CHAPTER 32 - Chapter32 AMacroeconomicTheoryoftheOpen...

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Chapter 32 A Macroeconomic Theory of the Open  Economy 1. Households make their savings available to borrowers through a. resource markets. b. the loanable funds market. c. the labor market.  d. taxes. ANSWER: b the loanable funds market. SECTION: 1 OBJECTIVE: 1 2. The supply of funds curve is upward sloping because a rise in the interest rate a. decreases the opportunity cost of firms’ investment spending. b. increases the opportunity cost of firms’ investment spending. c. decreases the opportunity cost to households of consuming. d. increases the opportunity cost to households of consuming. ANSWER: d increases the opportunity cost to households of consuming. SECTION: 1 OBJECTIVE: 1 3. Market clearing in the loanable funds market a. guarantees that total spending will be just sufficient to purchase whatever output is produced. b. means that the interest rate will never change. c. guarantees that total spending will equal the quantity of loanable funds demanded. d. requires that the government run a budget deficit. ANSWER: a guarantees that total spending will be just sufficient to purchase whatever output is produced. SECTION: 1 OBJECTIVE: 1 4. Which of the following changes would cause a movement along the U.S. demand curve for a foreign  currency? a. an increase in U.S. real GDP b. a decrease in U.S. real GDP c. an increase in the U.S. interest rate d. a change in the real exchange rate ANSWER: d a change in the real exchange rate SECTION: 1 OBJECTIVE: 1 189
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190    Chapter 32/A Macroeconomic Theory of the Open Economy 5. As the U.S. interest rate falls relative to the British interest rate, a. the U.S. demand curve for pounds will not change. b. the U.S. demand curve for pounds will shift to the left. c. the U.S. demand curve for pounds will shift to the right. d. there will be a move down the existing U.S. demand curve for pounds. ANSWER: c the U.S. demand curve for pounds will shift to the right. SECTION: 1 OBJECTIVE: 1 6. The supply of foreign exchange is a. determined by the real exchange rate. b. independent of the real exchange rate. c. determined by central bankers. d. determined by the President. ANSWER: b
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This note was uploaded on 10/22/2010 for the course BUSINESS BAIU09 taught by Professor Mr.ken during the Spring '10 term at American InterContinental University Dunwoody.

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CHAPTER 32 - Chapter32 AMacroeconomicTheoryoftheOpen...

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