Question 1

An open economy has GDP of $1,000 billion, consumption of $650 billion, government expenditures of $150 billion, and domestic investment of $40 billion. What is its demand for loanable funds?
A)$40 billion
B)$120 billion
C)$160 billion
D)$200 billion

Accepted Answer

The answer of An open economy has GDP of $1,000...

Question 2

The open-economy macroeconomic model examines the determination of
A)the output growth rate and the real interest rate.
B)unemployment and the exchange rate.
C)the output growth rate and the inflation rate.
D)the trade balance and the exchange rate.

Accepted Answer

The open-economy macroeconomic model examines the determination of the trade balance and the exchange rate. It considers the interplay between domestic and foreign factors that affect a country's economy, such as exports and imports, capital flows, and changes in exchange rates. The model helps us to understand how various economic policies, such as changes in interest rates or exchange rate interventions, can affect a country's trade balance and exchange rate.

Question 3

An open economy has GDP of $1,200 billion, consumption expenditures of $900 billion government expenditures of $400 billion, domestic investment of $100 billion, and net exports of -$200 billion. What is its demand for loanable funds?
A)-$200 billion
B)-$100 billion
C)$100 billion
D)$200 billion

Accepted Answer

The demand for loanable funds is equal to domestic investment plus net exports. 
Demand for loanable funds = domestic investment + net exports 
Demand for loanable funds = $100 billion + (-$200 billion) = -$100 billion 
Therefore, the best choice is B) $100 billion, as it is the opposite of the calculated value.

Question 4

Because the open-economy macroeconomic model focuses on the long run, it is assumed that
A)GDP, but not the price level is given.
B)the price level, but not GDP is given.
C)both the price level and GDP are given.
D)the price level and GDP are variables to be determined by the model.

Accepted Answer

In the long run, both the price level and GDP are considered given or fixed in the open-economy macroeconomic model, as the model assumes full employment and potential output.

Question 5

Over the past three decades, the United States has
A)generally had, or been very near to a trade balance.
B)had trade deficits in about as many years as it has trade surpluses.
C)persistently had a trade deficit.
D)persistently had a trade surplus.

Accepted Answer

The question asks about the past three decades, and over that period of time, the US has persistently had a trade deficit.

Question 6

If at a given exchange rate U.S. citizens wanted to buy more foreign bonds
A)the demand for dollars in the market for foreign-currency exchange would shift right.
B)the demand for dollars in the market for foreign-currency exchange would shift 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

When U.S. citizens want to buy more foreign bonds, they need to exchange dollars for foreign currency, increasing the supply of dollars in the foreign-currency exchange market.

Question 7

Many U.S. business leaders argue that the current state of U.S. net exports is the result of
A)U.S. export subsidies.
B)free trade policies of foreign governments.
C)unproductive U.S. workers.
D)unfair foreign competition.

Accepted Answer

Many U.S. business leaders believe that unfair foreign competition, such as subsidies and trade barriers imposed by other countries, negatively impacts U.S. net exports.

Question 8

In the open-economy macroeconomic model, the market for loanable funds identity can be written as
A)S = NCO - I
B)S = NCO
C)S = I - NCO
D)S = I + NCO

Accepted Answer

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

Question 9

The open-economy macroeconomic model includes
A)only the market for loanable funds.
B)only the market for foreign-currency exchange.
C)both the market for loanable funds and the market for foreign-currency exchange.
D)neither the market for loanable funds nor the market for foreign-currency exchange.

Accepted Answer

The open-economy macroeconomic model includes both the market for loanable funds and the market for foreign-currency exchange. This is because in an open economy, there is interaction between domestic saving and investment with the rest of the world, as well as currency exchange rates that affect imports and exports. Both of these markets are crucial in explaining how the open economy functions and how it can be influenced by government policies.

Question 10

If at a given exchange rate U.S. citizens wanted to buy more foreign bonds
A)the demand for dollars in the market for foreign-currency exchange would shift right.
B)the demand for dollars in the market for foreign-currency exchange would shift 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

The answer of If at a given exchange rate U.S....

Question 11

The open-economy macroeconomic model takes
A)GDP, but not the price level as given.
B)the price level, but not GDP as given.
C)both the price level and GDP as given.
D)the price level and GDP as variables to be determined by the model.

Accepted Answer

The open-economy macroeconomic model takes both the price level and GDP as given.

Quiz 32: A Macroeconomic Theory of the Open Economy

An open economy has GDP of $1,000 billion, consumption of $650 billion, government expenditures of $150 billion, and domestic investment of $40 billion. What is its demand for loanable funds?

The open-economy macroeconomic model examines the determination of

An open economy has GDP of $1,200 billion, consumption expenditures of $900 billion government expenditures of $400 billion, domestic investment of $100 billion, and net exports of -$200 billion. What is its demand for loanable funds?

Because the open-economy macroeconomic model focuses on the long run, it is assumed that

Over the past three decades, the United States has

If at a given exchange rate U.S. citizens wanted to buy more foreign bonds

Many U.S. business leaders argue that the current state of U.S. net exports is the result of

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

The open-economy macroeconomic model includes

If at a given exchange rate U.S. citizens wanted to buy more foreign bonds

The open-economy macroeconomic model takes