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Exam 18: Open-Economy Macroeconomic Models

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Question 81

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Suppose that a country has $120 billion of national saving, and $80 billion of domestic investment. Is this possible? Where did the other $40 billion of national savings go?

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This is possible for an open economy. Th...

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Question 82

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Bob, a Greek citizen, opens a restaurant in Chicago. His expenditures

A) increase U.S. net capital outflow and have no affect on Greek net capital outflow.
B) increase U.S. net capital outflow and increase Greek net capital outflow.
C) increase U.S. net capital outflow, but decrease Greek net capital outflow.
D) decrease U.S. net capital outflow, but increase Greek net capital outflow.

E) B) and C)
F) A) and B)

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Question 83

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If the Kenyan nominal exchange rate declines, and prices are unchanged in Kenya and abroad, then the Kenyan real exchange rate

It is possible for a country to have domestic investment that exceeds national saving.

Use the (hypothetical) information in the following table to answer the following questions.Table 18-2 $\begin{array}{|l|l|c|l|c}\hline \text { Country } & \text { Currency } & \begin{array}{l}\text { Currency per } \\\text { U.S. Dollar }\end{array} & \begin{array}{l}\text { U.S. Price } \\\text { Index }\end{array} & \begin{array}{l}\text { Country Price } \\\text { Index }\end{array} \\\hline \text { Bolivia } & \text { boloviano } & 8.00 & 200 & 1600 \\\hline \text { Japan } & \text { yen } & 80.00 & 200 & 20,000 \\\hline \text { Morocco } & \text { dinar } & 10.00 & 200 & 2,000 \\\hline \text { Norwegian } & \text { kroner } & 6.5 & 200 & 1,500 \\\hline \text { Thailand } & \text { baht } & 40.00 & 200 & 7,000 \\\hline\end{array}$ -Refer to Table 18-2. Which currency(ies) is(are) more valuable than predicted by the doctrine of purchasing-power parity?

According to purchasing power parity, if over the course of a year the price level in the U.S. rises more than in Canada, then which of the following rises?

Juan lives in Ecuador and purchases a motorcycle manufactured in the United States. The motorcycle is

Purchasing-power parity says that the nominal exchange rate must equal the real exchange rate.

If a McDonald's Big Mac cost $3.06 in the United States and 3.21 euros in the Euro area, then purchasing-power parity implies the nominal exchange rate is how many euros per dollar?

Suppose that money supply growth continues to be higher in Turkey than it is in the United States. What does purchasing-power parity imply will happen to the real and to the nominal exchange rate?

According to the doctrine of purchasing-power parity, which of the following should depreciate if over the next year the inflation rate is higher in the U.S. than in the Euro area?

How do we find the real exchange rate from the nominal exchange rate?

A depreciation of the U.S. real exchange rate induces U.S. consumers to buy

When Ghana sells chocolate to the United States, U.S. net exports

Suppose a Starbucks tall latte cost $4.00 in the United States and 3.20 euros in the Euro area. Also, suppose a McDonald's Big Mac costs $3.50 in the United States and 2.45 euros in Euro area. If the nominal exchange rate is .80 euros per dollar, which goods have prices that are consistent with purchasing power parity?

Sheri, a U.S. citizen, builds and operates a bookstore in Spain. This action is an example of

An open economy's GDP is always given by

Other things the same, a country could move from having a trade surplus to having a trade deficit if either

Other things the same, if the exchange rate changes from 30 Thai bhat per dollar to 25 Thai bhat per dollar, then the dollar has

Can purchasing-power parity be used to explain the fact that the U.S. dollar has depreciated by more than 50 percent against the German mark between 1970 and 1998, but appreciated by more than 100 percent against the Italian lira during the same period? Defend your answer.