A shift in demand toward the home countrys goods

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41. A shift in demand toward the home country’s goods would _____ the domestic real interest rate and _____ net desired saving (desired saving less desired investment) in the economy. (a) lower; increase (b) lower; decrease (c) raise; increase (d) raise; decrease Answer: C Level of difficulty: 2 Section: 13.3
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Chapter 13 Exchange Rates, Business Cycles, and Macroeconomic Policy in the Open Economy 209 42. A temporary decrease in government purchases would _____ the domestic real interest rate and _____ net desired saving (desired saving less desired investment) in the economy. 43. In a Keynesian model, a temporary increase in government purchases would cause output to _____ and the domestic real interest rate to _____, in the short run. 44. In the short run in the Keynesian model, an increase in the domestic money supply would cause domestic output to _____ and the domestic real interest rate to _____. 45. An increase in the American money supply would cause the value of the dollar to _____ and net American exports to _____ in the short run using a Keynesian model. (a) rise; rise (b) fall; rise (c) rise; fall (d) fall; fall Answer: D Level of difficulty: 2 Section: 13.4
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210 Abel/Bernanke • Macroeconomics, Fifth Edition 46. The Federal Reserve has just purchased bonds in the market, carrying out open market operations. In the short run in the Keynesian model, this would cause the foreign real interest rate to _____ and foreign output to _____. 47. According to the classical model, an increase in the American nominal money supply would cause the nominal exchange rate to _____ and the real exchange rate to _____. 48. Suppose Japan is currently running a current account surplus. The most effective way of eliminating this current account surplus would be to temporarily _____ government purchases and _____ the domestic money supply.
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