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.