International Trade and Real Exchange Rate

Topics: International trade, Inflation, United States dollar Pages: 3 (716 words) Published: November 14, 2013
TUTORIAL 9
Chapter 19: A Macroeconomic Theory of the Open Economy

Multiple-Choice Questions
1. The purchase of a capital asset adds to the demand for loanable funds a.only if the asset is located at home.
b.only if the asset is located abroad.
c.whether the asset is located at home or abroad.
d.None of the above is correct.

2. If the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied a.there is a surplus and the interest rate will rise.
b.there is a surplus and the interest rate will fall.
c.there is a shortage and the interest rate will rise.
d.there is a shortage and the interest rate will fall.

3. Which of the following would tend to shift the supply of dollars in the market for foreign-currency exchange in the open-economy macroeconomic model to the right? 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.

4. In the open-economy macroeconomic model, equilibrium is determined by the equality between the supply of dollars which comes from a.U.S. national saving and the demand for dollars for U.S. net exports. b.U.S. net capital outflow and the demand for dollars for U.S. net exports. c.domestic investment and the demand for U.S. net exports.

d.foreign demand for U.S. goods and U.S. demand for foreign goods.

5. In the open-economy macroeconomic model, which of the following would make India's net capital outflow decrease? a.a decrease in U.S. interest rates.
b.a decrease in Indian interest rates.
c.an appreciation of the Indian rupee.
d.None of the above is correct.
6. If a country went from a government budget deficit to a surplus, a.national saving would increase, shifting the supply of loanable funds right. b.national saving would increase, shifting the supply of loanable funds left. c.national saving would decrease, shifting the demand for loanable funds...
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