ECON2200 CH32

Refer to Figure 32-1. With a real interest rate of 4 percent

a) the equilibrium quantity of loanable funds is $40 billion.
b) the equilibrium quantity of loanable funds is $60 billion.
c) the equilibrium quantity of loanable funds is $30 billion.
d) the equilibrium quantity of loanable funds is $50 billion.
e) the equilibrium quantity of loanable funds is $20 billion

a) the equilibrium quantity of loanable funds is $40 billion.

A tax on imported goods is called a(n)

tariff

If the demand for loanable funds shifts right and the supply of loanable funds shift right, then

a) the real interest rate falls and the equilibrium quantity of loanable funds rises.
b) the real interest rate and the equilibrium quantity of loanable funds both rise.
c) the real interest rate is indeterminate but the equilibrium quantity of loanable funds rises.
d) the real interest rate and the equilibrium quantity of loanable funds both fall.
e) the real interest rate rises and the equilibrium quantify of loanable funds falls.

c) the real interest rate is indeterminate but the equilibrium quantity of loanable funds rises.

When the real exchange rate for the dollar depreciates, U.S. goods become

a) more expensive relative to foreign goods, which makes exports fall and imports rise.
b) more expensive relative to foreign goods, which makes exports rise and imports fall.
c) less 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 fall.
e) less expensive relative to foreign goods, which makes exports fall and imports rise.

c) less expensive relative to foreign goods, which makes exports rise and imports fall.

If there is a surplus in the market for loanable funds, the resulting change in the real interest rate

a) raises both the quantity of loanable funds supplied and the quantity of loanable funds demanded.
b) raises the quantity of loanable funds supplied and reduces the quantity of loanable funds demanded.
c) reduces the quantity of loanable funds supplied and raises the quantity of loanable funds demanded
d) reduces both the quantity of loanable funds supplied and the quantity of loanable funds demanded.
e) raises the supply of loanable funds and reduces the demand for loanable funds.

c) reduces the quantity of loanable funds supplied and raises the quantity of loanable funds demanded

Other things the same, if the interest rate falls, then

a) firms will want to borrow less, which decreases the quantity of loanable funds demanded.
b) firms will want to borrow more, which decreases the quantity of loanable funds demanded.
c) firms will want to borrow more, which increases the quantity of loanable funds demanded.
d) firms will want to borrow less, which decreases the quantity of loanable funds supplied.
e) firms will want to borrow more, which increase the quantity of loanable funds supplied

c) firms will want to borrow more, which increases the quantity of loanable funds demanded.

A large and sudden movement of funds out of a country is called

Capital Flight

If a government increases its budget deficit, then domestic interest rates

a) rise and net exports fall.
b) fall and net exports fall.
c) fall and net exports rise.
d) rise and net exports rise.
e) fall and net exports remain the same.

a) rise and net exports fall.

If interest rates rose more in the U.S. than in Canada, then other things the same

a) U.S. citizens would buy fewer Canadian bonds and Canadian citizens would buy fewer U.S. bonds.
b) U.S. citizens would buy more Canadian bonds and Canadian citizens would buy more U.S. bonds.
c) U.S. citizens would buy fewer Canadian bonds and Canadian citizens would buy more U.S. bonds.
d) U.S. citizens would buy fewer U.S. bonds and Canadian citizens would buy fewer Canadian bonds.
e) U.S. citizens would buy more Canadian bonds and Canadian citizens would buy fewer U.S. bonds.

c) U.S. citizens would buy fewer Canadian bonds and Canadian citizens would buy more U.S. bonds.

An increase in the budget deficit causes domestic interest rates

a) to fall, investment to fall, and GDP to fall.
b) to fall, investment to rise, and GDP to fall.
c) to rise, investment to rise, and GDP to fall.
d) to rise, investment to rise, and GDP to rise.
e) to rise, investment to fall, and GDP to fall.

e) to rise, investment to fall, and GDP to fall.

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 expected rate of return on U.S. assets falls.
c) The exchange rate falls.
d) The expected rate of return on U.S. assets rises.
e) The expected rate of return on foreign assets rises.

d) The expected rate of return on U.S. assets rises.

If U.S. citizens decide to save a smaller fraction of their incomes, U.S. domestic investment

a) increases, and U.S. net capital outflow decreases.
b) increases, and U.S. net capital outflow remain the same.
c) decreases, and U.S. net capital outflow decreases.
d) decreases, and U.S. net capital outflow increases.
e) increases, and U.S. net capital outflow increases.

c) decreases, and U.S. net capital outflow decreases.

Refer to Figure 32-1. In the Figure shown, if the real interest rate is 3 percent
Question options:

a) there is an equilibriuim interest rate and the interest rate will not change.
b) there is a shortage of loanable funds and the interest rate will fall.
c) there is a surplus of loanable funds and the interest rate will rise.
d) there is a surplus of loanable funds and the interest rate will fall.
e) there is a shortage of loanable funds and the interest rate will rise.

e) there is a shortage of loanable funds and the interest rate will rise.

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 expected rate of return on U.S. assets rises.
b) The expected rate of return on U.S. assets falls.
c) The expected rate of return on foreign assets falls.
d) The exchange rate rises.
e) The exchange rate falls.

b) The expected rate of return on U.S. assets falls.

When the real exchange rate for the dollar appreciates, U.S. goods become

a) less expensive relative to foreign goods, which makes exports fall and imports rise.
b) less expensive relative to foreign goods, which makes exports fall and imports fall.
c) more expensive relative to foreign goods, which makes exports rise and imports fall.
d) less expensive relative to foreign goods, which makes exports rise and imports fall.
e) more expensive relative to foreign goods, which makes exports fall and imports rise.

e) more expensive relative to foreign goods, which makes exports fall and imports rise.

If there is a shortage of loanable funds, then

a) the supply of loanable funds will shift left 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 falls.
d) the demand for loanable funds will shift right so the real interest rate rises.
e) there will be no shifts of the curves, but the real interest rate rises.

e) there will be no shifts of the curves, but the real interest rate rises.

An increase in the budget

a) deficit raises net exports and domestic investment.
b) deficit raises net exports and reduces domestic investment.
c) deficit reduces net exports and domestic investment.
d) surplus reduces net exports and domestic investment.
e) deficit reduces net exports and raises domestic investment.

c) deficit reduces net exports and domestic investment.

Suppose that the U.S. imposed an import quota on beef. Sales of U.S. beef producers would

a) fall and exports of other industries would decline.
b) not change, exports of other industries would increase.
c) rise and exports of other industries would decline.
d) not change, exports of other industries would decline.
e) rise and exports of other industries would increase.

c) rise and exports of other industries would decline.

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 supply of loanable funds curve is based on the logic that a higher real interest rate leads to higher spending.
e) the demand for loanable funds curve is based on the logic that a higher interest rate leads to lower saving.

a) the supply of loanable funds curve is based on the logic that a higher real interest rate leads to higher saving.

If interest rates rose more in Germany than in the U.S., then other things the same

a) U.S. citizens would more U.S. bonds and German citizens would buy more German bonds.
b) U.S. citizens would buy fewer German bonds and German citizens would buy fewer U.S. bonds.
c) U.S. citizens would buy more German bonds and German citizens would buy fewer U.S. bonds.
d) U.S. citizens would buy fewer German bonds and German citizens would buy more U.S. bonds.
e) U.S. citizens would buy more German bonds and German citizens would buy more U.S. bonds.

c) U.S. citizens would buy more German bonds and German citizens would buy fewer U.S. bonds.

If there is a surplus in the market for loanable funds, the resulting change in the real interest rate

a) raises the quantity of loanable funds supplied and reduces the quantity of loanable funds demanded.
b) reduces both the quantity of loanable funds supplied and the quantity of loanable funds demanded.
c) raises both the quantity of loanable funds supplied and the quantity of loanable funds demanded.
d) reduces the quantity of loanable funds supplied and raises the quantity of loanable funds demanded
e) raises the supply of loanable funds and reduces the demand for loanable funds.

d) reduces the quantity of loanable funds supplied and raises the quantity of loanable funds demanded

Which of the following would make the equilibrium real interest rate increase and
the equilibrium quantity of funds decrease?

a) The demand for loanable funds shifts right.
b) The demand for loanable funds shifts left.
c) The supply of loanable funds shifts left and the demand for loanable funds shifts right.
d) The supply of loanable funds shifts right.
e) The supply of loanable funds shifts left.

e) The supply of loanable funds shifts left.

If the quantity of loanable funds supplied is greater than the quantity demanded, then

a) there is a shortage of loanable funds and the interest rate will fall.
b) there is a surplus of loanable funds but the interest rate will remain the same.
c) there is a surplus of loanable funds and the interest rate will fall.
d) there is a surplus of loanable funds and the interest rate will rise.
e) there is a shortage of loanable funds and the interest rate will rise.

c) there is a surplus of loanable funds and the interest rate will fall.

If the quantity of loanable funds supplied is less than the quantity demanded, then

a) there is a surplus of loanable funds but the interest rate will remain the same.
b) there is a shortage of loanable funds and the interest rate will fall.
c) there is a surplus of loanable funds and the interest rate will fall.
d) there is a shortage of loanable funds and the interest rate will rise.
e) there is a surplus of loanable funds and the interest rate will rise.

d) there is a shortage of loanable funds and the interest rate will rise.

Other things the same, a lower real interest rate decreases the quantity of

a) domestic investment.
b) loanable funds supplied.
c) loanable funds demanded.
d) real GDP.
e) net capital outflow.

b) loanable funds supplied.

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 supply of dollars in the market for foreign-currency exchange shifts left.
b) the demand for dollars in the market for foreign-currency exchange shifts left.
c) the demand for dollars in the market for foreign-currency exchange shifts right.
d) the supply of dollars in the market for foreign-currency exchange shifts right.
e) the supply of dollars and the demand for dollars in the market for foreign-currency exchange shift left.

c) the demand for dollars in the market for foreign-currency exchange shifts right.

If a country raises its budget deficit, then in the market for foreign-currency exchange

a) supply shifts right.
b) supply and demand shift right.
c) demand shifts left.
d) supply and demand shift left.
e) supply shifts left.

e) supply shifts left.

Other things the same, a higher real interest rate raises the quantity of

a) domestic investment.
b) loanable funds supplied.
c) real GDP.
d) loanable funds demanded.
e) net capital outflow.

b) loanable funds supplied

A limit on the quantity of a good produced abroad that can be purchased domestically is called a(n)

a) exchange tax.
b) tariff.
c) excise tax.
d) import quota.
e) embargo.

d) import quota.

If a country's budget deficit decreases, then the exchange rate

a) rises, which reduces net exports.
b) remains the same and net exports remain the same.
c) falls, which raises net exports.
d) rises, which raises net exports.
e) falls, which reduces net exports.

c) falls, which raises net exports.

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 rise.
b) fall and the quantity of dollars supplied in the market for foreign-currency exchange would rise.
c) fall and the quantity of dollars demanded in the market for foreign-currency exchange would fall.
d) deficit reduces net exports and domestic investment.
e) rise and the quantity of dollars demanded in the market for foreign-currency exchange would fall.

d) deficit reduces net exports and domestic investment.

If the demand for loanable funds shifts left, then

a) the real interest rate rises and the supply of loanable funds falls.
b) the real interest rate and the equilibrium quantity of loanable funds both rise.
c) the real interest rate and the equilibrium quantity of loanable funds both fall.
d) the real interest rate falls and the equilibrium quantity of loanable funds rises.
e) the real interest rate rises and the equilibrium quantity of loanable funds falls.

c) the real interest rate and the equilibrium quantity of loanable funds both fall.

If a country had capital flight, then the real exchange rate would

a) fall. To offset this fall the government could increase the budget deficit.
b) rise. To offset this rise the government could balance the budget.
c) rise. To offset this rise the government could increase the budget deficit.
d) fall. To offset this fall the government could decrease the budget deficit.
e) rise. To offset this rise the government could decrease the budget deficit.

a) fall. To offset this fall the government could increase the budget deficit.

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 falls.
b) falls and the quantity of dollars exchanged does not change.
c) rises and the quantity of dollars exchanged rises.
d) falls and the quantity of dollars exchanged falls.
e) rises and the quantity of dollars exchanged does not change.

b) falls and the quantity of dollars exchanged does not change.

Which of the following would make the equilibrium real interest rate decrease and the equilibrium quantity of loanable funds increase?

a) The demand for loanable funds shifts right.
b) The supply of loanable funds shifts right.
c) The supply of loanable funds shifts left and the demand for loanable funds shifts right.
d) The demand for loanable funds shifts left
e) The supply of loanable funds shifts left.

b) The supply of loanable funds shifts right.

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

a) capital flight from the U.S. to other countries occurs, the U.S. moves from budget surplus to budget deficit
b) capital flight from U.S. to other countries occurs, the U.S. moves from budget deficit to budget surplus
c) capital flight from other countries to the U.S. occurs and the U.S. moves from budget surplus to budget deficit
d) capital flight from U.S. to other countries occurs, the U.S. moves toward a balanced budget.
e) capital flight from other countries to the U.S. occurs and the U.S. moves from budget deficit to budget surplus

c) capital flight from other countries to the U.S. occurs and the U.S. moves from budget surplus to budget deficit

If the supply of loanable funds shifts left, then

a) the real interest rate rises and the demand for loanable funds falls.
b) the real interest rate and the equilibrium quantity of loanable funds both fall.
c) the real interest rate rises and the equilibrium quantity of loanable funds falls.
d) the real interest rate falls and the equilibrium quantity of loanable funds rises.
e) the real interest rate and the equilibrium quantity of loanable funds both rise.

c) the real interest rate rises and the equilibrium quantity of loanable funds falls.

If the supply of loanable funds shifts right, then

a) the real interest rate rises and the equilibrium quantity of loanable funds falls.
b) the real interest rate rises and the demand for loanable funds falls.
c) the real interest rate and the equilibrium quantity of loanable funds both rise.
d) the real interest rate falls and the equilibrium quantity of loanable funds rises.
e) the real interest rate and the equilibrium quantity of loanable funds both fall.

d) the real interest rate falls and the equilibrium quantity of loanable funds rises.

If the government of Japan raised its budget deficit, then the yen would

a) appreciate and Japanese net exports would rise.
b) depreciate and Japanese net exports would rise.
c) appreciate and Japanese net exports would fall.
d) not change and Japanese net exports would not change.
e) depreciate and Japanese net exports would fall.

c) appreciate and Japanese net exports would fall.

If the U.S. government increased its deficit, then

a) U.S. bonds would pay higher interest but a dollar would purchase fewer foreign goods.
b) U.S. bonds would pay lower interest but a dollar would purchase more foreign goods.
c) U.S. bonds would pay higher interest and a dollar would purchase more foreign goods.
d) U.S. bonds would pay lower interest and a dollar would purchase fewer foreign goods..
e) U.S. bonds would pay lower interest but a dollar would purchase more U.S. goods.

c) U.S. bonds would pay higher interest and a dollar would purchase more foreign goods.

Which of the following would make both the equilibrium real interest rate and the equilibrium quantity of loanable funds decrease?

a) The supply of loanable funds shifts left.
b) The supply of loanable funds shifts right.
c) The demand for loanable funds shifts left.
d) The demand for loanable funds shifts right.
e) The supply of loanable funds shifts left and the demand for loanable funds shifts right.

c) The demand for loanable funds shifts left.

If the demand for dollars in the market for foreign-currency exchange shifts right, then the exchange rate

a) falls and the quantity of dollars exchanged does not change.
b) rises and the quantity of dollars exchanged does not change.
c) rises and the quantity of dollars exchanged rises.
d) falls and the quantity of dollars exchanged falls.
e) falls and the quantity of dollars exchanged rises.

b) rises and the quantity of dollars exchanged does not change.

Refer to Figure 32-1. In the Figure shown, if the real interest rate is 5 percent,

a) there is a surplus of loanable funds and the interst rate will rise.
b) there is an equilibrium interest rate and the interest rate will not change.
c) there is a surplus of loanable funds and the interst rate will fall.
d) there is a shortage of loanable funds and the interest rate will fall.
e) there is a shortage of loanable funds and the interest rate will rise.

c) there is a surplus of loanable funds and the interst rate will fall.

Other things the same, if the U.S. real exchange rate depreciated, then U.S. net exports would

a) rise 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) fall 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.
e) fall and the quantity of dollars supplied in the market for foreign-currency exchange would rise.

d) rise and the quantity of dollars demanded in the market for foreign-currency exchange would rise.

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 supply of loanable funds shifts left and the demand for loanable funds shifts right.
c) The demand for loanable funds shifts left.
d) The supply of loanable funds shifts left.
e) The supply of loanable funds shifts right.

a) The demand for loanable funds shifts right.

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Refer to Figure 32-1. With a real interest rate of 4 percent

a) the equilibrium quantity of loanable funds is $40 billion.
b) the equilibrium quantity of loanable funds is $60 billion.
c) the equilibrium quantity of loanable funds is $30 billion.
d) the equilibrium quantity of loanable funds is $50 billion.
e) the equilibrium quantity of loanable funds is $20 billion

a) the equilibrium quantity of loanable funds is $40 billion.

A tax on imported goods is called a(n)

tariff

If the demand for loanable funds shifts right and the supply of loanable funds shift right, then

a) the real interest rate falls and the equilibrium quantity of loanable funds rises.
b) the real interest rate and the equilibrium quantity of loanable funds both rise.
c) the real interest rate is indeterminate but the equilibrium quantity of loanable funds rises.
d) the real interest rate and the equilibrium quantity of loanable funds both fall.
e) the real interest rate rises and the equilibrium quantify of loanable funds falls.

c) the real interest rate is indeterminate but the equilibrium quantity of loanable funds rises.

When the real exchange rate for the dollar depreciates, U.S. goods become

a) more expensive relative to foreign goods, which makes exports fall and imports rise.
b) more expensive relative to foreign goods, which makes exports rise and imports fall.
c) less 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 fall.
e) less expensive relative to foreign goods, which makes exports fall and imports rise.

c) less expensive relative to foreign goods, which makes exports rise and imports fall.

If there is a surplus in the market for loanable funds, the resulting change in the real interest rate

a) raises both the quantity of loanable funds supplied and the quantity of loanable funds demanded.
b) raises the quantity of loanable funds supplied and reduces the quantity of loanable funds demanded.
c) reduces the quantity of loanable funds supplied and raises the quantity of loanable funds demanded
d) reduces both the quantity of loanable funds supplied and the quantity of loanable funds demanded.
e) raises the supply of loanable funds and reduces the demand for loanable funds.

c) reduces the quantity of loanable funds supplied and raises the quantity of loanable funds demanded

Other things the same, if the interest rate falls, then

a) firms will want to borrow less, which decreases the quantity of loanable funds demanded.
b) firms will want to borrow more, which decreases the quantity of loanable funds demanded.
c) firms will want to borrow more, which increases the quantity of loanable funds demanded.
d) firms will want to borrow less, which decreases the quantity of loanable funds supplied.
e) firms will want to borrow more, which increase the quantity of loanable funds supplied

c) firms will want to borrow more, which increases the quantity of loanable funds demanded.

A large and sudden movement of funds out of a country is called

Capital Flight

If a government increases its budget deficit, then domestic interest rates

a) rise and net exports fall.
b) fall and net exports fall.
c) fall and net exports rise.
d) rise and net exports rise.
e) fall and net exports remain the same.

a) rise and net exports fall.

If interest rates rose more in the U.S. than in Canada, then other things the same

a) U.S. citizens would buy fewer Canadian bonds and Canadian citizens would buy fewer U.S. bonds.
b) U.S. citizens would buy more Canadian bonds and Canadian citizens would buy more U.S. bonds.
c) U.S. citizens would buy fewer Canadian bonds and Canadian citizens would buy more U.S. bonds.
d) U.S. citizens would buy fewer U.S. bonds and Canadian citizens would buy fewer Canadian bonds.
e) U.S. citizens would buy more Canadian bonds and Canadian citizens would buy fewer U.S. bonds.

c) U.S. citizens would buy fewer Canadian bonds and Canadian citizens would buy more U.S. bonds.

An increase in the budget deficit causes domestic interest rates

a) to fall, investment to fall, and GDP to fall.
b) to fall, investment to rise, and GDP to fall.
c) to rise, investment to rise, and GDP to fall.
d) to rise, investment to rise, and GDP to rise.
e) to rise, investment to fall, and GDP to fall.

e) to rise, investment to fall, and GDP to fall.

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 expected rate of return on U.S. assets falls.
c) The exchange rate falls.
d) The expected rate of return on U.S. assets rises.
e) The expected rate of return on foreign assets rises.

d) The expected rate of return on U.S. assets rises.

If U.S. citizens decide to save a smaller fraction of their incomes, U.S. domestic investment

a) increases, and U.S. net capital outflow decreases.
b) increases, and U.S. net capital outflow remain the same.
c) decreases, and U.S. net capital outflow decreases.
d) decreases, and U.S. net capital outflow increases.
e) increases, and U.S. net capital outflow increases.

c) decreases, and U.S. net capital outflow decreases.

Refer to Figure 32-1. In the Figure shown, if the real interest rate is 3 percent
Question options:

a) there is an equilibriuim interest rate and the interest rate will not change.
b) there is a shortage of loanable funds and the interest rate will fall.
c) there is a surplus of loanable funds and the interest rate will rise.
d) there is a surplus of loanable funds and the interest rate will fall.
e) there is a shortage of loanable funds and the interest rate will rise.

e) there is a shortage of loanable funds and the interest rate will rise.

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 expected rate of return on U.S. assets rises.
b) The expected rate of return on U.S. assets falls.
c) The expected rate of return on foreign assets falls.
d) The exchange rate rises.
e) The exchange rate falls.

b) The expected rate of return on U.S. assets falls.

When the real exchange rate for the dollar appreciates, U.S. goods become

a) less expensive relative to foreign goods, which makes exports fall and imports rise.
b) less expensive relative to foreign goods, which makes exports fall and imports fall.
c) more expensive relative to foreign goods, which makes exports rise and imports fall.
d) less expensive relative to foreign goods, which makes exports rise and imports fall.
e) more expensive relative to foreign goods, which makes exports fall and imports rise.

e) more expensive relative to foreign goods, which makes exports fall and imports rise.

If there is a shortage of loanable funds, then

a) the supply of loanable funds will shift left 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 falls.
d) the demand for loanable funds will shift right so the real interest rate rises.
e) there will be no shifts of the curves, but the real interest rate rises.

e) there will be no shifts of the curves, but the real interest rate rises.

An increase in the budget

a) deficit raises net exports and domestic investment.
b) deficit raises net exports and reduces domestic investment.
c) deficit reduces net exports and domestic investment.
d) surplus reduces net exports and domestic investment.
e) deficit reduces net exports and raises domestic investment.

c) deficit reduces net exports and domestic investment.

Suppose that the U.S. imposed an import quota on beef. Sales of U.S. beef producers would

a) fall and exports of other industries would decline.
b) not change, exports of other industries would increase.
c) rise and exports of other industries would decline.
d) not change, exports of other industries would decline.
e) rise and exports of other industries would increase.

c) rise and exports of other industries would decline.

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 supply of loanable funds curve is based on the logic that a higher real interest rate leads to higher spending.
e) the demand for loanable funds curve is based on the logic that a higher interest rate leads to lower saving.

a) the supply of loanable funds curve is based on the logic that a higher real interest rate leads to higher saving.

If interest rates rose more in Germany than in the U.S., then other things the same

a) U.S. citizens would more U.S. bonds and German citizens would buy more German bonds.
b) U.S. citizens would buy fewer German bonds and German citizens would buy fewer U.S. bonds.
c) U.S. citizens would buy more German bonds and German citizens would buy fewer U.S. bonds.
d) U.S. citizens would buy fewer German bonds and German citizens would buy more U.S. bonds.
e) U.S. citizens would buy more German bonds and German citizens would buy more U.S. bonds.

c) U.S. citizens would buy more German bonds and German citizens would buy fewer U.S. bonds.

If there is a surplus in the market for loanable funds, the resulting change in the real interest rate

a) raises the quantity of loanable funds supplied and reduces the quantity of loanable funds demanded.
b) reduces both the quantity of loanable funds supplied and the quantity of loanable funds demanded.
c) raises both the quantity of loanable funds supplied and the quantity of loanable funds demanded.
d) reduces the quantity of loanable funds supplied and raises the quantity of loanable funds demanded
e) raises the supply of loanable funds and reduces the demand for loanable funds.

d) reduces the quantity of loanable funds supplied and raises the quantity of loanable funds demanded

Which of the following would make the equilibrium real interest rate increase and
the equilibrium quantity of funds decrease?

a) The demand for loanable funds shifts right.
b) The demand for loanable funds shifts left.
c) The supply of loanable funds shifts left and the demand for loanable funds shifts right.
d) The supply of loanable funds shifts right.
e) The supply of loanable funds shifts left.

e) The supply of loanable funds shifts left.

If the quantity of loanable funds supplied is greater than the quantity demanded, then

a) there is a shortage of loanable funds and the interest rate will fall.
b) there is a surplus of loanable funds but the interest rate will remain the same.
c) there is a surplus of loanable funds and the interest rate will fall.
d) there is a surplus of loanable funds and the interest rate will rise.
e) there is a shortage of loanable funds and the interest rate will rise.

c) there is a surplus of loanable funds and the interest rate will fall.

If the quantity of loanable funds supplied is less than the quantity demanded, then

a) there is a surplus of loanable funds but the interest rate will remain the same.
b) there is a shortage of loanable funds and the interest rate will fall.
c) there is a surplus of loanable funds and the interest rate will fall.
d) there is a shortage of loanable funds and the interest rate will rise.
e) there is a surplus of loanable funds and the interest rate will rise.

d) there is a shortage of loanable funds and the interest rate will rise.

Other things the same, a lower real interest rate decreases the quantity of

a) domestic investment.
b) loanable funds supplied.
c) loanable funds demanded.
d) real GDP.
e) net capital outflow.

b) loanable funds supplied.

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 supply of dollars in the market for foreign-currency exchange shifts left.
b) the demand for dollars in the market for foreign-currency exchange shifts left.
c) the demand for dollars in the market for foreign-currency exchange shifts right.
d) the supply of dollars in the market for foreign-currency exchange shifts right.
e) the supply of dollars and the demand for dollars in the market for foreign-currency exchange shift left.

c) the demand for dollars in the market for foreign-currency exchange shifts right.

If a country raises its budget deficit, then in the market for foreign-currency exchange

a) supply shifts right.
b) supply and demand shift right.
c) demand shifts left.
d) supply and demand shift left.
e) supply shifts left.

e) supply shifts left.

Other things the same, a higher real interest rate raises the quantity of

a) domestic investment.
b) loanable funds supplied.
c) real GDP.
d) loanable funds demanded.
e) net capital outflow.

b) loanable funds supplied

A limit on the quantity of a good produced abroad that can be purchased domestically is called a(n)

a) exchange tax.
b) tariff.
c) excise tax.
d) import quota.
e) embargo.

d) import quota.

If a country’s budget deficit decreases, then the exchange rate

a) rises, which reduces net exports.
b) remains the same and net exports remain the same.
c) falls, which raises net exports.
d) rises, which raises net exports.
e) falls, which reduces net exports.

c) falls, which raises net exports.

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 rise.
b) fall and the quantity of dollars supplied in the market for foreign-currency exchange would rise.
c) fall and the quantity of dollars demanded in the market for foreign-currency exchange would fall.
d) deficit reduces net exports and domestic investment.
e) rise and the quantity of dollars demanded in the market for foreign-currency exchange would fall.

d) deficit reduces net exports and domestic investment.

If the demand for loanable funds shifts left, then

a) the real interest rate rises and the supply of loanable funds falls.
b) the real interest rate and the equilibrium quantity of loanable funds both rise.
c) the real interest rate and the equilibrium quantity of loanable funds both fall.
d) the real interest rate falls and the equilibrium quantity of loanable funds rises.
e) the real interest rate rises and the equilibrium quantity of loanable funds falls.

c) the real interest rate and the equilibrium quantity of loanable funds both fall.

If a country had capital flight, then the real exchange rate would

a) fall. To offset this fall the government could increase the budget deficit.
b) rise. To offset this rise the government could balance the budget.
c) rise. To offset this rise the government could increase the budget deficit.
d) fall. To offset this fall the government could decrease the budget deficit.
e) rise. To offset this rise the government could decrease the budget deficit.

a) fall. To offset this fall the government could increase the budget deficit.

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 falls.
b) falls and the quantity of dollars exchanged does not change.
c) rises and the quantity of dollars exchanged rises.
d) falls and the quantity of dollars exchanged falls.
e) rises and the quantity of dollars exchanged does not change.

b) falls and the quantity of dollars exchanged does not change.

Which of the following would make the equilibrium real interest rate decrease and the equilibrium quantity of loanable funds increase?

a) The demand for loanable funds shifts right.
b) The supply of loanable funds shifts right.
c) The supply of loanable funds shifts left and the demand for loanable funds shifts right.
d) The demand for loanable funds shifts left
e) The supply of loanable funds shifts left.

b) The supply of loanable funds shifts right.

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

a) capital flight from the U.S. to other countries occurs, the U.S. moves from budget surplus to budget deficit
b) capital flight from U.S. to other countries occurs, the U.S. moves from budget deficit to budget surplus
c) capital flight from other countries to the U.S. occurs and the U.S. moves from budget surplus to budget deficit
d) capital flight from U.S. to other countries occurs, the U.S. moves toward a balanced budget.
e) capital flight from other countries to the U.S. occurs and the U.S. moves from budget deficit to budget surplus

c) capital flight from other countries to the U.S. occurs and the U.S. moves from budget surplus to budget deficit

If the supply of loanable funds shifts left, then

a) the real interest rate rises and the demand for loanable funds falls.
b) the real interest rate and the equilibrium quantity of loanable funds both fall.
c) the real interest rate rises and the equilibrium quantity of loanable funds falls.
d) the real interest rate falls and the equilibrium quantity of loanable funds rises.
e) the real interest rate and the equilibrium quantity of loanable funds both rise.

c) the real interest rate rises and the equilibrium quantity of loanable funds falls.

If the supply of loanable funds shifts right, then

a) the real interest rate rises and the equilibrium quantity of loanable funds falls.
b) the real interest rate rises and the demand for loanable funds falls.
c) the real interest rate and the equilibrium quantity of loanable funds both rise.
d) the real interest rate falls and the equilibrium quantity of loanable funds rises.
e) the real interest rate and the equilibrium quantity of loanable funds both fall.

d) the real interest rate falls and the equilibrium quantity of loanable funds rises.

If the government of Japan raised its budget deficit, then the yen would

a) appreciate and Japanese net exports would rise.
b) depreciate and Japanese net exports would rise.
c) appreciate and Japanese net exports would fall.
d) not change and Japanese net exports would not change.
e) depreciate and Japanese net exports would fall.

c) appreciate and Japanese net exports would fall.

If the U.S. government increased its deficit, then

a) U.S. bonds would pay higher interest but a dollar would purchase fewer foreign goods.
b) U.S. bonds would pay lower interest but a dollar would purchase more foreign goods.
c) U.S. bonds would pay higher interest and a dollar would purchase more foreign goods.
d) U.S. bonds would pay lower interest and a dollar would purchase fewer foreign goods..
e) U.S. bonds would pay lower interest but a dollar would purchase more U.S. goods.

c) U.S. bonds would pay higher interest and a dollar would purchase more foreign goods.

Which of the following would make both the equilibrium real interest rate and the equilibrium quantity of loanable funds decrease?

a) The supply of loanable funds shifts left.
b) The supply of loanable funds shifts right.
c) The demand for loanable funds shifts left.
d) The demand for loanable funds shifts right.
e) The supply of loanable funds shifts left and the demand for loanable funds shifts right.

c) The demand for loanable funds shifts left.

If the demand for dollars in the market for foreign-currency exchange shifts right, then the exchange rate

a) falls and the quantity of dollars exchanged does not change.
b) rises and the quantity of dollars exchanged does not change.
c) rises and the quantity of dollars exchanged rises.
d) falls and the quantity of dollars exchanged falls.
e) falls and the quantity of dollars exchanged rises.

b) rises and the quantity of dollars exchanged does not change.

Refer to Figure 32-1. In the Figure shown, if the real interest rate is 5 percent,

a) there is a surplus of loanable funds and the interst rate will rise.
b) there is an equilibrium interest rate and the interest rate will not change.
c) there is a surplus of loanable funds and the interst rate will fall.
d) there is a shortage of loanable funds and the interest rate will fall.
e) there is a shortage of loanable funds and the interest rate will rise.

c) there is a surplus of loanable funds and the interst rate will fall.

Other things the same, if the U.S. real exchange rate depreciated, then U.S. net exports would

a) rise 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) fall 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.
e) fall and the quantity of dollars supplied in the market for foreign-currency exchange would rise.

d) rise and the quantity of dollars demanded in the market for foreign-currency exchange would rise.

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 supply of loanable funds shifts left and the demand for loanable funds shifts right.
c) The demand for loanable funds shifts left.
d) The supply of loanable funds shifts left.
e) The supply of loanable funds shifts right.

a) The demand for loanable funds shifts right.

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