Question 1

All other things being equal, an increase in a country's real interest rate reduces net capital outflow.

Accepted Answer

A) True 
 B)False

Question 2

If a country's net capital outflow is positive, it is an addition to its demand for loanable funds.

Accepted Answer

A) True 
 B)False

Question 3

Assuming all other things unchanged, a higher UK real interest rate

Accepted Answer

A)   Decreases UK net capital outflow because UK residents and foreigners prefer to invest in the UK
B)   None of these answers
C)   Decreases UK net capital outflow because UK residents and foreigners prefer to invest abroad.
D)   Increases UK net capital outflow because UK residents and foreigners prefer to invest in the UK.E) A) and B)
F) B) and C)

Question 4

Suppose, due to political instability, Russia suddenly choose to invest in UK assets as opposed to Russian assets. Which of the following statements is true regarding UK net foreign investment?

Accepted Answer

A)   UK net foreign investment is unchanged because only UK residents can alter UK net foreign investment.
B)   UK net foreign investment rises.
C)   UK net foreign investment falls.
D)   None of these answers.E) A) and B)
F) None of the above

Question 5

Increased foreign investment in the UK causes the

Accepted Answer

A)   Balance on current accounts to become positive.
B)   Sum of the capital and current accounts to be positive.
C)   Balance of trade to become negative.
D)   Foreign exchange value of the pound to increase.E) C) and D)
F) B) and D)

Question 6

Other things the same, a lower real interest rate decreases the quantity of

Accepted Answer

A)   Loanable funds demanded.
B)   Loanable funds supplied.
C)   Domestic investment.
D)   Net capital outflow.E) A) and C)
F) B) and C)

Question 7

A country's net capital outflow is always equal to its net exports.

Accepted Answer

A) True 
 B)False

Question 8

If a country experiences a tremendous increase in the demand for loanable funds as many new infrastructure building projects are initiated, then the interest rate will

Accepted Answer

A)   Rise, there will be a decrease in net capital outflow, and the real exchange rate will fall.
B)   Rise, there will be a decrease in net capital outflow, and the real exchange rate will rise.
C)   Fall, there will be an increase in net capital outflow, and the real exchange rate will rise.
D)   Fall, there will be an increase in net capital outflow, and the real exchange rate will fall.E) C) and D)
F) B) and C)

Question 9

Which of the following statements about trade policy is true?

Accepted Answer

A)   A country's trade policy has no impact on the size of its trade balance.
B)   None of these answers.
C)   A restrictive import quota decreases a country's net exports.
D)   A restrictive import quota increases a country's net exports.E) A) and D)
F) All of the above

Question 10

An export subsidy should have the opposite effect of

Accepted Answer

A)   A government budget deficit.
B)   Capital flight.
C)   An increase in private saving.
D)   A tariff.E) B) and C)
F) None of the above

Question 11

What impact do trade policies, such as tariffs and quotas, have on the standard of living?

Accepted Answer

Trade policies reduce both imports and e...

Question 12

Explain how an increase in the demand for capital goods in the Eurozone countries can lead to a change in the value of the euro against other currencies.

Accepted Answer

An increase in demand for capital goods ...

Question 13

Net capital outflow is the purchase of domestic assets by foreigners minus the purchase of foreign assets by domestic residents.

Accepted Answer

A) True 
 B)False

Question 14

An increase in UK private saving

Accepted Answer

A)   Increases UK net exports and UK net capital outflow the same amount.
B)   Increases UK net exports and decreases UK net capital outflow.
C)   Decreases UK net exports and UK net capital outflow the same amount.
D)   Decreases UK net exports and increases UK net capital outflow.E) A) and B)
F) C) and D)

Question 15

Which of the following statements regarding the market for foreign currency exchange is true? An increase in UK net exports:

Accepted Answer

A)   Decreases the supply of pounds and the pound depreciates.
B)   Increases the demand for pounds and the pound appreciates.
C)   Increases the supply of pounds and the pound depreciates.
D)   Decreases the demand for pounds and the pound appreciates.E) A) and B)
F) C) and D)

Question 16

Consider this diagram of the market for foreign currency exchange. If the US government decides to increase import tariffs on imported steel, we could expect the 1 to D2. B)  Demand for dollars to shift from D2 to D1. C)  Supply of dollars to increase. D)  Supply of dollars to decrease." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   Demand for dollars to shift from D1 to D2.
B)   Demand for dollars to shift from D2 to D1.
C)   Supply of dollars to increase.
D)   Supply of dollars to decrease.E) A) and B)
F) A) and D)

Question 17

Government trade policies, such as tariffs and quota restrictions on imports,

Accepted Answer

A)   Can eliminate a trade imbalance.
B)   Often increase a trade deficit.
C)   Have no real effect on the trade balance.
D)   Can lower a deficit on current accounts but not on the capital account.E) B) and C)
F) A) and B)

Question 18

If the EU imposes a quota on the importing of clothing produced in China, so reducing UK imports of clothing, which of the following is true regarding UK net exports?

Accepted Answer

A)   Net exports will rise.
B)   None of these answers.
C)   Net exports will fall.
D)   Net exports will remain unchanged.E) B) and D)
F) C) and D)

Question 19

A country experiencing capital flight will experience a reduction in its net capital outflow and its net exports.

Accepted Answer

A) True 
 B)False

Question 20

Suppose that UK investors decide that investment opportunities in African countries have improved. What happens to UK net capital outflow? What happens to the UK real interest rate?

Accepted Answer

UK net capital outflow will in...

Exam 30: A Macroeconomic Theory of the Open Economy

If a country's net capital outflow is positive, it is an addition to its demand for loanable funds.

Correct AnswerverifiedShow Answer

Increased foreign investment in the UK causes the

Correct AnswerverifiedShow Answer

An export subsidy should have the opposite effect of

Correct AnswerverifiedShow Answer

An increase in UK private saving

Correct AnswerverifiedShow Answer

Net capital outflow is the purchase of domestic assets by foreigners minus the purchase of foreign assets by domestic residents.

Correct AnswerverifiedShow Answer

Suppose, due to political instability, Russia suddenly choose to invest in UK assets as opposed to Russian assets. Which of the following statements is true regarding UK net foreign investment?

Correct AnswerverifiedShow Answer

Explain how an increase in the demand for capital goods in the Eurozone countries can lead to a change in the value of the euro against other currencies.

Correct AnswerverifiedAn increase in demand for capital goods ...View AnswerShow Answer

A country's net capital outflow is always equal to its net exports.

Correct AnswerverifiedShow Answer

Which of the following statements about trade policy is true?

Correct AnswerverifiedShow Answer

Other things the same, a lower real interest rate decreases the quantity of

Correct AnswerverifiedShow Answer

A country experiencing capital flight will experience a reduction in its net capital outflow and its net exports.

Correct AnswerverifiedShow Answer

If a country experiences a tremendous increase in the demand for loanable funds as many new infrastructure building projects are initiated, then the interest rate will

Correct AnswerverifiedShow Answer

Which of the following statements regarding the market for foreign currency exchange is true? An increase in UK net exports:

Correct AnswerverifiedShow Answer

Government trade policies, such as tariffs and quota restrictions on imports,

Correct AnswerverifiedShow Answer

All other things being equal, an increase in a country's real interest rate reduces net capital outflow.

Correct AnswerverifiedShow Answer

Assuming all other things unchanged, a higher UK real interest rate

Correct AnswerverifiedShow Answer

Consider this diagram of the market for foreign currency exchange. If the US government decides to increase import tariffs on imported steel, we could expect the

Correct AnswerverifiedShow Answer

Suppose that UK investors decide that investment opportunities in African countries have improved. What happens to UK net capital outflow? What happens to the UK real interest rate?

Correct AnswerverifiedUK net capital outflow will in...View AnswerShow Answer

What impact do trade policies, such as tariffs and quotas, have on the standard of living?

Correct AnswerverifiedTrade policies reduce both imports and e...View AnswerShow Answer

If the EU imposes a quota on the importing of clothing produced in China, so reducing UK imports of clothing, which of the following is true regarding UK net exports?

Correct AnswerverifiedShow Answer

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An increase in demand for capital goods ...
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UK net capital outflow will in...
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Correct Answer
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Trade policies reduce both imports and e...
View Answer

Correct Answer
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