Chapter 19/A Macroeconomic Theory of the Open Economy  509

Chapt
er19
AMacroe
conomi
cThe
oryoft
heOpe
nEc
onomy
MULTI
PLECHOI
CE

1. Overthepa stt
wode cades,t
heUni t
edStateshas
a.genera l
lyhad,orbeenver yne a
rtoat radebala
nc e
.
b.ha dtradedefic it
sinaboutasma nyyearsasithast
rades
urpl
use
s.
c. per
sis
tentlyhadat r
adede fic it.
d.pe r
sis
tentlyhadat r
ades urplus.
ANSWER: c
. pers
ist
entl
yha dat radedefic it.
TYPE:
M DIFFICULTY:1S ECTION: 19.0

2. ManyU. S.businessleadersarguethatthecurr
ents
tat
eofU.
S.netexpor
tsi
sther
esul
tof
a.U. S.exportsubsi
dies.
b.f r
e et
radepol i
cie
soffor ei
gngov ernments
.
c. unproductiveU.S.wo r
ke r
s.
d.unf ai
rforeigncompe ti
tion.
ANSWER: d. unfairf
oreignc ompeti
tion.
TYPE:
M DI FFI
CULTY:1S ECTI ON: 19.
0

3. Ifac
ount r
y’simportsar
egrea
tertha
nit
sexpor
ts,
thec
ount
ryi
ssai
dtoha
vea
a.tradesurplus.
b.tradede ficit
.
c.compa rat
iveadvanta
ge.
d.absoluteadvanta
ge.
ANSWER:b. t
radedefic i
t.
TYPE:
M DIFFICULTY:1S ECTION:19.0

4. Theope n-e
conomyma croeconomi cmodelincl
udes
a. onlythema r
ketforloanablef unds.
b.onl ythema r
ketforforeign-curre
ncyexchange.
c. boththema r
ketforloanablef undsandthema rketforfore
ign-c
urr
encyex
change.
d.ne it
herthema r
ke tf
orl oanablefundsorthema rketforfor
eign-
cur
renc
yexchange
.
ANSWER: c. bot
hthema rke tforloanabl
efundsa ndthema r
ketforf
ore
ign-
cur
rencyexchange
.
TYPE:
M DI FFICULTY:1SECTI ON: 19.0

5. Theope n-ec
onomyma croeconomi cmode lexa
minesthede
ter
mina
tionof
a. outputgr owthrateandt here ali
nteres
trat
e.
b.une mpl oyme ntandthee x
cha ngerat
e
c. outputgr o
wt hrateandt heinfla t
ionrate
.
d.t hetradeba l
ancea ndt heexchangerate.
ANSWER: d. thetradeba l
a nceandt heexchangera
te.
TYPE:
M DI FFICULTY:1S ECTION: 19.
0

6. Theope n-economyma cr
oeconomicmode lt
akes
a. GDP ,butnott hepri
cele
ve lasgi
ve n.
b.t hepricelevel
,butnotGDPa sgiven.
c. boththepr ic
el e
velandGDPasgi ven.
d.t hepricelevelandGDPa svari
ablestobedeter
mine
dbyt
hemode
l.
ANSWER: c. botht hepri
cele
ve landGDPa sgive
n.
TYPE:
M DI FFICULTY:1S ECTION:
510  Chapter 19/A Macroeconomic Theory of the Open Economy

7. Inanope nec onomy ,t

hema rketf
orloanabl
efundse qua t
esna t
ionals
avi
ngwi
th
a. dome st
icinve s
tment.
b.ne tcapit
a loutflow.
c.t hesum ofna tionalc
onsumptionandg overnments pending.
d.t hesum ofdome st
icinv
es t
mentandne tcapit
aloutflow.
ANSWER: d. thes um ofdome st
ici
nvest
me ntandnetc apitaloutflow.
TYPE:
M DI FFICULTY:1S ECTION: 19.
1

8. Inanope neconomy ,t hema r

ke tf
orloanablef
undsequat
esna
tionals
avi
ngwi
th
a. dome st
icinvestme nt.
b.ne tcapit
alout flow.
c. nati
onalconsumpt ionminusdome st
ici
nvest
ment.
d.Noneoft hea bovea recorrect
.
ANSWER: d. No neoft hea bovearecorr
ect.
TYPE:
M DI FFI
CULTY:1S ECTI ON: 19.
1

9. Intheopen-
economymacr
oec
onomi
cmode
l,t
hema
rke
tforl
oana
blef
undsi
dent
it
ycanbewr
itt
ena
s
a. S=I
b.S=NCO
c. S=I+NCO
d.S+I=NCO
ANSWER: c. S=I+NCO
TYPE:
M DI FFI
CULTY:1SECTI
ON:19.
1

10. Intheope n-e

conomyma c r
oeconomicmodel
,thesuppl
yofl
oana
blef
undsc
ome
sfr
om
a. nati
onals a
vi ng.
b.pr iva
tesaving.
c. dome sti
cinve st
ment.
d.t hesum ofdome st
icinves
tme nta
ndnetcapi
talout
flow.
ANSWER: a. nationalsavi
ng.
TYPE:
M DI FFICULTY:1S ECTION: 19.
1

11. Intheope n-economyma croeconomicmodel

,thedemandforl
oanabl
efundsc
ome
sfr
om
a. dome sti
cinve s
tment.
b.ne texports.
c. netcapitaloutflow
d.t hesum ofne tcapit
aloutflow a nddomest
ici
nvest
ment.
ANSWER: d. thes um ofnetcapit
alout
flow anddome st
ici
nvest
ment.
TYPE:
M DI FFICULTY:1S ECTION: 19.
1

12. Thepur chas

eofac apitalas
setaddst ot
hedemandf orloanabl
efunds
a. onlyift
hea s
setislocate
da thome .
b.onl yift
hea s
setislocate
da broad.
c. whe t
hertheassetislocat
eda thomeorabroad.
d.Noneoft heaboveisc or
rect.
ANSWER: c. whethertheas s
etislocat
edathomeora broad.
TYPE:
M DI FFI
CULTY:1S ECTI ON: 19.
1

13. Jac
ka ndJ i
llareco-owne r
soft heU. S. firm We ll
sPetrol
eum.J ackborrowsmone yt obuildanoi lwe lli
nT exas
.Ji
ll
borrowsmone ytobui l
da noi lwe llinVe nezue l
a.
a. BothJ a
cka ndJ i
ll'
spurcha s eofc apit
alcounta sde mandf orloanabl
efundsi ntheU.S.ma r
ke t
.
b.Ne it
herJacknorJ il
l'
spur chas eofc apit
a lcountasde mandf orloanabl
efundsi ntheU. S.ma rket.
c.J ack'
spur chaseofcapitalc ount sasde ma ndforloanablefundsi ntheU.S.marke t
;Ji
ll'
spur chasedoesnot .
d.J il
l'
spur c
ha seofcapit
alc ount sasde ma ndf orloanablefundsint heU.S.ma r
ket;Jac
k'spur chasedoe snot.
ANSWER: a. Bot hJack'
sandJ ill'spur c
ha seofc apit
alcountasde ma ndforloanabl
ef undsint heU. S.ma r
ket.
TYPE:
M DI FFICULTY:2S ECTION: 19.1
 Chapter 19/A Macroeconomic Theory of the Open Economy  511

14. A hi
ghe rre
a lint
eres
trat
er ai
sesthequant
it
yof
a. dome st
icinvest
me nt
.
b.ne tcapit
a lout
flow.
c.loa nabl
ef undsdema nded.
d.loa nabl
ef undssupplied.
ANSWER: d. loanabl
efundss upplie
d.
TYPE:
M DI FFICULTY:2S ECTI ON: 19.
1

15. Alowe rrealinter

estrat
ede c
reasesthequant
it
yof
a.loa nabl
ef undsde manded.
b.loa nabl
ef undssupplied.
c. dome st
icinvestment.
d.ne tcapit
a loutflow.
ANSWER: b. loanablefundssupplied.
TYPE:
M DI FFI
CULTY:1S ECTION: 19.
1

16. Ani ncr

e as
ei nthere ali
nter
estrate
a. discouragespeoplefrom savingandsoincr e
a s
e st
hequa nti
tyofl oanabl
efundsde ma nde
d.
b.di scouragespeoplefrom savingandsode creasesthequantityofloanablef
undsde ma nded.
c.e ncourage speopletosaveands oincr
easesthequa ntit
yofloa nablefundssuppl
ied.
d.e ncourage speopletosaveands odecreas
est hequa nti
tyofloanablefundssuppli
ed.
ANSWER: c. e ncouragespeopletosaveandsoi ncrease
st hequantityofloanabl
efundss uppli
ed.
TYPE:
M DI FFICULTY:1S ECTI ON: 19.
1

17. Afal
linther e
a lint
erestrat
ee ncourage si
nvest
me ntandso
a.incr
easesthequa nt
ityofloanablef undsdemande d.
b.decreas
est hequa nti
tyofl oanabl
ef undsde manded.
c.incr
easesthequa nt
ityofloanablef undssupplie
d.
d.decreas
est hequa nti
tyofl oanabl
ef undssupplied.
ANSWER:a. increasesthequa nti
tyofl oanabl
efundsde mande
d.
TYPE:
M DIFFICULTY:1S ECTI ON: 19.1

18. Ani ncr

e as
ei nre alintere
stratesi
nt heUnitedStates
a. discouragesbot hU. S.andforeignresi
dentsfrom buyingU. S.a s
sets.
b.e ncourage sbot hU.S.andf orei
gnr es
identstobuyU. S.asse
ts.
c.e ncourage sU.S .re
s i
dentstobuyU. S.asse
ts,butdiscouragesforeignresi
dent
sfr
om buyi
ngU.
S.as
set
s.
d.e ncourage sforeignr e
sidentstobuyU. S.ass
ets,butdisc
our agesU. S.r
esi
dent
sfr
om buyi
ngU.
S.as
set
s.
ANSWER: b. e ncour agesbothU. S.
andf orei
gnr e
sidentst
obuyU. S.asset
s.
TYPE:
M DI FFICULTY:1S ECTI ON: 19.
1

19. Whichofthefollowingwoul dbeconsis

tentwi thanincreaseintheU.S.realint
eres
tra
te?
a. aSwissbankpur chas
esaU. S.bondinsteadoftheGe rma nbondthe yha dconsi
dere
dpur c
hasi
ng.
b.fir msdecidesincei
nt e
restr
atesar
ehi ghertodomor ei nvest
ments pending.
c. Br
a ddeci
de stoputlessmoneyi nhissavingsaccountthanheha dpla nnedto.
d.Al loft
hea bovea r
econsist
ent.
ANSWER: a. aS wissbankpur chas
esaU.S. bondi ns
teadoftheGe rmanbondt heyhadconsi
deredpur
chas
ing.
TYPE:
M DIFFICULTY:1S ECTION: 19.
1

20. Anincre
aseintheU.S.re
a li
nterestr
ateinduces
a. Americ
anstobuymor eforeignassets,
whi c
hincre
as e
sU.S.netcapit
a loutflow.
b.Ame ric
anstobuymor eforeignassets,
whi c
hreducesU.S.netcapit
alout flow
c.forei
gnerstobuymor eU.S.asset
s,whichr e
ducesU.S.netcapit
aloutflow.
d.forei
gnerstobuymor eU.S.asset
s,whichincre
asesU.S.netcapit
alout flow.
ANSWER: c
. for
eigne
rstobuymor eU.S.asset
s,whichreducesU.S.netcapita
loutflow.
TYPE:
M DIFFICULTY:2S ECTION: 19.1
512  Chapter 19/A Macroeconomic Theory of the Open Economy

21. Inanope neconomy,thedema ndforloanabl

efundscome sfr
om
a. onlythosewhowa nttoborrowf undstobuydome st
iccapit
algoods.
b.onl ythosewhowa nttoborrow fundstobuyfor
eignassets
.
c.t hosewhowa nttoborrow fundstobuyeithe
rdome st
iccapit
algoodsorforeignass
ets.
d.ne it
herthosewhowa nttobor r
ow fundstobuydome sti
ccapit
algoodsnort hosewhowa ntt
oborr
ow f
undst
o
buyforei
gna s
set
s.
ANSWER: c. t
hosewhowantt obor row f
undstobuye i
therdome st
iccapi
talgoodsorforei
gnasse
ts.
TYPE:
M DI FFICULTY:1SECTION: 19 .
1

22. Inanope neconomyt hes upplyofl oa

nabl efundsc omesfrom
a. nati
onalsavings.Dema ndc ome sfr
om onl ydome sti
cinvestment.
b.na ti
onalsavings.Dema ndc ome sfr
om dome s
t i
cinvestmentandne tcapit
aloutflow.
c. Onlynetcapi t
aloutflow.Dema ndf orloanablefundscome sfrom nati
onalsavi
ngs.
d.dome s
tici
nve st
me ntandne tcapitaloutflow.De ma ndforloanablefundscomesf r
om na
tionals
avi
ngs
.
ANSWER: b. nati
onalsavings.De mandc ome sfrom dome sti
cinvest
me ntandne tcapi
talout
flow.
TYPE:
M DI FFI
CULTY:2S ECTI ON: 19.1

23. Ift
hequa ntit
yofloanablef
undss uppli
edi sgreat
erthanthequa nti
tydemande
d,t
hen
a.t hereisashort
ageofloanablefundsa ndtheinte
restra
tewillfal
l.
b.t hereisashort
ageofloanablefundsa ndtheinte
restra
tewillris
e.
c.t hereisasurpl
usofloanablefundsandt heinter
estrat
ewillfall
.
d.the reisasurpl
usofloanablefundsa ndtheinter
estrat
ewillrise
.
ANSWER: c. ther
eisas ur
plusofloanablefundsandt heinte
res
tr at
ewillf
all
.
TYPE:
M DI FFICULTY:2S ECTION: 19.
1

24. Ift
hereisas urpl
usofloanablefunds,t
hequa nti
tydema ndedis
a. great
ertha nt
hequa nt
it
ys upplie
da ndtheinter
estra
tewi l
lri
se.
b.gr eat
ertha nt
hequa nt
it
ys upplie
da ndtheinter
estra
tewi l
lfa
ll.
c.l e
s st
hant hequanti
tysuppliedandtheinteres
trat
ewi l
lris
e.
d.l e
s st
hant hequanti
tysuppli
e dantheintere
strat
ewi l
lfal
l.
ANSWER: d. l
e sst
hanthequa nt
itysupplie
da ntheinte
restra
tewillf
all
.
TYPE:
M DI FFICULTY:2S ECTION: 19.1

25. Ift
he r
ei sas
hortageofloanabl efunds,
a.t hede mandforloanabl
ef undswi llshif
trightsot hei nter
estrateri
ses.
b.t hesupplyofloanablefundswi l
lshif
tleftsothei nterestra
tefalls
.
c.t herewil
lbenos hift
softhec urves
,butthei nte
res trateri
ses.
d.the rewil
lbenos hift
softhec urve
s,butthei nte
res tratefal
ls.
ANSWER: c. t
herewi l
lbenos hi ft
softhec ur
ve s,butthei nteres
traterise
s.
TYPE:
M DI FFICULTY:1S ECTION: 19.1

26. Whi c
hoft hef ol
lowingwoul dma keboththee qui
li
brium i
nte
res
tra
teandt
hee
qui
li
bri
um qua
nti
tyofl
oanabl
e
fundsincr
e as
e ?
a. Thede ma ndf orl
oanablef undss hi
ft
sright.
b.Thede ma ndf orl
oa nabl
ef undsshift
sleft
.
c. Thesuppl yofl oanabl
ef undss hi
ftsri
ght.
d.Thes uppl yofl oanabl
ef undss hi
ftsl
eft
.
ANSWER: a. Thede ma ndforloanablefundsshift
sright.
TYPE:
M DI FFI
CULTY:2S ECTION: 19.
1

27. Whichoft hefol

lowingwoul dma ketheequili
brium i
nte
res
tra
tei
ncr
eas
eandt
hee
qui
li
bri
um quant
it
yoff
unds
decr
ea s
e?
a. Thes uppl
yofl oanabl
ef undss hi
ft
sright.
b.Thes uppl
yofl oanabl
ef undss hi
ft
sleft
.
c. Thede mandf orl
oa nablefundsshif
tsright.
d.Thede mandf orl
oa nablefundsshift
sleft
.
ANSWER: b. Thesuppl yofloanablefundsshift
sleft
.
TYPE:
M DI FFICULTY:2S ECTION: 19.
1
 Chapter 19/A Macroeconomic Theory of the Open Economy  513

28. Atthee qui

li
br i
um int
e r
estrat
eint heope neconomyma cr
oeconomi
cmode
l,t
heamountt
hatpe
opl
ewantt
osa
ve
equalsthedesire
dqua ntit
yof
a. netcapit
aloutflow.
b.dome st
icinvest
me nt.
c. netcapit
aloutflow pl usdome st
icinve
stme nt
.
d.f ore
igncur r
encysuppl i
ed.
ANSWER: c. netcapit
aloutflow pl usdome s
ticinves
tme
nt.
TYPE:
M DI FFICULTY:1S ECTI ON: 19.
1

29. Inanopene conomy,

a. netcapi
taloutflow =i mports.
b.ne tcapi
taloutflow =ne texports
.
c. netcapi
taloutflow =e xports
.
d.Noneoft hea boveiscor
rect.
ANSWER: b. ne tc
apitalout
flow =ne texpor
ts.
TYPE:
M DI FFI
CULTY:1S ECTION: 19.
1

Fort
hef
oll
owi
ngf
ourque
sti
onsr
efe
rtot
hefigur
ebe
low:

30. Theloana blefundsma rke

tisinequi
li
bri
um a
t
a. 2pe r
ce nt,10.
b.3pe r
ce nt,20
.
c. 4pe r
ce nt,30
.
d.Noneoft heaboveiscorr
ect.
ANSWER: b. 3percent
,20.
TYPE:
M DI FFICULTY:1S ECTION: 19.
1

31. Int
hefigur eshown,i
ftherealint
eres
tra
teis4pe
rce
nt,t
hequant
it
yofl
oana
blef
undsde
mandedi
s
a.10,andthequant
it
ysuppli
e dis20.
b.10,andthequant
it
ysuppli
e dis30.
c.30,andthequant
it
ysuppli
e dis10.
d.30,andthequant
it
ysuppliedis20.
ANSWER:b. 10,
andthequant
it
ys upplie
dis30.
TYPE:
M DIFFICULTY:1SECTION:1 9.
1

32. Int
hefigur eshown,i
fther
ealint
eres
tra
tei
s2pe
rce
nt,t
her
ewi
llbea
a.surpl
usof10.
b.surpl
usof20.
c.short
ageof10.
d.short
ageof20.
ANSWER:d. shorta
geof20.
TYPE:
M DIFFI
CULTY:1S ECTION:19.
1
514  Chapter 19/A Macroeconomic Theory of the Open Economy

33. Int
hefigur esho wn, i
fther e
alintere
strat
eis2pe rc
ent
,the
rewi
llbepr
ess
uref
or
a.thereali
ntere
stratetor i
se.
b.thedema ndforloanablefundsc urvetoshif
tright
.
c.thesupplyforloanablefundsc urvetoshif
tlef
t.
d.Alloftheabovea recorrect
.
ANSWER:a. t
her eali
nterestrat
etor i
se.
TYPE:
M DIFFI
CULTY:1S ECTI ON: 19.
1

34. Nete xpor t

sarepositi
ve,t
hen
a.e xpor tsaregre
aterthanimpor t
s.
b.ne tcapita
loutflow isne gati
ve.
c. Bot hoftheabov earecorr
ect.
d.Ne itheroftheaboveiscorrect
.
ANSWER: a. export
sa r
egreaterthanimpor
ts.
TYPE:
M DI FFI CULTY:1S ECTION: 19.1

35. Ifnetexportsa r
enegative
,then
a. netcapitaloutflow ispos it
ive,s
oforeignassetsboughtbyAme r
icansaregreate
rthanAme r
icanassetsboughtby
f
or e
igners.
b.ne tcapitaloutflow ispos it
ive,s
oAme ri
cana s
s e
tsboughtbyforeigner
sa regreat
erthanfore
igna ss
etsboughtby
Ame ric
ans .
c. netcapitaloutflow isne gati
ve,sof
or e
igna ss
etsboughtb yAme ri
cansa r
egr e
aterthanAme ri
c anass
etsboughtby
f
or e
igners.
d.ne tcapitaloutflow isne gati
ve,soAme r
ica
nas setsboughtbyforei
gnersaregreatert
hanforeignasset
sboughtby
Ame ric
ans .
ANSWER: d. ne tcapi
taloutflow i snega
tive,soAme r
icanasset
sboughtb yforei
gnersaregrea
tertha nf
orei
gnas se
ts
boughtbyAme r
icans.
TYPE:
M DI FFICULTY:2S ECTION: 19.1

36. Inthema r
ketforforei
gnc urr
encyexchangei nt heopene conomyma cr
oec
onomicmode
l,t
heamountofne
tca
pit
al
out
flo wrepresentst
hequa nti
tyofdollars
a.s uppl
iedforthepur poseofsel
li
nga sse
tsdome s
tic
all
y.
b.s uppl
iedforthepur poseofbuyingassetsa broad.
c. demande dforthepurposeofbuyingU. S. netexportsofgoodsandser
vic
es.
d.de mande dforthepurposeofimpor t
ingf oreigngoodsa ndservi
ces
.
ANSWER: b. s
uppliedforthepurposeofbuyi nga ss
etsabroad.
TYPE:
M DI FFI
CULTY:2S ECTION: 19.
1

37. Int
heope ne conomymac roeconomi cmode lnetcapi
taloutflow i
sequalt
othequant
ityof
a. doll
arssuppliedintheforei
gne xcha ngema rket
.
b.dol l
arsdema ndintheforeignexc hangemar ket.
c.f undssuppliedintheloanablefundsma r
ket.
d.Noneoft heaboveiscorrect
.
ANSWER: a. doll
arssuppli
edi nthefor e
igne xchangema rke
t.
TYPE:
M DI FFI
CULTY:1S ECTION: 19.1

38. Netcapit
aloutflow i sequalto
a. nat
ionalsavingminusthet r
adeba lance.
b.dome stici
nve s
tmentplusna t
ionalsaving.
c. nat
ionalsavingminusdome s
ticinvest
me nt.
d.dome sti
cinve s
tmentmi nusnationalsaving.
ANSWER: c
. na
t i
onalsavi
ngmi nusdome st
icinvest
ment
.
TYPE:
M DIFFICULTY:2S ECTION: 19.
1

39. Theva l
ueofne texportsequalsthevalueof
a. nati
onalsaving.
b.publ i
csaving.
c. nati
onalsaving–ne texports.
d.na ti
onalsaving–dome st
icinves
tme nt
ANSWER: d. na
t i
onalsaving–dome s
ticinv
est
ment
TYPE:
M DI FFI
CULTY:2S ECTI ON: 19.
1
 Chapter 19/A Macroeconomic Theory of the Open Economy  515

40. Whichoft hefoll

owingisincl
udedinthede mandf ordoll
arsinthema r
ketf
orf
ore
ign-
cur
renc
yex
cha
ngei
nthe
open-
ma rketma cr
oeconomicmode l
?
a. A fir minKe nyawa ntst
obuywhe a
tf r
om aU. S.firm.
b.A J a
pa nes
eba nkdesir
estopurchaseU.S.Tr
easur yse
curit
ies
.
c. AnU. S.ci
tize
nwa ntstobuyabondi ssuedbyaMe xi
cancorporat
ion.
d.Al loftheabovea r
ecorrec
t.
ANSWER: a. A fir minKe nyawantstobuywhe atfrom aU.S.fir m.
TYPE:
M DIFFICULTY:3S ECTION: 19.
1

41. Whi chofthefoll

owingi sincl
udedi nthesupplyofdol l
arsinthema r
ketforfor
eign-cur
renc
yexchangei
ntheopen-
economyma cr
oeconomi cmode l
?
a. Ar et
a i
loutl
etinAf ghanis
tanwa ntstobuywa tchesfrom aU.S.manufact
urer.
b.A U. S.bankloansdol l
arstoBlai
r,aU.S.res
ident,whowa ntst
opur c
haseane wc armadeint
heUni t
edSt
ate
s.
c. A U.S.basedmut ualfundwa ntstopurchasestocksissuedbyaPolishcompa ny.
d.Al loftheabovea recorrec
t.
ANSWER: c. A U.S.basedmut ualfundwa ntst
opur chases t
ocksiss
uedb yaPolis
hc ompany.
TYPE:
M DI FFICULTY:3S ECTI ON: 19.
1

42. Whichoft hef ol

lowi
ngwoul dte
ndt oshif
tthesupplyofdol
lar
sinf
ore
ign-
cur
renc
yex
cha
ngei
ntheopen-
mar
ket
macroeconomi cmode ltotheri
ght?
a. Thee xchangerat
er i
ses.
b.Thee xchangerat
ef al
ls
.
c. Thee xpe c
tedrat
eofr et
urnonU. S.as
setsri
ses.
d.Thee xpe c
tedrat
eofr et
urnonU. S.as
setsfal
ls
.
ANSWER: d. Theexpecte
dr at
eofreturnonU. S.
asset
sfal
ls
.
TYPE:
M DI FFICULTY:2S ECTI ON: 19.
1

43. Whi chofthefol

lowingwoul dtendtoshif
tthesupplyofdol
lar
sinf
ore
ign-
cur
renc
yex
cha
ngema
rke
toft
heope
n-
economyma c
roeconomicmode ltothele
ft?
a. Theexchanger a
teris
es.
b.Thee xchanger a
tefal
ls.
c. Theexpe c
tedrateofret
urnonU. S.ass
etsri
ses.
d.Thee xpe c
tedrateofret
urnonU. S.ass
etsfal
ls
.
ANSWER: c. Theexpectedrat
eofr e
turnonU. S.
asset
sris
es.
TYPE:
M DI FFI
CULTY:2S ECTION: 19.
1

44. There alex

changerateequal
sthere l
ati
ve
a. priceofdomesti
ca ndforei
gncur r
ency.
b.pr iceofdomesti
ca ndforei
gngoods .
c.r ateofdomesti
ca ndfore
igninteres
t.
d.Noneoft heaboveiscorrec
t.
ANSWER: b. pri
ceofdome sti
candf orei
gngoods
.
TYPE:
M DI FFICULTY:1S ECTION: 19.
1

45. Netcapita
loutflow =nete xpor t
simpliest
hat
a.thes upplyofdollarsequalsthedema ndfordol
lar
sinthefor
eign-c
urr
encyexc
hangema r
ket
.
b.nationalsavi
nge qua l
sdome stici
nvestment
.
c.thevol umeofe xportsequalsthevolumeofimports.
d.Alloft heabovea recorr
ect.
ANSWER:a. t
hes upplyofdollarsequalsthedemandfordoll
arsi
nt hef
ore
ign-
cur
rencyexc
hangema
rke
t.
TYPE:
M DIFFICULTY:1S ECTI ON:1 9.
1

46. Inthema rketf

orforei
gn-c
urrencye xchangeint heopen-ec
onomyma croe
conomi cmodel,
ahigherU.
S.r
eale
x c
hange
rat
ema kes
a. U.S.goodsmor eexpe
nsiver e
lati
vetoforeigngoodsa ndreducest
hequa nt
it
yofdollar
ssuppl
ied.
b.U. S.goodsmor eexpe
nsiver e
lati
vetoforeigngoodsa ndreducest
hequantit
yofdollar
sdemanded.
c.f ore
igngoodsmor eexpensiverelat
ivetoU. S.goodsandreducest
hequantit
yofdollar
ssuppl
ied.
d.f ore
igngoodsmor eexpensiverelat
ivetoU. S.goodsandreducest
hequantit
yofdollar
sdemanded.
ANSWER: b. U.S.goodsmoreexpe nsi
ver el
ati
vet oforei
gngoodsandreducesthequant
it
yofdollar
sdemanded.
TYPE:
M DI FFICULTY:1S ECTION: 19.1
516  Chapter 19/A Macroeconomic Theory of the Open Economy

47. Thepr ic
et hatbala
ncessupplyandde
mandi
nthemar
ketf
orf
ore
ign-
cur
renc
yex
cha
ngei
ntheope
n-e
conomy
macroe c
onomi cmode listhe
a. nomi nalexchangerate
.
b.nomi nalinte
restrat
e.
c.r e
a lexchangerate.
d.r ealint
e r
estrat
e.
ANSWER: c. r
ealexchangerat
e.
TYPE:
M DI FFICULTY:1S ECTION: 19
.1

48. Intheope n-e

conomyma croeconomicmode l
,ther ealexchanger at
ei sdet
erminedinthemar
ketwhe
redol
lar
sar
e
exc
ha ngedforforei
gnc urr
enc ybythee qua li
tyoft hes uppl yofdollars
,whichcome sf
rom
a. U.S.nati
onalsavingandt hedema ndf ordol larsforU. S.netexpor t
s.
b.U. S.netcapit
aloutflow a ndthede ma ndf ordol lar
sf orU.S.netexport
s.
c. dome sti
cinvest
me ntandt hedema ndf orU. S.ne texpor t
s.
d.f ore
ignde mandf orU.S.goodsandU. S .de ma ndf orforeigngoods .
ANSWER: b. U.S.netcapit
alout flow andt hede ma ndf ordol l
arsforU.S.netexpor
ts.
TYPE:
M DI FFICULTY:2S ECTION: 19.
1

49. Whe nt herealexchangera t

efort hedol
larappreci
ates
,U.S.goodsbecome
a.les sexpens i
verelat
ivetoforeigngoods,whichmake sexport
sr i
seandimportsfal
l.
b.les sexpens i
verelat
ivetoforeigngoods,whichma kesexport
sfallandimport
sr i
se.
c. mor eexpens i
ver e
lati
vetof orei
gngoods ,whi
chmake sexportsris
eandimpor t
sfall
.
d.mor eexpe nsi
ver e
lati
vetof orei
gngoods ,whi
chma kesexportsfal
landimportsris
e.
ANSWER: d. mor ee xpensi
ver el
a t
ivetof
oreigngoods,whichmake sexport
sfal
landi mport
sri
se.
TYPE:
M DI FFICULTY:2S ECTI ON: 19.1

50. Whe ntherealexcha ngerateforthedollardepr

eci
ates
,U.S.goodsbecome
a.lessexpens i
ver e
lati
vet oforeigngoods,whi
chmake sexport
sr i
seandimportsfal
l.
b.lessexpens i
ver e
lati
vet oforeigngoods,whi
chma kesexport
sfallandimport
sr i
se.
c. moreexpens i
ver ela
t i
vetof or
e i
gngoods,whic
hmake sexportsris
eandimpor t
sfall
.
d.mor eexpe nsi
ver ela
t i
vetof or
e i
gngoods,whic
hma kesexportsfal
landimportsri
se.
ANSWER: a. lesse xpensiverel
a ti
vetoforei
gngoods,whichma kesexport
sri
seandi mportsf
all
.
TYPE:
M DIFFICULTY:2S ECTION: 19.
1

51. Ift
her ealexc hangerat
ef orthedol
lari
sabovetheequil
ibr
ium level,
thequanti
tyofdol
lar
ssuppl
iedi
nthef
ore
ign-
cur
renc ye x
c hangema rketis
a. greatertha nthequa nti
tydemandedandt hedol
larwillapprec
iate.
b.gr eatertha nthequa nti
tydemandedandt hedol
larwilldeprec
iate.
c.l e
s sthant hequantityde mandedandthedoll
arwillappreci
ate.
d.l e
s sthant hequantityde mandedandthedoll
arwilldepreci
ate
.
ANSWER: b. gr e
atert
hant hequanti
tydema ndedandthedollarwilldepre
cia
te.
TYPE:
M DI FFICULTY:2S ECTI ON: 19.
1

52. Ift
her ealexchangerateforthedolla
risbe low theequil
ibri
um level
,thequant
it
yofdol
lar
ssuppl
iedi
nthef
ore
ign-
cur
renc ye x
changema rketis
a.l e
s sthanthequa nti
tyde mandeda ndt hedol l
arwillappreci
ate.
b.l e
s sthanthequa nti
tyde mandedandt hedol l
arwilldepreci
ate.
c. greaterthanthequa nti
tydema ndeda ndt hedollarwillappreci
ate
.
d.gr eaterthanthequa nti
tydema ndedandt hedollarwilldepreci
ate
.
ANSWER: a. l
essthanthequa nti
tydema nde da ndthedol l
arwillappreci
ate
.
TYPE:
M DI FFICULTY:2S ECTION: 19.1
 Chapter 19/A Macroeconomic Theory of the Open Economy  517

53. Int
heope n- ec
onomyma croeconomi cmode l,t
hequa ntit
yofdol l
arsde ma ndedint hef or
eign-curr
e ncye xc
ha nge
market
a. dependsont her ealexchanger ate.Thequantityofdollarssuppli
e dint hefor
eign- e
x c
ha ngema rketdepe ndson
therealinter
e s
trat
e .
b.de pendsont her ealinterestrat
e.Thequa ntit
yofdol l
arssuppliedi ntheforei
gn- exchangema rke tdependsont he
reale
xc hanger a
te.
c.a ndthequa nt i
tyofdol la
rss upplie
di ntheforeign-
currencyexcha ngema rketde pendont herealexchanger at
e.
d.a ndthequa nt i
tyofdol l
arss uppliedintheforeign-
currencyexcha ngema rketde pendont herealint
e r
estrate.
ANSWER: a. depe ndsont her ealexchangerate.Thequa nti
tyofdollarssuppl i
edint heforeign-exc
hangemar ke t
depe ndsont her ealinte
restrat
e.
TYPE:
M DI FFI
CULTY:3S ECTI ON: 1 9.
1

54. Thethe oryofpurchas

ing-
powerpar
ityi
mpl
iest
hatt
hede
mandc
urvef
orf
ore
ign-
cur
renc
yex
cha
ngei
s
a. downwa r
ds l
oping.
b.upwa rdslopi
ng.
c. horizontal
.
d.ve rtic
al.
ANSWER: c. horiz
ontal
.
TYPE:
M DI FFICULTY:2S ECTION:19.
1

55. Theva r
iabl
et hatl
inksthemarketforl
oanabl
efundsa
ndt
hef
ore
ign-
cur
renc
yex
changema
rke
tis
a. netcapit
aloutflow.
b.na ti
onalsaving.
c.e xport
s.
d.dome st
icinvest
me nt
.
ANSWER: a. netcapit
aloutflow.
TYPE:
M DIFFICULTY:2S ECTION:1 9.
2

56. Whichoft hef

oll
owi
ngiscor
rec
tinanope
nec
onomy?
a. S=I
b.S=NX+NCO
c. S=NCO
d.S=I+NCO
ANSWER: d. S=I+NCO
TYPE:
M DI FFI
CULTY:1SECTION:19.
2

57. Int
heope n-economyma cr
oeconomi
cmode
l,t
heke
ydet
ermi
nantofne
tca
pit
alout
flow i
sthe
a. nominalexchanger a
te.
b.nomi nalinter
estrate
.
c.r eale
xchanger a
te.
d.r eali
nter
estrate
.
ANSWER: d. r
ealintere
strat
e.
TYPE:
M DI FFI
CULTY:1S ECTION: 19.
2

58. Whe ntheU.S.realintere

stra
tef a
lls
,owni ngU.S.as
setsis
a.lessatt
ract
ivea nds oU.S.netcapit
aloutflow r i
ses.
b.lessatt
ract
ivea nds oU.S.netcapit
aloutflow f al
ls.
c. moreattr
acti
vea nds oU.S.netcapit
a lout
flow r ise
s.
d.mor eattr
acti
vea nds oU.S.netcapit
a lout
flow f all
s.
ANSWER: a. lessat
t rac
tiveands oU.S.netcapi
taloutflow ri
ses
.
TYPE:
M DIFFICULTY:1S ECTI ON: 19.
2

59. Cet
erispa
ribus,i
ftheCa nadianrealinte
r es
trat
ewe r
etoi ncrease
,Ca nadianne
tcapi
talout
flow
a.a ndne tcapit
aloutflow ofot he rcountr
ieswo uldrise.
b.a ndne tcapit
aloutflow ofot he rcountr
ieswo uldfa l
l.
c. wouldr i
se,whilenetcapita
lout flow ofot hercount ri
eswoul dfall
.
d.wo ul
df al
l,whil
ene tcapit
aloutflow ofot hercount r
ieswo ul
dr i
s e
.
ANSWER: d. wouldfa l
l,whilenetcapitaloutflow ofot herc ountr
ieswoul dr
ise
.
TYPE:
M DI FFI
CULTY:1S ECTION: 19.
2
518  Chapter 19/A Macroeconomic Theory of the Open Economy

60. Int
heope n-economyma croe c
onomi cmode l
,whi
choft
hef
oll
owi
ngwoul
dma
keMe
xic
o’sne
tca
pit
alout
flow
dec
rease?
a. adecreas
ei nU.S.interestrat
es
b.ade creas
ei nMe xicaninterestrat
es
c.a nappreciat
ionoft heMe xi
canpe so.
d.Noneoft heabovei scorrect.
ANSWER: a. ade creaseinU. S.inter
estrat
es
TYPE:
M DIFFICULTY:2S ECTI ON: 19 .
2

61. Int
heope n-
economyma croeconomi cmode l
,ifacountr
y’sint
eres
tra
tei
ncr
eas
es,i
tsne
tcapi
talout
flow
a.andther eale
xc hanger at
ei ncreas
e.
b.andther eale
xc hanger at
ede cr
ease.
c.incr
easesandt herea lexc
ha nger at
ede c
reases
.
d.decrease
sa ndther ealexcha ngerateinc
reases
.
ANSWER:d. decreasesandt her ealexchangeratei
ncre
ases.
TYPE:
M DIFFICULTY:2S ECTI ON: 19 .
2

62. Int
heope n-
e c
onomyma cr
oec onomi cmodel,i
fthesupplyofl
oana
blef
undsi
ncr
eas
es,ne
tcapi
talout
flow
a.andt her ealexchangeratei ncre
ase.
b.a ndt her e
alexchanger at
ede cr
ease.
c. increasesandther ealexchanger atedec
reases
.
d. de cr
easesa ndther e
alexcha nger a
teinc
reases
.
ANSWER:c . increas
e sandther e ale
xchangeratedecr
eas
es.
TYPE:
M DI FFICULTY:3S ECTION: 19.2

63. Int
heope n-
economyma croec onomi cmodel,i
fthesuppl
yofl
oana
blef
undsi
ncr
eas
es,t
hei
nte
res
tra
te
a.andther eale
xc hanger atei ncrease
.
b.andther eale
xc hanger atede cr
ease.
c.incr
easesandt herea lexcha nger at
edecreas
es.
d.decrease
sa ndther ealex cha ngeratei
ncreas
es.
ANSWER:b. andther eale xchanger at
edecre
ase.
TYPE:
M DIFFICULTY:2S ECTI ON: 19 .
2
 Chapter 19/A Macroeconomic Theory of the Open Economy  519

Thef
oll
owi
ngt
hreeque
sti
onsa
rebas
edont
hefigur
ebe
low:

64. Nationalsa
vingi srepresent
edbythe
a. dema ndc urveinpane la.
b.de ma ndc urveinpane lc.
c.s upplycur veinpane la.
d.s upplycur veinpane lc.
ANSWER: c. supplyc urveinpanela.
TYPE:
M DI FFICULTY:1S ECTI ON:19.
2

65. Dome sti

cinves
tme ntplusne tcapita
lout
flow i
sre
pres
ent
edbyt
he
a. dema ndcurveinpa ne la.
b.de ma ndcurveinpa ne lc.
c.s upplycurveinpa nela .
d.Noneoft heabovei scorrect
.
ANSWER: a. demandc ur veinpa nela.
TYPE:
M DI FFICULTY:1S ECTI ON: 19.2

66. Atani nter estrateof3pe rcent

,thediagr am indic
atesthat
a.t herei sas ur plusinthema rketf
orf orei
gnc urrencyexchange .
b.na tiona lsa vingequalsdome sti
cinve st
me nt.
c. netc apitalout flow +dome st
icinve s
tme nt=na t
ionalsa
vi ng.
d.t hema rke tforforei
gn-curr
enc yexchanget hequa nti
tyofdol l
arssuppl
iede
qua
lst
hequant
it
yofdol
lar
s
dema nde d.
ANSWER: c. netc apit
aloutflow +dome s
ticinvest
me nt=nationalsa
ving.
TYPE:
M DI FFICULTY:1S ECTION: 19 .
2

67. Becauseago ver

nme ntbudgetde fic i
trepresent
s
a. negati
vepublicsavi
ng,itincreasesnationalsavi
ngs.
b.ne gati
vepublicsavi
ng,itde cr
ease sna
t i
onalsavings
.
c. posit
ivepublicsavi
ng,iti
nc re
a s
e snat
ionals a
vings.
d.pos it
ivepublicsavi
ng,itdecreasesnationalsavi
ngs.
ANSWER: b. negat
ivepublicsaving,itdecrease
sna ti
onalsa
vings
.
TYPE:
M DI FFICULTY:1S ECTION: 19.
3
520  Chapter 19/A Macroeconomic Theory of the Open Economy

68. ThePe ople’

sRepublicofChi nahasha dalargetrades urplusinrec entyears
.Whichofthefoll
owingist
hemost
li
kel
ye xplanat
ionoft hissurpl
us?
a. Chinaha sahighr ateofinfla t
ion,whichreduc estheva lueofitscurrency
.
b.Chi naha salarges upplyofla
bor,solow wage sgiveitac ompe tit
iveedge.
c. Chinaha smanyt radebar r
ier
s,whichrestr
ictthea bil
it
yofot he rcountri
estos
ellt
heirproduc
tsinChina
.
d.Chi naha salargea mountofs a
vingrela
tivetodome sti
cinvestme nt.
ANSWER: d. Chinaha sal ar
gea mountofsavingrelati
vet odome s
ticinvest
me nt
.
TYPE:
M DI FFICULTY:2S ECTI ON: 19.
3

69. Ifacountr
yinc r
easesitsbudge tde ficit,
the
a.s uppl
yofl oanablefundsshi ft
sright.
b.s uppl
yofl oanablefundsshi ft
sleft
.
c. demandf orloanablefundss hift
sright.
d.de mandf orloanablefundss hift
sleft
.
ANSWER: b. s
uppl yofloanablef undsshift
slef
t.
TYPE:
M DI FFI
CULTY:1S ECTION: 33 .
3

70. SupposethatChil
ehasabudge tsurplus,andthengoesi ntodefic i
t.Thisact
ionwoul
d
a.increasenat
ionals
avinga ndshiftChi l
e’ssuppl
yofl oanablef
undsl ef
t.
b.increas
ena t
ionals
avinga ndshiftChi l
e’sdemandforl oanabl
efundsr i
ght.
c. decr
easenati
onalsavingands hi
f tChile’
ssupplyofloanablefundsleft
.
d.de cr
easenati
onalsavingands hi
f tChile’
sdemandf orloanablefundsright
.
ANSWER: c
. de
creas
ena t
ionalsavinga nds hi
ftChil
e’ss
uppl yofloanablefundslef
t.
TYPE:
M DIFFICULTY:1S ECTION: 19.
3

71. Ifacountr
ywe ntfr
om ago ver
nme ntbudgetdefic i
ttoasurplus
,
a. nati
onalsavingswoul dinc
reaseshi
ft
ingthesupplyofloa
na bl
ef undsri
ght.
b.na ti
onalsavingswoul dinc
reaseshi
ft
ingthesupplyofloa
na bl
ef undsle
ft.
c. nati
onalsavingswoul ddecre
aseshif
ti
ngthede mandforloanablefundsri
ght.
d.na ti
onalsavingswo ulddecre
aseshif
ti
ngthedema ndforloanablefundslef
t.
ANSWER: a. na
t i
onalsavingswouldincr
easeshi
fti
ngthesupplyofl oanabl
efundsri
ght
.
TYPE:
M DI FFI
CULTY:2S ECTI ON:19.3

72. Ift
heg over
nme ntofCol
ombiaimplementedapolic
ythatre
duce
dna
tiona
lsa
ving,i
tsr
eale
xchanger
atewoul
d
a. deprec
iateandColombi
annetexportswouldris
e.
b.de prec
iateandColombi
annetexportswouldfal
l.
c.a pprec
iateandColombi
anne texpor
tswouldris
e.
d.a pprec
iateandColombi
anne te
xportswouldfal
l.
ANSWER: d. appre
cia
teandColombiannetexpor
tswouldfal
l.
TYPE:
M DI FFI
CULTY:2S ECTION:19.3

73. Ift
heg over
nme ntofIndiama depolicychangestha
tincr
eas
edna
tiona
lsa
ving,t
her
eale
xchanger
ateoft
her
upe
e
would
a. deprec
iateandIndiannete xport
swoul dris
e.
b.de prec
iateandIndiannete xport
swoul dfal
l.
c.a pprec
iateandIndiannete xport
swoul dris
e.
d.a pprec
iateandIndiannete xport
swoul dfal
l.
ANSWER: a. depre
ciat
ea ndIndiannete xpor
tswouldris
e.
TYPE:
M DI FFI
CULTY:2S ECTI ON: 19.3

74. SupposethatthegovernmentofJ ordanrai

sesit
sbudgetde
fic
it.Ther
eale
xchanger
ateoft
heJ
ordani
andi
nar
a. deprec
iat
e sandJorda
nianne tex por
tswouldris
e.
b.de prec
iat
e sandJorda
nianne tex por
tswouldfal
l.
c.a pprec
iat
e sandJordani
annete xportsri
se.
d.a pprec
iat
e sandJordani
anne tex por
tsf
all
.
ANSWER: d. apprec
iate
sandJ ordaniannetexport
sfal
l.
TYPE:
M DI FFI
CULTY:2S ECTION: 19.3
 Chapter 19/A Macroeconomic Theory of the Open Economy  521

75. Ifagovernmentincreasesitsbudgetdeficit
,the
nint
ere
str
ate
s
a.a nddome sti
cinvestme ntri
se.
b.a nddome sti
cinvestme ntfal
ls
.
c.r i
seanddome s
ticinvestmentfall
s.
d.fa l
landdome sti
cinve stmentri
ses.
ANSWER: c. r
iseanddome stici
nvestmentf
all
s.
TYPE:
M DI FFI
CULTY:2S ECTI ON: 19.
3

76. Ifagovernmenti
nc reasesitsbudgetdefic it
,the
ni nt
ere
str
ate
s
a.r i
seandthere alexchangerateapprec
iates.
b.fallandtherealex c
ha ngerat
ede pr
eciat
es.
c.r i
seandthere alexchangeratedeprec
iates.
d.fallandtherealex c
ha ngerat
ea ppr
eciat
es.
ANSWER: a. r
iseandt here a
lexchangerat
ea ppreci
ates
.
TYPE:
M DIFFICULTY:2S ECTI ON: 19.
3

77. Ifagovernmenti
nc r
ease
si t
sbudgetdefic it
,theninter
estr
ates
a.r i
seandthetradebalancemovestowardsur pl
us.
b.r i
seandthetradebalancemovestowardde fic i
t.
c.fa l
landthetr
adebalanc emovest
o wa
rds urplus.
d.fa l
landthetr
a debal
anc emovest
owardde ficit.
ANSWER: b. r
iseandthetradebal
ancemove stowardde ficit
.
TYPE:
M DI FFI
CULTY:2S ECTION: 19.
3

78. Ifagovernmentincreas
esitsbudgetdeficit,t
hent
her
eale
xcha
nger
ate
a.a nddome st
icinvest
me ntris
e.
b.a nddome st
icinvest
me ntfal
l.
c.r i
sesanddome s
tici
nvestmentfal
ls.
d.fa l
lsanddome sti
cinvestmentri
ses.
ANSWER: c. r
ise
sa nddome stici
nvest
me ntf
alls
.
TYPE:
M DI FFI
CULTY:2S ECTION: 19.
3

79. Ifagovernme nti

ncrease
sitsbudgetdeficit
,the
nt hereale
xcha
ngerat
e
a.a ppreci
atesandthetradebalancemovestowar
ds ur
plus.
b.a ppreci
atesandthetradebalancemovestowar
dde fic i
t.
c. depreci
atesandthetradebalanc
emov esto
wa r
ds ur
plus.
d.de preci
atesandthetradebalanc
emo vestowar
dde fic i
t.
ANSWER: b. apprec
iate
sa ndthetr
adebalancemovestowarddeficit
.
TYPE:
M DI FFI
CULTY:2S ECTION: 19.
3

80. Ifagovernme ntsta

r t
edwi t
hade fic itandmovedtoas ur
plus
,dome
sti
cinves
tme
nt
a.a ndtherea lexc
ha nger at
ewoul drise.
b.a ndtherea lexc
ha nger at
ewoul dfall.
c. wouldrisea ndther ealexchangeratewoul
df al
l.
d.wo ul
dfalla ndtherea lexc
hangera tewoul
dr i
se.
ANSWER: c. woul driseandt herealex
c hanger
atewo ul
dfal
l.
TYPE:
M DI FFI
CULTY:2S ECTION: 19.
3

81. Ift
heg ove
rnme ntst
art
edwithabudge tdefici
ta ndmo vedt oasurpl
us,dome
sti
cinv
est
mentwoul
d
a.r i
seandthet r
adebala
ncewo uldmovetowardss urpl
us.
b.r i
seandthet r
adebala
ncewoul dmov et
owardsde fic i
t.
c.fallandthetradebal
ancewouldmo vetowa
rdss urplus.
d.fallandthetradebal
ancewouldmovet owar
dsde fic i
t.
ANSWER: a. r
iseandthetr
adebalancewouldmov etowa r
dss urpl
us.
TYPE:
M DIFFICULTY:2S ECTION: 19.
3