Macroeconomics Final Exam - (Chapter 19 Study Questions)

At the equilibrium real interest rate in the open-economy macroeconomic model, the equilibrium quantity of loanable funds equals

national saving.

At the equilibrium real interest rate in the open-economy macroeconomic model, the amount of people want to save equals the desired quantity of

net capital outflow plus domestic investment.

The variable that links the market for loanable funds and the market for foreign-currency exchange is

net capital outflow.

Starting from r2 and E3, an increase in the budget surplus can be illustrated as a move to

r1 and E2.

Other things the same, people in the US would want to save more if the real interest rate in the US

rose. The increased saving would increase the quantity of loanable funds supplied.

Suppose that the government goes from a budget surplus to a budget deficit. The effects of the change could be illustrated by

shifting the supply curve in panel a to the left and the supply curve in panel c to the left.

A rise in the budget deficit

shifts both the supply of loanable funds in the market for loanable funds and the supply of dollars in the market for foreign-currency exchange left.

If at a given exchange rate foreign citizens wanted to buy fewer US bonds, then the

supply of dollars in the market for foreign-currency exchange shifts right.

A tax on imported goods is called a(n)

tariff.

A US company wants to buy yen in order to buy Japanese bonds. In the open-economy macroeconomic model, the transaction would be part of

the supply of currency in the foreign exchange market, and part of the demand for loanable funds.

The open-economy macroeconomic model examines the determination of

the trade balance and the exchange rate

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

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

An increase in the budget deficit causes domestic interest rates

to rise and investment to fall.

A country has output of $700 billion, consumption of $500 billion, government expenditures of$100 and investment of $60 million. What is its supply of loanable funds?

$100 Billion

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?

US citizens want to buy more foreign bonds

Which of the following contains a list only of things that increase when the budget deficit of the US decreases?

US supply of loanable funds, US net capital outflow, Us domestic investment

Which of the following make(s) demand for US dollars in the market for foreign-currency exchange higher than otherwise?

a Russian firm wanting to buy equipment from a US manufacturer but not a US manufacturer wanting to buy zinc from Canada.

Other things the same, in the open-economy macroeconomic model, which of the following would make India's net capital outflow increase?

a decrease in Indian interest rates.

If the exchange rate rises, which of the following falls in the open-economy macroeconomic model?

desired net exports but not desired net capital outflow.

An increase in the budget deficit causes net capital outflow to

fall, because the supply of loanable funds shifts left.

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

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

If a government has a budget surplus, then public saving

is positive and increases national saving.