In the open-economy macroeconomic model, if net capital outflow increases then a
ID: 1204093 • Letter: I
Question
In the open-economy macroeconomic model, if net capital outflow increases then a. the supply of dollars in the market for foreign-currency exchange shifts right. b. the demand for dollars in the market for foreign-currency exchange shifts right. c. the demand for dollars in the market for foreign-currency exchange shifts right. d. the supply of dollars in the market for foreign-currency exchange shifts left. 22. Other things the same, if the U.S. real exchange rate depreciated, then U.S. net exports would a. fall and the quantity of dollars demanded in the market for foreign-currency exchange would fall. b. fall and the quantity of dollars demanded in the market for foreign-currency exchange would rise. c. rise and the quantity of dollars demanded in the market for foreign-currency exchange would fall. d. rise and the quantity of dollars demanded in the market for foreign-currency exchange would rise. 23. If the supply of dollars in the market for foreign-currency exchange shifts left, then the a. rises and the quantity of dollars exchanged does not change. b. rises and the quantity of dollars exchanged falls. c. rises and the quantity of dollars exchanged rises. d. falls and the quantity of dollars exchanged does not change. 24. When a country's government budget deficit decreases, a. the real exchange rate of its currency and its net exports increase. b. the real exchange rate of its currency increases and its net exports increase. c. the real exchange rate of its currency increases and its net exports decrease. d. the real exchange rate of its currency decreases and its net exports increase. 25. Imposing an import quota causes the domestic real exchange rate to a. depreciate, which decreases foreign demand for domestic goods. b. appreciate, which increases foreign demand for domestic goods. c. depreciate, which increases foreign demand for domestic goods. d. appreciate, which decreases foreign demand for domestic goods.Explanation / Answer
21. d. the supply of dollars in the market for foreign-currency exchange shifts left.
An open economy macroeconomics model is one that engages in international exchange of goods, services, and investments.
22. c. Rise and the quantity of dollars demanded in the market for foreign-currency exchange would rise
The real exchange rate is the ratio of the price level abroad and the domestic price level, where the foreign price level is converted into domestic currency units via the current nominal exchange rate.
23. c. rises and the quantity of dollars exchanged rises
The foreign exchange is the exchange of one currency for another, or the conversion of one currency into another currency
24. Decreases real interest rate and crowds out investment
Hence correct option is a.
Budget deficit is a status of financial health in which expenditures exceed revenue
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