econ ch. 32 quiz

One year a country has negative net exports. The next year it still has negative net exports and imports have risen more than exports.

Its trade deficit fell

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

Supply shifts left

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?

The expected rate of return on US assets falls

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

The supply of loanable funds shifts left

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

U.S. citizens would buy more German bonds and German citizens would by fewer U.S. bonds

Other things the same, which of the following would both make foreigners more willing to engage in U.S. portfolio investment?

U.S. interest rates fall, the default risk of U.S. assets fall

If the US government increased its deficit, then

US bonds would pay higher interest and a dollar would purchase more foreign goods

If a lobster in Maine costs $10 and the same type of lobster in Massachusetts costs $30, then people could make a profit by

buying lobsters in Maine and selling them in Massachusetts. This action would decrease the price of lobster in Massachusetts.

When making investment decisions, investors

compare the real interest rates offered on different bonds

Ivan, a Russian citizen, sells several hundred cases of caviar to a restaurant chain in the United States. By itself, this sale

decrease U.S. net exports and increases Russian net exports

An increase in the budget

deficit reduces investment because the interest rate rises.

Other things the same, if the exchange rate changes from 125 yen per dollar to 115 yen per dollar, the dollar has

depreciated and so buys fewer Japanese goods.

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

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

John, a U.S. citizen, opens up a sports bar in Tokyo. This is an example of U.S.

foreign direct investment

A country's trade balance

is greater than zero only if exports are greater than imports

If a country has a trade deficit

it has negative net exports and negative net capital outflow

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

loanable funds supplied

When a country's central bank increases the money supply, its

price level rises and its currency depreciates relative to other currencies in the world.

The nominal exchange rate is the

rate at which a person can trade the currency of one country for another

Other things the same, if the dollar depreciates relative to the British pound, then

the exchange rate falls. It will cost fewer pounds to travel in the U.S.

If there is a shortage of loanable funds, then

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