Question 1

The dollar is said to depreciate against the euro if

Accepted Answer

A)   the exchange rate falls. Other things the same, it will cost fewer euros to buy U.S. goods.
B)   the exchange rate falls. Other things the same, it will cost more euros to buy U.S. goods.
C)   the exchange rate rises. Other things the same, it will cost fewer euros to buy U.S. goods.
D)   the exchange rate rises. Other things the same, it will cost more euros to buy U.S. goods.E) All of the above
F) A) and D)

Question 2

Other things the same, which of the following could explain a rise in Sweden's net capital outflow?

Accepted Answer

A)   interest rates on Swedish bonds rise
B)   the probability of default on Swedish bonds rises
C)   Sweden enacts a law reducing taxes on income earned by foreign-owned businesses operating in Sweden
D)   None of the above are correct.E) All of the above
F) C) and D)

Question 3

By itself, if a U.S. firm builds a new factory overseas, U.S. net capital outflow rises.

Accepted Answer

A) True 
 B)False

Question 4

If the purchasing power of the dollar is always the same at home and abroad, then the nominal exchange rate defined as units of foreign currency per dollar decreases if the U.S. price level rises more than the price level in foreign countries.

Accepted Answer

A) True 
 B)False

Question 5

Firms in Saudi Arabia sell oil to the U.S. Other things the same, these oil sales

Accepted Answer

A)   increase Saudi net exports and net capital outflow.
B)   decrease Saudi net exports and net capital outflow.
C)   increase Saudi net exports and decrease Saudi net capital outflow.
D)   decrease Saudi net exports and increase Saudi net capital outflow.E) None of the above
F) A) and D)

Question 6

A German mutual fund sells euros to a U.S. bank for $20,000. The mutual fund then uses these dollars to purchase a bond issued by United Express, a U.S. delivery company. As a result of these two transactions, what happened to U.S. net capital outflow?

Accepted Answer

A)   It fell by $40,000.
B)   It fell by $20,000.
C)   It was unchanged.
D)   It rose by $20,000.E) A) and B)
F) B) and D)

Question 7

The nominal exchange rate is 90 Pakistani rupees per dollar. The price of a shirt in Pakistan is 1800 rupees. The same shirt sells for $25 in the U.S.
A. What is the real exchange rate? Show your work.
B. Can arbitragers make a profit?
C. If your answer to C is yes, where would they buy and where would they sell?

Accepted Answer

A. The real exchange rate = $2...

Question 8

Suppose that the nominal exchange rate is .80 euro per dollar, that the price of a basket of goods in the U.S. is $500 and the price of a basket of goods in Germany is 400 Euro. Suppose that these values change to .90 euro per dollar, $600, and 600 euro. Then the real exchange rate would

Accepted Answer

A)   appreciate which by itself would make U.S. net exports fall.
B)   appreciate which by itself would make U.S. net exports rise.
C)   depreciate which by itself would make U.S. net exports fall.
D)   depreciate which by itself would make U.S. net exports rise.E) A) and D)
F) B) and C)

Question 9

Mark, a U.S. citizen, buys stock in a British Shipping company. This purchase is an example of

Accepted Answer

A)   investment for Mark and U.S. foreign direct investment.
B)   investment for Mark and U.S. foreign portfolio investment.
C)   saving for Mark and U.S. foreign direct investment.
D)   saving for Mark and U.S. foreign portfolio investment.E) A) and B)
F) A) and C)

Question 10

The ability to profit by purchasing wheat in the U.S. and selling it in China implies that the

Accepted Answer

A)   nominal exchange rate is less than 1.
B)   nominal exchange rate is greater than 1.
C)   real exchange rate is less than 1.
D)   real exchange rate is greater than 1.E) All of the above
F) B) and C)

Question 11

Other things the same, an increase in foreign prices raises the real exchange rate.

Accepted Answer

A) True 
 B)False

Question 12

If the American company Stryker builds and operates a new factory in France,

Accepted Answer

A)   it engages in foreign direct investment. By itself this action lowers U.S. net capital outflow.
B)   it engages in foreign direct investment. By itself this action raises U.S. net capital outflow.
C)   it engages in foreign portfolio investment. By itself this action lowers U.S. net capital outflow.
D)   it engages in foreign portfolio investment. By itself this action raises U.S. net capital outflow.E) All of the above
F) A) and D)

Question 13

While vacationing in Agra, India, the price of one night's stay at your hotel room rises from 6600 rupees to 7200 rupees. If the exchange rate was previously 55 rupees per dollar, what would the exchange rate need to be now in order for the number of dollars you pay for your room to remain the same? Does this imply the rupee depreciated or appreciated against the dollar?

Accepted Answer

At an exchange rate of 55 rupees the roo...

Question 14

If a country changes its corporate tax laws so that domestic businesses build and manage more business in other countries, then the net capital outflow of that country

Accepted Answer

A)   and the net capital outflow of other countries rise.
B)   rises and the net capital outflow of other countries fall.
C)   falls and the net capital outflow of other countries rise.
D)   None of the above are correct.E) None of the above
F) All of the above

Question 15

According to purchasing-power parity, if two countries have the same price level because they have the same prices for all goods and services, then which of the following would equal 1?

Accepted Answer

A)   the real exchange rate, but not the nominal exchange rate
B)   the nominal exchange rate, but not the real exchange rate
C)   the real exchange rate and the nominal exchange rate
D)   neither the real exchange rate nor the nominal exchange rateE) B) and D)
F) C) and D)

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Bob traps lobsters in Maine and sells them to a restaurant in Mexico. Other things the same, these sales

Accepted Answer

A)   increase U.S. net exports and have no effect on Mexican net exports.
B)   increase U.S. net exports and decrease Mexican net exports.
C)   decrease U.S. net exports and have no effect on Mexican net exports.
D)   decrease U.S. net exports and increase Mexican net exports.E) A) and D)
F) C) and D)

Question 18

How do the nominal exchange rate and the real exchange rate differ?

Accepted Answer

The nominal exchange rate is the rate at...

Question 19

The nominal exchange rate is the

Accepted Answer

A)   nominal interest rate in one country divided by the nominal interest rate in the other country.
B)   the ratio of a foreign country's interest rate to the domestic interest rate.
C)   rate at which a person can trade the currency of one country for another.
D)   the real exchange rate minus the inflation rate.E) All of the above
F) B) and D)

Question 20

Which of the following is always correct?

Accepted Answer

A)   Y - I = NCO
B)   NCO = NX
C)   NX = I
D)   All of the above are correct.E) All of the above
F) A) and D)

Exam 13: Open-Economy Macroeconomics: Basic Concepts

Firms in Saudi Arabia sell oil to the U.S. Other things the same, these oil sales

Correct Answer
verified

The dollar is said to depreciate against the euro if

Correct Answer
verified

If the American company Stryker builds and operates a new factory in France,

Correct Answer
verified

According to purchasing-power parity, if two countries have the same price level because they have the same prices for all goods and services, then which of the following would equal 1?

Correct Answer
verified

The ability to profit by purchasing wheat in the U.S. and selling it in China implies that the

Correct Answer
verified

A German mutual fund sells euros to a U.S. bank for $20,000. The mutual fund then uses these dollars to purchase a bond issued by United Express, a U.S. delivery company. As a result of these two transactions, what happened to U.S. net capital outflow?

Correct Answer
verified

If a country changes its corporate tax laws so that domestic businesses build and manage more business in other countries, then the net capital outflow of that country

Correct Answer
verified

Suppose that the nominal exchange rate is .80 euro per dollar, that the price of a basket of goods in the U.S. is $500 and the price of a basket of goods in Germany is 400 Euro. Suppose that these values change to .90 euro per dollar, $600, and 600 euro. Then the real exchange rate would

Correct Answer
verified

If the purchasing power of the dollar is always the same at home and abroad, then the nominal exchange rate defined as units of foreign currency per dollar decreases if the U.S. price level rises more than the price level in foreign countries.

Correct Answer
verified

Other things the same, an increase in foreign prices raises the real exchange rate.

Correct Answer
verified

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

Correct Answer
verified

Mark, a U.S. citizen, buys stock in a British Shipping company. This purchase is an example of

Correct Answer
verified

Which of the following is always correct?

Correct Answer
verified

How do the nominal exchange rate and the real exchange rate differ?

Correct Answer
verified
The nominal exchange rate is the rate at...
View Answer

Correct Answer
verified
A. The real exchange rate = $2...
View Answer

Other things the same, which of the following could explain a rise in Sweden's net capital outflow?

Correct Answer
verified

The nominal exchange rate is the

Correct Answer
verified

Bob traps lobsters in Maine and sells them to a restaurant in Mexico. Other things the same, these sales

Correct Answer
verified

Correct Answer
verified
At an exchange rate of 55 rupees the roo...
View Answer

By itself, if a U.S. firm builds a new factory overseas, U.S. net capital outflow rises.

Correct Answer
verified

Exam 13: Open-Economy Macroeconomics: Basic Concepts

Firms in Saudi Arabia sell oil to the U.S. Other things the same, these oil sales

Correct AnswerverifiedShow Answer

The dollar is said to depreciate against the euro if

Correct AnswerverifiedShow Answer

If the American company Stryker builds and operates a new factory in France,

Correct AnswerverifiedShow Answer

According to purchasing-power parity, if two countries have the same price level because they have the same prices for all goods and services, then which of the following would equal 1?

Correct AnswerverifiedShow Answer

The ability to profit by purchasing wheat in the U.S. and selling it in China implies that the

Correct AnswerverifiedShow Answer

A German mutual fund sells euros to a U.S. bank for $20,000. The mutual fund then uses these dollars to purchase a bond issued by United Express, a U.S. delivery company. As a result of these two transactions, what happened to U.S. net capital outflow?

Correct AnswerverifiedShow Answer

If a country changes its corporate tax laws so that domestic businesses build and manage more business in other countries, then the net capital outflow of that country

Correct AnswerverifiedShow Answer

Suppose that the nominal exchange rate is .80 euro per dollar, that the price of a basket of goods in the U.S. is $500 and the price of a basket of goods in Germany is 400 Euro. Suppose that these values change to .90 euro per dollar, $600, and 600 euro. Then the real exchange rate would

Correct AnswerverifiedShow Answer

If the purchasing power of the dollar is always the same at home and abroad, then the nominal exchange rate defined as units of foreign currency per dollar decreases if the U.S. price level rises more than the price level in foreign countries.

Correct AnswerverifiedShow Answer

Other things the same, an increase in foreign prices raises the real exchange rate.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Mark, a U.S. citizen, buys stock in a British Shipping company. This purchase is an example of

Correct AnswerverifiedShow Answer

Which of the following is always correct?

Correct AnswerverifiedShow Answer

How do the nominal exchange rate and the real exchange rate differ?

Correct AnswerverifiedThe nominal exchange rate is the rate at...View AnswerShow Answer

Correct AnswerverifiedA. The real exchange rate = $2...View AnswerShow Answer

Other things the same, which of the following could explain a rise in Sweden's net capital outflow?

Correct AnswerverifiedShow Answer

The nominal exchange rate is the

Correct AnswerverifiedShow Answer

Bob traps lobsters in Maine and sells them to a restaurant in Mexico. Other things the same, these sales

Correct AnswerverifiedShow Answer

Correct AnswerverifiedAt an exchange rate of 55 rupees the roo...View AnswerShow Answer

By itself, if a U.S. firm builds a new factory overseas, U.S. net capital outflow rises.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
verified
The nominal exchange rate is the rate at...
View Answer

Correct Answer
verified
A. The real exchange rate = $2...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified
At an exchange rate of 55 rupees the roo...
View Answer

Correct Answer
verified