Question 1

Last year a country had $700 billion of saving and $900 of investment. What was its net capital outflow? How is it possible for a country to have investment that exceeds saving?

Accepted Answer

Net capital outflow equals saving - dome...

Question 2

An appreciation of the U.S. real exchange rate induces U.S. consumers to buy

Accepted Answer

A)  fewer domestic goods and fewer foreign goods.
B)  more domestic goods and fewer foreign goods.
C)  fewer domestic goods and more foreign goods.
D)  more domestic goods and more foreign goods.E) A) and D)
F) A) and C)

Question 3

Matt and Melinda are American residents. Matt buys stock issued by a German corporation. Melinda opens a shoe factory in Panama. Whose purchase, by itself, increases the U.S.'s net capital outflow?

Accepted Answer

A)  Matt's
B)  Melinda's
C)  both Matt's and Melinda's
D)  neither Matt's nor Melinda'sE) B) and D)
F) B) and C)

Question 4

Egypt has exports of $500 million and imports of $750 million. Egypt

Accepted Answer

A)  sells more overseas then it buys from overseas; it has a trade deficit.
B)  sells more overseas then it buys from overseas; it has a trade surplus.
C)  buys more from overseas then it sells overseas; it has a trade deficit.
D)  buys more from overseas then it sells overseas; it has a trade surplus.E) B) and C)
F) A) and D)

Question 5

A U.S. firm sells diesel locomotives to a German railroad. Other things the same, this sale

Accepted Answer

A)  increases U.S. net exports and decreases German net exports.
B)  decreases U.S. net exports and increases German net exports.
C)  increases U.S. and German net exports.
D)  decreases U.S. and German net exports.E) B) and C)
F) A) and B)

Question 6

Which of the following equations is always correct in an open economy?

Accepted Answer

A)  I = Y - C
B)  I = S
C)  I = S - NCO
D)  I = S + NXE) All of the above
F) A) and B)

Question 7

Other things the same, the real exchange rate between American and French goods would be lower if

Accepted Answer

A)  prices of French goods were higher, or the number of euros a dollar purchased was higher.
B)  prices of French goods were higher, or the number of euros a dollar purchased was lower.
C)  prices of French goods were lower, or the number of euros a dollar purchased was higher.
D)  prices of French goods were lower, or the number of euros a dollar purchased was lower.E) B) and C)
F) A) and D)

Question 8

If a country's government reduced corruption and reformed its tax system so that businesses found operating there less risky, it's likely that this country's

Accepted Answer

A)  net exports and net capital outflows would increase.
B)  net exports would increase and its net capital outflows would decrease.
C)  net exports and net capital outflow would decrease.
D)  net exports would decrease and its net capital outflow would increase.E) A) and B)
F) B) and C)

Question 9

If purchasing-power parity holds, the price level in the U.S. is 140, and the price level in Canada is 120, which of the following is true?

Accepted Answer

A)  the real exchange rate is 120/140.
B)  the real exchange rate is 140/120.
C)  the nominal exchange rate is 120/140
D)  the nominal exchange rate is 140/120E) C) and D)
F) B) and C)

Question 10

The purchase of U.S. government bonds by Egyptians is an example of

Accepted Answer

A)  U.S. imports.
B)  U.S. exports.
C)  foreign portfolio investment by Egyptians.
D)  foreign direct investment by Egyptians.E) B) and D)
F) C) and D)

Question 11

A country purchases $3 billion of foreign-produced goods and services and sells $2 billion dollars of domestically produced goods and services to foreign countries. It has

Accepted Answer

A)  exports of $3 billion and a trade surplus of $1 billion.
B)  exports of $3 billion and a trade deficit of $1 billion.
C)  exports of $2 billion and a trade surplus of $1 billion.
D)  exports of $2 billion and a trade deficit of $1 billion.E) A) and B)
F) A) and C)

Question 12

A U.S. mutual fund buys stocks issued by a Columbian company. This purchase is an example of

Accepted Answer

A)  U.S. foreign direct investment. It increases Columbia's net capital outflow.
B)  U.S. foreign direct investment. It decreases Columbia's net capital outflow.
C)  U.S. foreign portfolio investment. It decreases Columbia's net capital outflow.
D)  U.S. foreign portfolio investment. It increases Columbia's net capital outflow.E) All of the above
F) B) and D)

Question 13

When a Japanese auto maker opens a factory in the U.S., U.S. net capital outflow

Accepted Answer

A)  increases because the foreign company makes a portfolio investment in the U.S.
B)  declines because the foreign company makes a portfolio investment in the U.S.
C)  increases because the foreign company makes a direct investment in capital in the U.S.
D)  declines because the foreign company makes a direct investment in capital in the U.S.E) B) and D)
F) B) and C)

Question 14

The value of Austria's exports minus the value of Austria's imports is called

Accepted Answer

A)  Austria's net exports.
B)  Austria's net imports.
C)  Austria's foreign portfolio investment
D)  Austria's foreign direct investment.E) B) and C)
F) C) and D)

Question 15

If purchasing-power parity holds, a bushel of rice costs $10 in the U.S., and the nominal exchange rate is 25 Thai baht per dollar, what is the price of rice in Thailand?

Accepted Answer

A)  400 baht
B)  250 bhat
C)  100 bhat
D)  None of the above is correct.E) A) and C)
F) All of the above

Question 16

Other things the same, which of the following would both make Americans more willing to buy Italian goods?

Accepted Answer

A)  the nominal exchange rate falls, the price of goods in Italy falls
B)  the nominal exchange rate falls, the price of goods in Italy rises
C)  the nominal exchange rate rises, the price of goods in Italy falls
D)  the nominal exchange rate rises, the price of goods in Italy risesE) B) and D)
F) A) and B)

Question 17

According to purchasing-power parity, when a country's central bank decreases the money supply, a unit of money

Accepted Answer

A)  gains value both in terms of the domestic goods and services it can buy and in terms of the foreign currency it can buy.
B)  gains value in terms of the domestic goods and services it can buy, but loses value in terms of the foreign currency it can buy.
C)  loses value in terms of the domestic goods and services it can buy, but gains value in terms of the foreign currency it can buy.
D)  loses value both in terms of the domestic goods and services it can buy and in terms of the foreign currency it can buy.E) None of the above
F) B) and C)

Question 18

If the price of a good in the U.S. is $10 and the unit of foreign currency is the dinar, in which case is the real exchange rate 5/4?

Accepted Answer

A)  the foreign price is 4 dinars and the exchange rate is 1/2 dinars per dollar
B)  the foreign price is 5 dinars and the exchange rate is 2.5 dinars per dollar
C)  the foreign price is 4 dinars and the exchange rate is 2 dinars per dollar
D)  the foreign price is 5 dinars and the exchange rate is 2/5 dinars per dollarE) All of the above
F) B) and C)

Question 19

If purchasing power parity holds and a basket of goods costs $300 in the U.S. and the same basket costs 450 manats in Azerbiajan, then what is the nominal exchange rate?

Accepted Answer

A)  about .67 manats per dollar
B)  1 manat per dollar
C)  1.5 manats per dollar
D)  about 1.67 manats per dollarE) B) and C)
F) B) and D)

Question 20

If a country has Y > C + I + G, then

Accepted Answer

A)  S > I and it has a trade surplus.
B)  S > I and it has a trade deficit.
C)  S 
D)  S < I and it has a trade deficit.E) A) and B)
F) A) and C)

Exam 31: Open-Economy Macroeconomics: Basic Concepts

Other things the same, which of the following would both make Americans more willing to buy Italian goods?

Correct AnswerverifiedShow Answer

If purchasing-power parity holds, a bushel of rice costs $10 in the U.S., and the nominal exchange rate is 25 Thai baht per dollar, what is the price of rice in Thailand?

Correct AnswerverifiedShow Answer

If a country's government reduced corruption and reformed its tax system so that businesses found operating there less risky, it's likely that this country's

Correct AnswerverifiedShow Answer

An appreciation of the U.S. real exchange rate induces U.S. consumers to buy

Correct AnswerverifiedShow Answer

Other things the same, the real exchange rate between American and French goods would be lower if

Correct AnswerverifiedShow Answer

If the price of a good in the U.S. is $10 and the unit of foreign currency is the dinar, in which case is the real exchange rate 5/4?

Correct AnswerverifiedShow Answer

If purchasing power parity holds and a basket of goods costs $300 in the U.S. and the same basket costs 450 manats in Azerbiajan, then what is the nominal exchange rate?

Correct AnswerverifiedShow Answer

The value of Austria's exports minus the value of Austria's imports is called

Correct AnswerverifiedShow Answer

When a Japanese auto maker opens a factory in the U.S., U.S. net capital outflow

Correct AnswerverifiedShow Answer

A country purchases $3 billion of foreign-produced goods and services and sells $2 billion dollars of domestically produced goods and services to foreign countries. It has

Correct AnswerverifiedShow Answer

If purchasing-power parity holds, the price level in the U.S. is 140, and the price level in Canada is 120, which of the following is true?

Correct AnswerverifiedShow Answer

Last year a country had $700 billion of saving and $900 of investment. What was its net capital outflow? How is it possible for a country to have investment that exceeds saving?

Correct AnswerverifiedNet capital outflow equals saving - dome...View AnswerShow Answer

According to purchasing-power parity, when a country's central bank decreases the money supply, a unit of money

Correct AnswerverifiedShow Answer

Egypt has exports of $500 million and imports of $750 million. Egypt

Correct AnswerverifiedShow Answer

Which of the following equations is always correct in an open economy?

Correct AnswerverifiedShow Answer

Matt and Melinda are American residents. Matt buys stock issued by a German corporation. Melinda opens a shoe factory in Panama. Whose purchase, by itself, increases the U.S.'s net capital outflow?

Correct AnswerverifiedShow Answer

A U.S. mutual fund buys stocks issued by a Columbian company. This purchase is an example of

Correct AnswerverifiedShow Answer

A U.S. firm sells diesel locomotives to a German railroad. Other things the same, this sale

Correct AnswerverifiedShow Answer

If a country has Y > C + I + G, then

Correct AnswerverifiedShow Answer

The purchase of U.S. government bonds by Egyptians is an example of

Correct AnswerverifiedShow Answer

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Net capital outflow equals saving - dome...
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