Question 1

Mike, a U.S. citizen, buys $1,000 worth of olives from Greece. By itself this purchase

Accepted Answer

A)  increases U.S. imports by $1,000 and increases U.S. net exports by $1,000.
B)  increases U.S. imports by $1,000 and decreases U.S. net exports by $1,000.
C)  increases U.S. exports by $1,000 and increases U.S. net exports by $1,000.
D)  increases U.S. exports by $1,000 and decreases U.S. net exports by $1,000.E) All of the above
F) B) and D)

Question 2

The country of Wiknam has net capital outflow of $1,000, government purchases of $5,000 and consumption of $20,000. Which of the following is correct?

Accepted Answer

A)  If its domestic investment is $1,000, its GDP is $26,000.
B)  If its domestic investment is $2,000, its GDP is $28,000.
C)  If its domestic investment is $5,000, its GDP is $29,000.
D)  None of the above are correct.E) B) and C)
F) A) and C)

Question 3

According to purchasing power parity, the nominal exchange rate between the U.S. and another country should equal the price level of foreign goods divided by the price level of U.S. goods.

Accepted Answer

A) True 
 B)False

Question 4

If the dollar buys fewer bananas in Guatemala than in Honduras, then traders could make a profit by

Accepted Answer

A)  buying bananas in Honduras and selling them in Guatemala, which would tend to raise the price of bananas in Honduras.
B)  buying bananas in Honduras and selling them in Guatemala, which would tend to raise the price of bananas in Guatemala.
C)  buying bananas in Guatemala and selling them in Honduras, which would tend to raise the price of bananas in Guatemala.
D)  buying bananas in Guatemala and selling them in Honduras, which would tend to raise the price of bananas in Honduras.E) B) and C)
F) All of the above

Question 5

If a country exports more than it imports, then it has

Accepted Answer

A)  positive net exports and positive net capital outflows.
B)  positive net exports and negative net capital outflows.
C)  negative net exports and positive net capital outflows.
D)  negative net exports and negative net capital outflows.E) A) and B)
F) None of the above

Question 6

If U.S. exports are $150 billion and U.S. imports are $100 billion, which of the following is correct?

Accepted Answer

A)  The U.S. has a trade surplus of $100 billion.
B)  The U.S. has a trade surplus of $50 billion.
C)  The U.S. has a trade deficit of $100 billion.
D)  The U.S. has a trade deficit of $50 billion.E) A) and D)
F) None of the above

Question 7

Net capital outflow is the purchase of domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.

Accepted Answer

A) True 
 B)False

Question 8

If purchasing-power parity between France and the U.S. holds, but then U.S. prices rise,

Accepted Answer

A)  the real exchange rate is above its purchasing-power parity value. An increase in the nominal exchange rate can move it back.
B)  the real exchange rate is above its purchasing-power parity value. A decrease in the nominal exchange rate can move it back.
C)  the real exchange rate is below its purchasing-power parity value. An increase in the nominal exchange rate can move it back.
D)  the real exchange rate is below its purchasing-power parity value. A decrease in the nominal exchange rate can move it back.E) All of the above
F) None of the above

Question 9

If Spain has a trade deficit, then

Accepted Answer

A)  foreign countries purchase more Spanish assets than Spain purchases from them. This makes Spanish saving greater than Spanish domestic investment.
B)  foreign countries purchase more Spanish assets than Spain purchases from them. This makes Spanish saving smaller then Spanish domestic investment.
C)  foreign countries purchase fewer Spanish assets than Spain purchases from them. This makes Spanish saving greater than Spanish domestic investment.
D)  Foreign countries purchase fewer Spanish assets than Spain purchases from them. This makes Spanish saving greater than Spanish domestic investment.E) A) and B)
F) A) and C)

Question 10

If U.S. exports are $300 billion and U.S. imports total $350 billion, which of the following is correct?

Accepted Answer

A)  The U.S. has a trade surplus of $350 billion.
B)  The U.S. has a trade surplus of $50 billion.
C)  The U.S. has a trade deficit of $350 billion.
D)  The U.S. has a trade deficit of $50 billion.E) C) and D)
F) B) and C)

Question 11

Purchasing-power parity describes the forces that determine

Accepted Answer

A)  prices in the short run.
B)  prices in the long run.
C)  exchange rates in the short run.
D)  exchange rates in the long run.E) B) and C)
F) A) and D)

Question 12

Over the past five decades, the U.S. economy has become

Accepted Answer

A)  more closed.
B)  more open.
C)  less trade-oriented.
D)  more self-sufficient.E) A) and B)
F) A) and C)

Question 13

According to purchasing-power parity what should the nominal exchange rate between the U.S. and another country be equal to?

Accepted Answer

A)  1
B)  the real exchange rate between the U.S. and that country
C)  the price level in the U.S. divided by the price level in the other country
D)  the price level in the other country divided by the price level in the U.S.E) All of the above
F) B) and C)

Question 14

If you go to the bank and notice that a dollar buys more Japanese yen than it used to, then the dollar has

Accepted Answer

A)  appreciated. Other things the same, the appreciation would make Americans less likely to travel to Japan.
B)  appreciated. Other things the same, the appreciation would make Americans more likely to travel to Japan.
C)  depreciated. Other things the same, the depreciation would make Americans less likely to travel to Japan.
D)  depreciated. Other things the same, the depreciation would make Americans more likely to travel to Japan.E) None of the above
F) A) and B)

Question 15

In the U.S. a candy bar costs $1. If the nominal exchange rate were 6 Chinese yuan per dollar and the real exchange rate were 1.2, then, what would be the price of a candy bar in China?

Accepted Answer

A)  7.2 yuan
B)  6 yuan
C)  5 yuan
D)  3.6 yuanE) C) and D)
F) A) and B)

Question 16

Colonial America had little industry and so had mostly raw materials to export. At the same time, there were many opportunities to purchase capital goods and earn a high rate of return because there was little existing capital so that the marginal product of capital was relatively high. What does this suggest about net exports and net capital outflow in colonial America?

Accepted Answer

Net exports were negative because the va...

Question 17

If domestic residents of France purchase 1.2 trillion euros of foreign assets and foreigners purchase 1.5 trillion euros of French assets, then France's net capital outflow is

Accepted Answer

A)  -.3 trillion euros, so it must have a trade deficit.
B)  -.3 trillion euros, so it must have a trade surplus.
C)  .3 trillion euros, so it must have a trade deficit.
D)  .3 trillion euros, so it must have a trade surplus.E) B) and C)
F) A) and C)

Question 18

From 1970 to 1998 the U.S. dollar

Accepted Answer

A)  gained value compared to the Italian lira because inflation was higher in the U.S.
B)  gained value compared to the Italian lira because inflation was lower in the U.S.
C)  lost value compared to the Italian lira because inflation was higher in the U.S.
D)  lost value compared to the Italian lira because inflation was lower in the U.S.E) C) and D)
F) A) and B)

Question 19

If a country has a trade surplus

Accepted Answer

A)  it has positive net exports and positive net capital outflow.
B)  it has positive net exports and negative net capital outflow.
C)  it has negative net exports and positive net capital outflow.
D)  it has negative net exports and negative net capital outflow.E) B) and C)
F) A) and C)

Question 20

Alfonso, a citizen of Italy, decides to purchase bonds issued by Ireland instead of ones issued by the United States even though the Irish bonds have a higher risk of default. An economic reason for his decision might be that

Accepted Answer

A)  he dislikes U.S. foreign policy.
B)  the Irish bonds pay a higher rate of interest.
C)  the U.S. government is more stable than the Irish government.
D)  None of the above provide an economic reason for buying the riskier bond.E) B) and C)
F) A) and D)

Exam 31: Open-Economy Macroeconomics: Basic Concepts

If U.S. exports are $300 billion and U.S. imports total $350 billion, which of the following is correct?

Correct Answer
verified

If a country exports more than it imports, then it has

Correct Answer
verified

If you go to the bank and notice that a dollar buys more Japanese yen than it used to, then the dollar has

Correct Answer
verified

Net capital outflow is the purchase of domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.

Correct Answer
verified

Correct Answer
verified
Net exports were negative because the va...
View Answer

Alfonso, a citizen of Italy, decides to purchase bonds issued by Ireland instead of ones issued by the United States even though the Irish bonds have a higher risk of default. An economic reason for his decision might be that

Correct Answer
verified

If domestic residents of France purchase 1.2 trillion euros of foreign assets and foreigners purchase 1.5 trillion euros of French assets, then France's net capital outflow is

Correct Answer
verified

If purchasing-power parity between France and the U.S. holds, but then U.S. prices rise,

Correct Answer
verified

If U.S. exports are $150 billion and U.S. imports are $100 billion, which of the following is correct?

Correct Answer
verified

In the U.S. a candy bar costs $1. If the nominal exchange rate were 6 Chinese yuan per dollar and the real exchange rate were 1.2, then, what would be the price of a candy bar in China?

Correct Answer
verified

According to purchasing power parity, the nominal exchange rate between the U.S. and another country should equal the price level of foreign goods divided by the price level of U.S. goods.

Correct Answer
verified

If Spain has a trade deficit, then

Correct Answer
verified

If the dollar buys fewer bananas in Guatemala than in Honduras, then traders could make a profit by

Correct Answer
verified

Purchasing-power parity describes the forces that determine

Correct Answer
verified

Over the past five decades, the U.S. economy has become

Correct Answer
verified

From 1970 to 1998 the U.S. dollar

Correct Answer
verified

The country of Wiknam has net capital outflow of $1,000, government purchases of $5,000 and consumption of $20,000. Which of the following is correct?

Correct Answer
verified

If a country has a trade surplus

Correct Answer
verified

Mike, a U.S. citizen, buys $1,000 worth of olives from Greece. By itself this purchase

Correct Answer
verified

According to purchasing-power parity what should the nominal exchange rate between the U.S. and another country be equal to?

Correct Answer
verified

Exam 31: Open-Economy Macroeconomics: Basic Concepts

If U.S. exports are $300 billion and U.S. imports total $350 billion, which of the following is correct?

Correct AnswerverifiedShow Answer

If a country exports more than it imports, then it has

Correct AnswerverifiedShow Answer

If you go to the bank and notice that a dollar buys more Japanese yen than it used to, then the dollar has

Correct AnswerverifiedShow Answer

Net capital outflow is the purchase of domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedNet exports were negative because the va...View AnswerShow Answer

Alfonso, a citizen of Italy, decides to purchase bonds issued by Ireland instead of ones issued by the United States even though the Irish bonds have a higher risk of default. An economic reason for his decision might be that

Correct AnswerverifiedShow Answer

If domestic residents of France purchase 1.2 trillion euros of foreign assets and foreigners purchase 1.5 trillion euros of French assets, then France's net capital outflow is

Correct AnswerverifiedShow Answer

If purchasing-power parity between France and the U.S. holds, but then U.S. prices rise,

Correct AnswerverifiedShow Answer

If U.S. exports are $150 billion and U.S. imports are $100 billion, which of the following is correct?

Correct AnswerverifiedShow Answer

In the U.S. a candy bar costs $1. If the nominal exchange rate were 6 Chinese yuan per dollar and the real exchange rate were 1.2, then, what would be the price of a candy bar in China?

Correct AnswerverifiedShow Answer

According to purchasing power parity, the nominal exchange rate between the U.S. and another country should equal the price level of foreign goods divided by the price level of U.S. goods.

Correct AnswerverifiedShow Answer

If Spain has a trade deficit, then

Correct AnswerverifiedShow Answer

If the dollar buys fewer bananas in Guatemala than in Honduras, then traders could make a profit by

Correct AnswerverifiedShow Answer

Purchasing-power parity describes the forces that determine

Correct AnswerverifiedShow Answer

Over the past five decades, the U.S. economy has become

Correct AnswerverifiedShow Answer

From 1970 to 1998 the U.S. dollar

Correct AnswerverifiedShow Answer

The country of Wiknam has net capital outflow of $1,000, government purchases of $5,000 and consumption of $20,000. Which of the following is correct?

Correct AnswerverifiedShow Answer

If a country has a trade surplus

Correct AnswerverifiedShow Answer

Mike, a U.S. citizen, buys $1,000 worth of olives from Greece. By itself this purchase

Correct AnswerverifiedShow Answer

According to purchasing-power parity what should the nominal exchange rate between the U.S. and another country be equal to?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
Net exports were negative because the va...
View Answer

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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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