Question 1

A U.S. retailer buys shoes from an Italian company. The Italian firm then uses all of the revenues to buy leather from the U.S. These transactions

Accepted Answer

A)   increase both U.S. net exports and U.S. net capital outflow.
B)   decrease both U.S. net exports and U.S. net capital outflow.
C)   increase U.S. net exports and do not affect U.S. net capital outflow.
D)   None of the above is correct.E) All of the above
F) C) and D)

Question 2

A Chinese company exchanges yuan Chinese currency)  for dollars. It uses these dollars to purchase scrap metal from a U.S. company. As a result of these transactions, Chinese

Accepted Answer

A)   net exports increase, and U.S. net capital outflow increases.
B)   net exports increase, and U.S. net capital outflow decreases.
C)   net exports decrease, and U.S. net capital outflow increases.
D)   net exports decrease, and U.S. net capital outflow decreases.E) None of the above
F) All of the above

Question 3

Goods that cost one dollar in the U.S. cost one euro in France, the real exchange rate would be computed as how many French goods per U.S. goods?

Accepted Answer

A)   one
B)   the price of the U.S. goods
C)   the number of euros that can be bought with one U.S. dollar
D)   None of the above is correct.E) B) and C)
F) None of the above

Question 4

If a nation is selling more goods and services to foreigners than it is buying from them, then on net it must be selling assets abroad.

Accepted Answer

A) True 
 B)False

Question 5

From 1970 to 1998 the U.S. dollar

Accepted Answer

A)   gained value compared to the German mark because inflation was higher in Germany.
B)   gained value compared to the German mark because inflation was lower in Germany.
C)   lost value compared to the German mark because inflation was higher in Germany.
D)   lost value compared to the German mark because inflation was lower in Germany.E) None of the above
F) B) and C)

Question 6

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?

Accepted Answer

Higher money growth leads to higher pric...

Question 7

Dave, a U.S. citizen buys a bicycle manufactured in China. Dave's purchase is

Accepted Answer

A)   both a U.S. and Chinese export.
B)   both a U.S. and Chinese import.
C)   a U.S. import and a Chinese export.
D)   a U.S. export and a Chinese import.E) A) and B)
F) A) and C)

Question 8

Assuming purchasing-power parity holds and that over a period of five years the dollar had appreciated relative to the currency of Country X, what would explain the appreciation of the dollar?

Accepted Answer

Money growth, and so...

Question 9

A country purchases more goods and services from residents of foreign countries than residents of foreign countries purchase from it. This country has

Accepted Answer

A)   a trade surplus and positive net exports.
B)   a trade surplus and negative net exports.
C)   a trade deficit and positive net exports.
D)   a trade deficit and negative net exports.E) A) and C)
F) A) and B)

Question 10

If purchasing-power parity holds, the price level in the U.S. is 250, and the price level in Japan is 260, which of the following is true?

Accepted Answer

A)   the real exchange rate is 250/260
B)   the real exchange rate is 260/250
C)   the nominal exchange rate is 250/260
D)   the nominal exchange rate is 260/250E) A) and B)
F) B) and C)

Question 11

If the Canadian nominal exchange rate does not change, but prices rise faster abroad than in Canada, then the Canadian real exchange rate

Accepted Answer

A)   does not change.
B)   rises.
C)   declines.
D)   None of the above is necessarily correct.E) None of the above
F) All of the above

Question 12

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

Accepted Answer

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

Question 13

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

Question 14

If Israel's domestic investment exceeds its national saving, then Israel has

Accepted Answer

A)   positive net capital outflows and negative net exports.
B)   positive net capital outflows and positive net exports.
C)   negative net capital outflows and negative net exports.
D)   negative net capital outflows and positive net exports.E) C) and D)
F) A) and B)

Question 15

A country has net capital outflow of -10 billion euros and domestic investment of 20 billion euros. What is its national saving?

Accepted Answer

A)   30 billion euros
B)   10 billion euros
C)   -10 billion euros
D)   -30 billion eurosE) A) and B)
F) None of the above

Question 16

The nominal exchange rate is 30 Thai bhat for one U.S. dollar. A sub sandwich combo deal in the U.S. costs $6 dollars in the U.S. and 120 bhat in Thailand. The real exchange rate is

Accepted Answer

A)   3/8
B)   2/3
C)   3/2
D)   8/3E) C) and D)
F) B) and D)

Question 17

A nation has a positive net capital outflow. Which of the following is correct?

Accepted Answer

A)   Purchases of foreign assets by domestic residents exceed purchases of domestic assets by foreigners
B)   It has positive net exports.
C)   Its savings exceeds its domestic investment.
D)   All of the above are correct.E) None of the above
F) A) and B)

Question 18

Other things the same, if a country has a trade deficit and saving rises,

Accepted Answer

A)   net capital outflow rises, so the trade deficit increases.
B)   net capital outflow rises, so the trade deficit decreases.
C)   net capital outflow falls, so the trade deficit increases.
D)   net capital outflow falls, so the trade deficit decreases.E) B) and C)
F) None of the above

Question 19

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 20

A country recently had a trade deficit of $2.5 trillion and purchased $3 trillion of foreign assets. How many of its assets did foreigners purchase?

Accepted Answer

The answer of A country recently had a trade deficit...

Exam 13: Open-Economy Macroeconomics: Basic Concepts

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

Correct AnswerverifiedShow Answer

If the Canadian nominal exchange rate does not change, but prices rise faster abroad than in Canada, then the Canadian real exchange rate

Correct AnswerverifiedShow Answer

Goods that cost one dollar in the U.S. cost one euro in France, the real exchange rate would be computed as how many French goods per U.S. goods?

Correct AnswerverifiedShow Answer

From 1970 to 1998 the U.S. dollar

Correct AnswerverifiedShow Answer

Dave, a U.S. citizen buys a bicycle manufactured in China. Dave's purchase is

Correct AnswerverifiedShow Answer

The nominal exchange rate is 30 Thai bhat for one U.S. dollar. A sub sandwich combo deal in the U.S. costs $6 dollars in the U.S. and 120 bhat in Thailand. The real exchange rate is

Correct AnswerverifiedShow Answer

Assuming purchasing-power parity holds and that over a period of five years the dollar had appreciated relative to the currency of Country X, what would explain the appreciation of the dollar?

Correct AnswerverifiedMoney growth, and so...View AnswerShow Answer

A Chinese company exchanges yuan Chinese currency) for dollars. It uses these dollars to purchase scrap metal from a U.S. company. As a result of these transactions, Chinese

Correct AnswerverifiedShow Answer

If purchasing-power parity holds, the price level in the U.S. is 250, and the price level in Japan is 260, which of the following is true?

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A country has net capital outflow of -10 billion euros and domestic investment of 20 billion euros. What is its national saving?

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A nation has a positive net capital outflow. Which of the following is correct?

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Other things the same, if a country has a trade deficit and saving rises,

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A country purchases more goods and services from residents of foreign countries than residents of foreign countries purchase from it. This country has

Correct AnswerverifiedShow Answer

A country recently had a trade deficit of $2.5 trillion and purchased $3 trillion of foreign assets. How many of its assets did foreigners purchase?

Correct AnswerverifiedShow Answer

If Israel's domestic investment exceeds its national saving, then Israel has

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 nation is selling more goods and services to foreigners than it is buying from them, then on net it must be selling assets abroad.

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

A U.S. retailer buys shoes from an Italian company. The Italian firm then uses all of the revenues to buy leather from the U.S. These transactions

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedHigher money growth leads to higher pric...View AnswerShow Answer

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Higher money growth leads to higher pric...
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