ECN 222 CH 19

If the Japanese government raised its budget deficit, then the yen would

appreciate and Japanese net exports would fall.

In which case(s) does(do) a country's demand for loanable funds shift left?

neither an increase in the budget deficit nor capital flight

If a country raises its budget deficit, then its

net capital outflow and net exports fall.

If a country repeals an investment tax credit,

net capital outflow rises and the real exchange rate falls.

If the U.S. government imposes an import quota on beef, U.S. net exports will

not change, the real exchange rate of the dollar will appreciate, and domestic sales of U.S. beef will increase.

In the open-economy macroeconomic model, the source of the supply of loanable funds is

public saving + personal saving

An increase in the budget surplus

raises net exports and domestic investment.

An increase in the budget deficit makes domestic interest rates

rise because the supply of loanable funds shifts left.

During the financial crisis it was proposed that firms be provided with a tax credit for investment projects. Such a tax credit would

shift the demand for loanable funds right and shift the supply of dollars in the market for foreign-currency exchange 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 the U.S. raised its tariff on tires, then at the original exchange rate there would be a

shortage in the market for foreign-currency exchange, so the real exchange rate would appreciate.

The imposition of an import quota shifts

the demand for currency right, so the exchange rate rises.

If a country experiences capital flight, which curves shift right?

the demand for loanable funds and the supply of its currency in the market for foreign-currency exchange

If the U.S. government went from a budget deficit to a budget surplus then

the interest rate and the real exchange rate would decrease.

If the supply of loanable funds shifts right, then

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

In the market for foreign-currency exchange, capital flight shifts

the supply curve right.

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?

$70 billion

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

NCO + I < S.

In the open-economy macroeconomic model, the market for loanable funds identity can be written as

S = I + NCO

Which of the following is the most accurate statement?

The effects of trade policy are more microeconomic than macroeconomic.

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

U.S. citizens would buy more Japanese bonds and Japanese citizens would buy fewer U.S. bonds.

Capital flight refers to

a large and sudden movement of funds out of a country.

In which case(s) does(do) a country's demand for loanable funds shift right?

capital flight, but not an increase in the budget deficit

If U.S. citizens decide to save a larger fraction of their incomes, the real interest rate

decreases, the real exchange rate of the dollar depreciates, and U.S. net capital outflow increases.

When a country suffers from capital flight, the exchange rate

depreciates, because supply in the market for foreign-currency exchange shifts right.

Trade policies

do not affect a country's overall trade balance, but affect some firms or industries differently than others.

Trade policies

do not alter the trade balance because they cannot alter the national saving or domestic investment of the country that implements them.

In an open economy, national saving equals

domestic investment plus net capital outflow.

If interest rates rise in the U.S., then other things the same

foreigners would buy more U.S. bonds which reduces the quantity of loanable funds demanded in the U.S.

When a country imposes an import quota, its

imports fall and its net exports are unchanged.

Which of the following would do the most to reduce a trade deficit?

increase domestic saving

A rise in the government budget deficit

increases the interest rate so in the market for foreign-currency exchange, supply shifts left.

In an open economy, the source for the demand for loanable funds is

investment + net capital outflow

If a government has a budget surplus, then public saving

is positive and increases national saving.

If a country places tariffs on imported goods, then

its currency appreciates which reduces exports.

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

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