Chapter 32A Macroeconomic Theory of the Open EconomyTRUE/FALSE1.Over the past two decades, the United States has persistently exported more goods and services than it has imported.ANS:FDIF:1REF:32-1NAT:AnalyticLOC:International trade and financeTOP:U.S. tradeMSC:Analytical2.Over the past two decades the U.S. has persistently had trade deficits.ANS:TDIF:1REF:32-1NAT:AnalyticLOC:International trade and financeTOP:U.S. tradeMSC:Definitional3.The primary focus of the open-economy macroeconomic model is the determination of GDP and the price level.ANS:FDIF:1REF:32-1NAT:AnalyticLOC:International trade and financeTOP:Open-economy macroeconomic modelMSC:Definitional4.In an open economy, the supply of loanable funds comes from national saving.ANS:TDIF:1REF:32-1NAT:AnalyticLOC:International trade and financeTOP:Market for loanable fundsMSC:Definitional5.In an open economy, the demand for loanable funds comes from both domestic investment and net capital outflow.ANS:TDIF:1REF:32-1NAT:AnalyticLOC:International trade and financeTOP:Market for loanable fundsMSC:Definitional6.The purchase of a capital asset adds to the demand for loanable funds only if that asset is a domestic one.ANS:FDIF:1REF:32-1NAT:AnalyticLOC:International trade and financeTOP:Market for loanable fundsMSC:Definitional7.A drop in the French real interest rate reduces French net capital outflow.ANS:FDIF:2REF:32-1NAT:AnalyticLOC:International trade and financeTOP:Net capital outflowMSC:Applicative8.In the open-economy macroeconomic model, at the equilibrium real interest rate, the amount that people (including government) want to save exactly balances desired domestic investment.ANS:FDIF:1REF:32-1NAT:AnalyticLOC:International trade and financeTOP:Market for loanable fundsMSC:Definitional9.In the open-economy macroeconomic model, a higher domestic interest rate reduces the quantity of loanable funds demandedANS:TDIF:1REF:32-1NAT:AnalyticLOC:International trade and financeTOP:Market for loanable fundsMSC:Applicative10.If the real interest rate were above the equilibrium rate, there would be a shortage of loanable funds.ANS:FDIF:1REF:32-1NAT:AnalyticLOC:International trade and financeTOP:Market for loanable fundsMSC:Applicative11.Net capital outflow represents the quantity of dollars supplied in the foreign-currency exchange market.ANS:TDIF:1REF:32-1NAT:AnalyticLOC:International trade and financeTOP:Market for foreign-currency exchangeMSC:Definitional12.In the open-economy macroeconomic model, net exports equal the quantity of dollars demanded in the foreign-currency exchange market.ANS:TDIF:1REF:32-1NAT:AnalyticLOC:International trade and financeTOP:Market for foreign-currency exchangeMSC:Definitional13.Other things the same, when the real exchange rate of the dollar appreciates, U.S. goods become more attractive to U.S. residents, but less attractive to foreign residents.ANS:FDIF:2REF:32-1NAT:AnalyticLOC:International trade and financeTOP:Market for foreign-currency exchangeMSC:Analytical14.Other things the same, a higher real exchange rate raises net exports.ANS:FDIF:1REF:32-1NAT:AnalyticLOC:International trade and financeTOP:Demand for foreign-currency exchange | Net exports | Real exchange rateMSC:Applicative15.In the open-economy macroeconomic model, the supply of dollars in the market for foreign-currency exchange is upward sloping.ANS:FDIF:1REF:32-1NAT:AnalyticLOC:International trade and financeTOP:Market for foreign-currency exchangeMSC:Definitional16.In the open-economy macroeconomic model, the supply curve of currency is vertical because the quantity of currency supplied does not depend on the real exchange rate.ANS:TDIF:1REF:32-1NAT:AnalyticLOC:International trade and financeTOP:Market for foreign-currency exchangeMSC:Applicative17.If the real exchange rate of the U.S. dollar were above its equilibrium level, the real exchange rate of the U.S. dollar would appreciate.ANS:FDIF:1REF:32-1NAT:AnalyticLOC:International trade and financeTOP:Market for foreign-currency exchangeMSC:Analytical18.In the open-economy macroeconomic model, other things the same, when a U.S. resident imports a foreign good, our model treats this as a decrease in the demand for dollars in the foreign-currency exchange market.ANS:TDIF:2REF:32-2NAT:AnalyticLOC:International trade and financeTOP:Market for foreign-currency exchangeMSC:Applicative19.The key determinant of net capital outflow is the real interest rate.ANS:TDIF:2REF:32-2NAT:AnalyticLOC:International trade and financeTOP:Net capital outflowMSC:Applicative20.A higher U.S. interest rate discourages Americans from buying foreign assets