Question 1

Other things the same, which of the following would shift the supply of dollars in the market for foreign exchange to the right?
A)foreigners want to buy more U.S. bonds
B)foreigners want to buy fewer U.S. bonds
C)foreigners want to buy more U.S. goods and services.
D)foreigners want to buy fewer U.S. goods and services.

Accepted Answer

The answer of Other things the same, which of the...

Question 2

In the open economy macroeconomic model, the amount of dollars demanded in the market for foreign-currency exchange at a given real exchange rate increases if
A)either U.S. imports or exports increase.
B)either U.S. imports or exports decrease.
C)either U.S. imports increase or U.S. exports decrease.
D)either U.S. imports decrease or U.S. exports increase.

Accepted Answer

The answer of In the open economy macroeconomic model, the...

Question 3

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 demand for dollars in the market for foreign-currency exchange shifts right.
B)the demand for dollars in the market for foreign-currency exchange shifts left.
C)the supply of dollars in the market for foreign-currency exchange shifts right.
D)the supply of dollars in the market for foreign-currency exchange shifts left.

Accepted Answer

If foreign citizens want to purchase more U.S. goods and services, they will need to exchange their currency for dollars in order to make these purchases. This will increase the demand for dollars in the market for foreign-currency exchange, shifting the demand curve to the right. As a result, the exchange rate will rise, making U.S. goods and services relatively more expensive for foreign buyers and potentially reducing their demand in the future.

Question 4

In the open-economy macroeconomic model, as the exchange rate rises,
A)desired net exports fall, so the quantity of dollars supplied rise.
B)desired net exports fall, so the quantity of dollars demanded falls.
C)desired net exports rise ,so the quantity of dollars supplied falls.
D)desired net exports rise, so the quantity of dollars demanded rises.

Accepted Answer

As the exchange rate rises, exports become more expensive for foreigners, making them less desirable. This causes a decrease in desired net exports, which in turn causes a decrease in the quantity of dollars demanded. Therefore, choice B is the best answer.

Question 5

Which of the following make(s) demand for U.S. dollars in the market for foreign-currency exchange higher than otherwise?
A)a U.S. airline wanting to buy jets made in France and a Swedish hospital wanting to buy medical equipment made in the U.S.
B)a U.S. airline wanting to buy jets made in France, but not a Swedish hospital wanting to buy medical equipment made in the U.S.
C)a Swedish hospital wanting to buy medical equipment made in the U.S., but not a U.S. airline wanting to buy jets made in France
D)neither a U.S. bank wanting to lend money to a Canadian company nor a U.S. firm wanting to buy computers made in South Korea

Accepted Answer

The answer of Which of the following make(s) demand for...

Question 6

In the open-economy macroeconomic model, the demand for dollars shifts right if at any given exchange rate
A)foreign residents want to buy more U.S. goods and services.
B)U.S. residents want to buy fewer foreign goods and services.
C)Both A and B are correct.
D)None of the above is correct.

Accepted Answer

The demand for dollars in the open-economy macroeconomic model is based on transactions between the domestic and foreign economies. If foreign residents want to buy more U.S. goods and services (A), they will need to exchange their currency for dollars, increasing the demand for dollars. Similarly, if U.S. residents want to buy fewer foreign goods and services (B), they will need to exchange their dollars for foreign currency, decreasing the demand for dollars. Both A and B are correct, as they represent two different types of transactions that can result in a rightward shift in the demand for dollars.

Question 7

When the U.S. real exchange rate appreciates, U.S. goods become
A)more attractive to consumers in the U.S. and abroad.
B)more attractive to consumers in the U.S. and less attractive to consumers abroad.
C)less attractive to consumers in the U.S. and abroad.
D)less attractive to consumers in the U.S. and more attractive to consumers abroad.

Accepted Answer

The answer of When the U.S. real exchange rate appreciates,...

Question 8

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?
A)foreign citizens want to buy more U.S. bonds
B)U.S. citizens want to buy more foreign bonds
C)foreign citizens want to buy more U.S. goods
D)U.S. citizens want to buy more foreign goods

Accepted Answer

The answer of At a given real exchange rate, which...

Question 9

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

Accepted Answer

The answer of Other things the same, if the U.S....

Question 10

In the open-economy macroeconomic model, a higher U.S. real exchange rate makes
A)U.S. goods more expensive relative to foreign goods and reduces the quantity of dollars supplied.
B)U.S. goods more expensive relative to foreign goods and reduces the quantity of dollars demanded.
C)foreign goods more expensive relative to U.S. goods and reduces the quantity of dollars supplied.
D)foreign goods more expensive relative to U.S. goods and reduces the quantity of dollars demanded.

Accepted Answer

A higher U.S. real exchange rate means that U.S. goods become more expensive relative to foreign goods. As a result, foreign consumers will demand less U.S. goods, reducing the quantity of dollars demanded. This is because they will find it cheaper to buy domestically produced goods in their own currencies.

Question 11

Which of the following is included in the demand for dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?
A)a company in Canada wants to buy oranges from the U.S
B)a Japanese banks want to buy bonds from the U.S. government
C)a U.S. citizen wants to buy stock a German company is selling
D)None of the above is correct.

Accepted Answer

The answer of Which of the following is included in...

Question 12

In the open-economy macroeconomic model, the quantity of dollars demanded in the market for foreign-currency exchange
A)depends on the real exchange rate. The quantity of dollars supplied in the foreign-exchange market depends on the real interest rate.
B)depends on the real interest rate. The quantity of dollars supplied in the foreign-exchange market depends on the real exchange rate.
C)and the quantity of dollars supplied in the market for foreign-currency exchange depend on the real exchange rate.
D)and the quantity of dollars supplied in the market for foreign-currency exchange depend on the real interest rate.

Accepted Answer

In the open-economy macroeconomic model, the quantity of dollars demanded in the market for foreign-currency exchange depends on the real exchange rate. This is because a higher real exchange rate makes foreign goods relatively cheaper, causing an increase in imports and a corresponding increase in the demand for foreign currency. On the other hand, the quantity of dollars supplied in the foreign-exchange market depends on the real interest rate. This is because a higher real interest rate makes domestic assets more attractive, causing an increase in capital inflows and a corresponding increase in the supply of dollars.

Question 13

Other things the same, if the expected return on U.S. assets increases, the
A)supply of dollars in the market for foreign-currency exchange shifts right.
B)supply of dollars in the market for foreign-currency exchange shifts left.
C)demand for dollars in the market for foreign-currency exchange shifts right
D)demand for dollars in the market for foreign-currency exchange shifts left.

Accepted Answer

The answer of Other things the same, if the expected...

Question 14

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 exchange rate falls
C)the expected rate of return on U.S. assets rises
D)the expected rate of return on U.S. assets falls

Accepted Answer

The answer of Which of the following would shift the...

Question 15

When the real exchange rate for the dollar depreciates, U.S. goods become
A)less expensive relative to foreign goods, which makes exports rise and imports fall.
B)less expensive relative to foreign goods, which makes exports fall and imports rise.
C)more 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 rise.

Accepted Answer

When the real exchange rate for the dollar depreciates, U.S. goods become relatively less expensive compared to foreign goods. This situation makes exports more attractive to foreign buyers and encourages them to purchase more U.S. goods, while making foreign goods relatively more expensive for domestic consumers, which discourages imports. Consequently, exports rise and imports fall, resulting in an improvement in the trade balance.

Question 16

The theory of purchasing-power parity implies that the demand curve for foreign-currency exchange is
A)downward sloping.
B)upward sloping.
C)horizontal.
D)vertical.

Accepted Answer

The answer of The theory of purchasing-power parity implies that...

Question 17

When the real exchange rate for the dollar appreciates, U.S. goods become
A)less expensive relative to foreign goods, which makes exports rise and imports fall.
B)less expensive relative to foreign goods, which makes exports fall and imports rise.
C)more 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 rise.

Accepted Answer

The answer of When the real exchange rate for the...

Question 18

If at a given exchange rate foreign citizens want to buy fewer U.S bonds, then the
A)supply of dollars in the market for foreign-currency exchange shifts right.
B)supply of dollars in the market for foreign-currency exchange shifts left.
C)demand for dollars in the market for foreign-currency exchange shifts right.
D)demand for dollars in the market for foreign-currency exchange shifts left.

Accepted Answer

The answer of If at a given exchange rate foreign...

Question 19

The real exchange rate measures the
A)price of domestic currency relative to foreign currency.
B)price of domestic goods relative to the price of foreign goods.
C)rate of domestic and foreign interest.
D)None of the above is correct.

Accepted Answer

The real exchange rate measures the relative price of domestic goods to foreign goods. This is important for international trade and can affect a country's competitiveness in the global market. Option A refers to the nominal exchange rate, which is simply the price of one currency in terms of another. Option C is not relevant to the real exchange rate. Option D is incorrect because there is a correct answer.

Question 20

Which of the following would shift the demand for dollars in the market for foreign currency exchange to the right?
A)foreign citizens want to buy more U.S. goods and services at a given exchange rate
B)foreign citizens want to buy fewer U.S. goods and services at a given exchange rate
C)foreign citizens want to buy more U.S. bonds
D)foreign citizens want to by fewer U.S. bonds

Accepted Answer

When foreign citizens want to buy more U.S. goods and services at a given exchange rate, they will need to convert their currency into US dollars, which increases the demand for US dollars in the foreign currency exchange market.

Quiz 32: A Macroeconomic Theory of the Open Economy

Other things the same, which of the following would shift the supply of dollars in the market for foreign exchange to the right?

In the open economy macroeconomic model, the amount of dollars demanded in the market for foreign-currency exchange at a given real exchange rate increases if

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

In the open-economy macroeconomic model, as the exchange rate rises,

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

In the open-economy macroeconomic model, the demand for dollars shifts right if at any given exchange rate

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

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?

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

In the open-economy macroeconomic model, a higher U.S. real exchange rate makes

Which of the following is included in the demand for dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

In the open-economy macroeconomic model, the quantity of dollars demanded in the market for foreign-currency exchange

Other things the same, if the expected return on U.S. assets increases, the

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?

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

The theory of purchasing-power parity implies that the demand curve for foreign-currency exchange is

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

If at a given exchange rate foreign citizens want to buy fewer U.S bonds, then the

The real exchange rate measures the

Which of the following would shift the demand for dollars in the market for foreign currency exchange to the right?