Question 1

If the exchange rate is 1.25 New Zealand dollars per U.S dollar, the price of apples is $2 a pound in the U.S. and 1 New Zealand dollar per pound in New Zealand, what is the real exchange rate?

Accepted Answer

A)   2.50
B)   2
C)   1.25
D)   .75E) B) and C)
F) A) and B)

Question 2

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

Question 3

Oceania buys $100 of wine from Escudia and Escudia buys $80 of wool from Oceania. Suppose this is the only trade that these countries do. What are the net exports of Oceania and Escudia, in that order?

Accepted Answer

A)   $80 and $100
B)   $-20 and $20
C)   $20 and -$20
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 4

A country's saving is greater than its domestic investment. This difference means that its

Accepted Answer

A)   net capital outflow and net exports are positive.
B)   net capital outflow and net exports are negative.
C)   net capital outflow is positive and net exports are negative.
D)   net capital outflow is negative and net exports are positive.E) A) and B)
F) A) and C)

Question 5

You are planning a graduation trip to Mexico. Other things the same, if the dollar appreciates relative to the peso, then

Accepted Answer

A)   the dollar buys fewer pesos. Your hotel room in Mexico will require fewer dollars.
B)   the dollar buys fewer pesos. Your hotel room in Mexico will require more dollars.
C)   the dollar buys more pesos. Your hotel room in Mexico will require fewer dollars.
D)   the dollar buys more pesos. Your hotel room in Mexico will require more dollars.E) All of the above
F) C) and D)

Question 6

Suppose a bottle of wine costs 20 euros in France and 25 dollars in the United States. If the exchange rate is .80 euros per dollar, what is the real exchange rate?

Accepted Answer

The real exchange rate = nomin...

Question 7

The nominal exchange rate is .80 euros per U.S. dollar and a basket of goods in France costs 1,000 euros while the same basket costs $800 in the U.S. The nominal exchange rate is 1.2 Australian dollars per U.S. dollar and a basket of goods in Australia costs 960 Australian dollars while the same basket costs $800 in the U.S.. Which country has purchasing-power parity with the U.S.?

Accepted Answer

A)   both France and Australia
B)   France but not Australia
C)   Australia but not France
D)   neither France nor AustraliaE) All of the above
F) A) and D)

Question 8

During a hyperinflation the real domestic value of a country's currency

Accepted Answer

A)   falls and its nominal exchange rate depreciates.
B)   falls and its nominal exchange rate appreciates.
C)   rises and its nominal exchange rate depreciates.
D)   rises and its nominal exchange rate appreciates.E) C) and D)
F) A) and B)

Question 9

You are staying in London over the summer and you have a number of dollars with you. If the dollar appreciates relative to the British pound, then other things the same,

Accepted Answer

A)   the dollar would buy more pounds. The appreciation would discourage you from buying as many British goods and services.
B)   the dollar would buy more pounds. The appreciation would encourage you to buy more British goods and services.
C)   the dollar would buy fewer pounds. The appreciation would discourage you from buying as many British goods and services.
D)   the dollar would buy fewer pounds. The appreciation would encourage you to buy more British goods and services.E) C) and D)
F) None of the above

Question 10

Sam, a U.S. citizen, buys bonds issued by a Greek company that bottles olives. Sam's purchase is

Accepted Answer

A)   foreign direct investment. By itself it increases U.S. net capital outflow.
B)   foreign direct investment. By itself it decreases U.S. net capital outflow.
C)   foreign portfolio investment. By itself it increases U.S. net capital outflow.
D)   foreign portfolio investment. By itself it decreases U.S. net capital outflow.E) None of the above
F) B) and C)

Question 11

Other things the same, if the exchange rate changes from .8 euros per dollar to .9 euros per dollar, the dollar

Accepted Answer

A)   depreciates so U.S. goods become less expensive relative to foreign goods.
B)   depreciates so U.S. goods become more expensive relative to foreign goods.
C)   appreciates so U.S. goods become less expensive relative to foreign goods.
D)   appreciates so U.S. goods become more expensive relative to foreign goods.E) B) and C)
F) A) and C)

Question 12

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) A) and B)
F) B) and D)

Question 13

The increase in international trade in the United States is partly due to

Accepted Answer

A)   improvements in transportation.
B)   advances in telecommunications.
C)   increased trade of goods with a high value per pound.
D)   All of the above are correct.E) C) and D)
F) A) and C)

Question 14

If the U.S. has exports of $1.5 trillion and imports of $2.2 trillion, then the U.S.

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) None of the above
F) B) and C)

Question 15

Last year country A's residents purchased $700 billion of goods and services from and sold $500 billion of goods and services to residents of foreign countries. Its domestic investment was $1,100. What was country A's saving? Show your work.

Accepted Answer

net capital outflow = net expo...

Question 16

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) A) and D)
F) B) and D)

Question 17

Exchange rates are 100 yen per dollar, 0.8 euro per dollar, and 12 pesos per dollar. A bottle of beer in New York costs 6 dollars, 500 yen in Tokyo, 6 euro in Munich, and 84 pesos in Cancun. Where is the most expensive and the cheapest beer, in that order?

Accepted Answer

A)   Cancun, New York
B)   Munich, Tokyo
C)   Tokyo, Munich
D)   New York, CancunE) B) and C)
F) A) and B)

Question 18

A U.S. bakery buys wheat from Canada and pays for it with US dollars. This transaction

Accepted Answer

A)   increases Canadian net exports, and increases U.S. net capital outflow.
B)   increases Canadian net exports, and decreases U.S. net capital outflow.
C)   decreases Canadian net exports, and increases U.S. net capital outflow.
D)   decreases Canadian net exports, and decreases U.S. net capital outflow.E) A) and B)
F) C) and D)

Question 19

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) A) and D)
F) None of the above

Question 20

From 1980 to 1987

Accepted Answer

A)   foreigners were buying more assets from the United States than Americans were buying abroad. The United States was going into debt.
B)   Americans were buying more assets abroad than foreigners were buying from the United States. The United States was going into debt.
C)   foreigners were buying more assets from the United States than Americans were buying abroad. The United States was moving into surplus.
D)   Americans were buying more assets abroad than foreigners were buying from the United States. The United States was moving into surplus.E) None of the above
F) A) and D)

Exam 13: Open-Economy Macroeconomics: Basic Concepts

You are planning a graduation trip to Mexico. Other things the same, if the dollar appreciates relative to the peso, then

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

From 1980 to 1987

Correct Answer
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Exchange rates are 100 yen per dollar, 0.8 euro per dollar, and 12 pesos per dollar. A bottle of beer in New York costs 6 dollars, 500 yen in Tokyo, 6 euro in Munich, and 84 pesos in Cancun. Where is the most expensive and the cheapest beer, in that order?

Correct Answer
verified

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

Correct Answer
verified

From 1970 to 1998 the U.S. dollar

Correct Answer
verified

Oceania buys $100 of wine from Escudia and Escudia buys $80 of wool from Oceania. Suppose this is the only trade that these countries do. What are the net exports of Oceania and Escudia, in that order?

Correct Answer
verified

Suppose a bottle of wine costs 20 euros in France and 25 dollars in the United States. If the exchange rate is .80 euros per dollar, what is the real exchange rate?

Correct Answer
verified
The real exchange rate = nomin...
View Answer

Other things the same, if the exchange rate changes from .8 euros per dollar to .9 euros per dollar, the dollar

Correct Answer
verified

If the exchange rate is 1.25 New Zealand dollars per U.S dollar, the price of apples is $2 a pound in the U.S. and 1 New Zealand dollar per pound in New Zealand, what is the real exchange rate?

Correct Answer
verified

Sam, a U.S. citizen, buys bonds issued by a Greek company that bottles olives. Sam's purchase is

Correct Answer
verified

The increase in international trade in the United States is partly due to

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

Correct Answer
verified

If the U.S. has exports of $1.5 trillion and imports of $2.2 trillion, then the U.S.

Correct Answer
verified

A U.S. bakery buys wheat from Canada and pays for it with US dollars. This transaction

Correct Answer
verified

You are staying in London over the summer and you have a number of dollars with you. If the dollar appreciates relative to the British pound, then other things the same,

Correct Answer
verified

A country's saving is greater than its domestic investment. This difference means that its

Correct Answer
verified

During a hyperinflation the real domestic value of a country's currency

Correct Answer
verified

Last year country A's residents purchased $700 billion of goods and services from and sold $500 billion of goods and services to residents of foreign countries. Its domestic investment was $1,100. What was country A's saving? Show your work.

Correct Answer
verified
net capital outflow = net expo...
View Answer

Exam 13: Open-Economy Macroeconomics: Basic Concepts

You are planning a graduation trip to Mexico. Other things the same, if the dollar appreciates relative to the peso, then

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

From 1980 to 1987

Correct AnswerverifiedShow Answer

Exchange rates are 100 yen per dollar, 0.8 euro per dollar, and 12 pesos per dollar. A bottle of beer in New York costs 6 dollars, 500 yen in Tokyo, 6 euro in Munich, and 84 pesos in Cancun. Where is the most expensive and the cheapest beer, in that order?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

From 1970 to 1998 the U.S. dollar

Correct AnswerverifiedShow Answer

Oceania buys $100 of wine from Escudia and Escudia buys $80 of wool from Oceania. Suppose this is the only trade that these countries do. What are the net exports of Oceania and Escudia, in that order?

Correct AnswerverifiedShow Answer

Suppose a bottle of wine costs 20 euros in France and 25 dollars in the United States. If the exchange rate is .80 euros per dollar, what is the real exchange rate?

Correct AnswerverifiedThe real exchange rate = nomin...View AnswerShow Answer

Other things the same, if the exchange rate changes from .8 euros per dollar to .9 euros per dollar, the dollar

Correct AnswerverifiedShow Answer

If the exchange rate is 1.25 New Zealand dollars per U.S dollar, the price of apples is $2 a pound in the U.S. and 1 New Zealand dollar per pound in New Zealand, what is the real exchange rate?

Correct AnswerverifiedShow Answer

Sam, a U.S. citizen, buys bonds issued by a Greek company that bottles olives. Sam's purchase is

Correct AnswerverifiedShow Answer

The increase in international trade in the United States is partly due to

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

Correct AnswerverifiedShow Answer

If the U.S. has exports of $1.5 trillion and imports of $2.2 trillion, then the U.S.

Correct AnswerverifiedShow Answer

A U.S. bakery buys wheat from Canada and pays for it with US dollars. This transaction

Correct AnswerverifiedShow Answer

You are staying in London over the summer and you have a number of dollars with you. If the dollar appreciates relative to the British pound, then other things the same,

Correct AnswerverifiedShow Answer

A country's saving is greater than its domestic investment. This difference means that its

Correct AnswerverifiedShow Answer

During a hyperinflation the real domestic value of a country's currency

Correct AnswerverifiedShow Answer

Last year country A's residents purchased $700 billion of goods and services from and sold $500 billion of goods and services to residents of foreign countries. Its domestic investment was $1,100. What was country A's saving? Show your work.

Correct Answerverifiednet capital outflow = net expo...View AnswerShow Answer

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The real exchange rate = nomin...
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net capital outflow = net expo...
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