makes
a. U.S. goods more expensive relative to foreign goods and reduces the quantity of dollars
supplied.
b. U.S. goods more expensive relative to foreign goods and reduces the quantity of dollars
demanded.
c. foreign goods more expensive relative to U.S. goods and reduces the quantity of dollars
supplied.
d. foreign goods more expensive relative to U.S. goods and reduces the quantity of dollars
demanded.
120. In the open-economy macroeconomic model, equilibrium in the market for foreign-currency
exchange is determined by the equality between the supply of dollars which comes from
a. U.S. national saving and the demand for dollars for U.S. net exports.
b. U.S. net capital outflow and the demand for dollars for U.S. net exports.
c. domestic investment and the demand for U.S. net exports.
d. foreign demand for U.S. goods and services and U.S. demand for foreign goods and services.
121. In the open economy macroeconomic model, the price that balances supply and demand in
the market for foreign-currency exchange model is the
a. nominal exchange rate.
b. nominal interest rate.
c. real exchange rate.
d. real interest rate.
122. Other things the same, in the open-economy macroeconomic model, if the exchange rate
rises,
a. the demand for dollars shifts left.
b. the demand for dollars shifts right.
c. the quantity of dollars demanded falls.
d. the quantity of dollars demanded rises.
123. In the open-economy macroeconomic model, the

a. exchange rate adjusts to equate private saving with the sum of investment, net exports, and net
capital outflow.
b. exchange rate adjusts to equate national saving with the sum of investment and net capital
outflow.
c. interest rate adjusts to equate private saving with the sum of investment, net exports, and net
capital outflow.
d. interest rate adjusts to equate national saving with the sum of investment and net capital
outflow.
124. Suppose the real exchange rate is such that the market for foreign-currency exchange has a
surplus. This surplus will lead to
a. an appreciation of the dollar, an increase in U.S. net exports, and so an increase in the quantity
of dollars demanded in the foreign exchange market.
b. an appreciation of the dollar, a decrease in U.S. net exports, and so a decrease in the quantity
c. a depreciation of the dollar, an increase in U.S. net exports, and so an increase in the quantity
d. a depreciation of the dollar, a decrease in U.S. net exports, and so a decrease in the quantity of
dollars demanded in the foreign exchange market.
125. If the real exchange rate for the dollar is above the equilibrium level, the quantity of dollars
supplied in the market for foreign-currency exchange is
a. greater than the quantity demanded and the dollar will appreciate.
b. greater than the quantity demanded and the dollar will depreciate.
c. less than the quantity demanded and the dollar will appreciate.
d. less than the quantity demanded and the dollar will depreciate.
126. If the real exchange rate for the dollar is below the equilibrium level, the quantity of dollars
supplied in the market for foreign-currency exchange is
a. less than the quantity demanded and the dollar will appreciate.
b. less than the quantity demanded and the dollar will depreciate.
c. greater than the quantity demanded and the dollar will appreciate.
d. greater than the quantity demanded and the dollar will depreciate.
127. In the open-economy macroeconomic model, if there is a surplus in the market for foreign-
currency exchange, which of the following will move the market to equilibrium?
a. the real exchange rate depreciates and net exports fall.
b. the real exchange rate depreciates and net exports rise.
c. the real exchange rate appreciates and net exports fall.
d. the real exchange rate appreciates and net exports rise.
128. Which of the following is consistent with moving from a shortage to equilibrium in the
market for foreign currency exchange?
a. the exchange rate falls so foreign residents want to buy more U.S. goods and services
b. the exchange rate falls so foreign residents want to buy fewer U.S. goods and services
c. the exchange rate rises so foreign residents want to buy more U.S. goods and services
d. the exchange rate rises so foreign residents want to buy fewer U.S. goods and services
129. Which of the following is consistent with moving from a surplus to equilibrium in the
market for foreign currency exchange?
a. the exchange rate falls causing U.S. residents to import more
b. the exchange rate falls causing U.S. residents to import less
c. the exchange rate rises causing U.S. residents to import more
d. the exchange rate rises causing U.S. residents to import less
130. Which of the following is consistent with moving from a surplus to equilibrium in the
market for foreign-currency exchange?
a. the exchange rate appreciates making domestic goods relatively more expensive.
b. the exchange rate appreciates making domestic goods relatively less expensive.
c. the exchange rate depreciates making domestic goods relatively more expensive.
d. the exchange rate depreciates making domestic goods relatively less expensive.
Figure 32-2
131. Refer to Figure 32-2. What are the equilibrium values of the real exchange rate and net
exports?
a. 1, 300
b. .8, 400
c. .6, 500
d. None of the above are correct.
132. Refer to Figure 32-2. If the real exchange rate is 1, then there is a
a. surplus of 100 so the real exchange rate will fall.
b. surplus of 100 so the real exchange rate will rise.
c. shortage of 100 so the real exchange rate will fall.
d. shortage of 100 so the real exchange rate will rise.
133. Refer to Figure 32-2. At what real exchange rate is the quantity of dollars demanded equal
to 500?
a. 1
b. .8
c. .6
d. None of the above are correct.
134. If the demand for dollars in the market for foreign-currency exchange shifts left, then the
exchange rate
a. rises and the quantity of dollars exchanged rises.
b. rises and the quantity of dollars exchanged does not change.
c. falls and the quantity of dollars exchanged falls.
d. falls and the quantity of dollars exchanged does not change.
135. If the demand for dollars in the market for foreign-currency exchange shifts right, then the
exchange rate
a. rises and the quantity of dollars exchanged rises.
c. falls and the quantity of dollars exchanged falls.
136. If the supply of dollars in the market for foreign-currency exchange shifts left, then the
exchange rate
a. rises and the quantity of dollars exchanged falls.
c. rises and the quantity of dollars exchanged rises.
137. If the supply of dollars in the market for foreign-currency exchange shifts right, then the
exchange rate
a. rises and the quantity of dollars exchanged falls.
c. falls and the quantity of dollars exchanged rises.
138. If for some reason Americans desired to increase their purchases of foreign assets, then
other things the same
a. both the real exchange rate and the quantity of dollars exchanged in the market for foreign-
currency exchange would fall.
b. both the real exchange rate and the quantity of dollars exchanged in the market for foreign-
currency would rise.
c. the real exchange rate would rise and the quantity of dollars exchanged in the market for
foreign-currency would fall.
d. the real exchange rate would fall and the quantity of dollars exchanged in the market for
foreign-currency would rise.
139. If for some reason Americans desired to decrease their purchases of foreign assets, then
other things the same
a. both the real exchange rate and the quantity of dollars exchanged in the market for foreign-
currency exchange would fall.
b. both the real exchange rate and the quantity of dollars exchanged in the market for foreign-
currency would rise.
c. the real exchange rate would rise and the quantity of dollars exchanged in the market for
foreign-currency would fall.
d. the real exchange rate would fall and the quantity of dollars exchanged in the market for
foreign-currency would rise.
140. If at a given exchange rate U.S. citizens wanted to buy more foreign bonds
a. the demand for dollars in the market for foreign-currency exchange would shift right.
b. the demand for dollars in the market for foreign-currency exchange would shift left.
141. If at a given exchange rate U.S. citizens wanted to buy more foreign bonds
a. the demand for dollars in the market for foreign-currency exchange would shift right.
b. the demand for dollars in the market for foreign-currency exchange would shift left.
142. An open economy has GDP of $1,000 billion, consumption of $650 billion, government
expenditures of $150 billion, and domestic investment of $40 billion. What is its demand for
loanable funds?
a. $40 billion
b. $120 billion
c. $160 billion
d. $200 billion
143. An open economy has GDP of $1,200 billion, consumption expenditures of $900 billion
government expenditures of $400 billion, domestic investment of $100 billion, and net exports of
-$200 billion. What is its demand for loanable funds?
a. -$200 billion
b. -$100 billion
c. $100 billion
d. $200 billion
144. In the open-economy macroeconomic model, the market for loanable funds identity can be
written as
a. S = NCO - I
b. S = NCO
c. S = I - NCO
d. S = I + NCO

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1. In an open economy, national saving equals

12. Other things the same an increase in the interest rate

15. The explanation for the slope of

16. The slope of the supply of loanable funds is based on an increase in

29. If a country has a positive net capital outflow, then

30. If a country has a negative net capital outflow, then

40. Other things the same, a decrease in the interest rate

49. An increase in real interest rates in the United States

61. If there is a surplus of loanable funds, the quantity demanded is

66. If there is a surplus in the U.S. loanable funds market, then

72. If the demand for loanable funds shifts right, then

73. If the demand for loanable funds shifts left, then

75. If the supply of loanable funds shifts right, then

77. If the supply of loanable funds shifts left, then

84. Refer to Figure 32-1. The loanable funds market is in equilibrium at

88. The value of net exports equals the value of

89. In an open economy,

90. If net exports are positive, then

106. The real exchange rate measures the

111. In the open-economy macroeconomic model, as the exchange rate rises,

123. In the open-economy macroeconomic model, the

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