Question 1

The large trade deficits in the U.S. during the 1990's were primarily associated with a rise in domestic investment spending rather than a rise in the budget deficit.

Accepted Answer

A) True 
 B)False

Question 2

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 D)
F) A) and C)

Question 3

Which of the following is an example of U.S. foreign direct investment?

Accepted Answer

A)   A U.S. based mutual fund buys stock in Eastern European companies.
B)   A U.S. citizen builds and operates a coffee shop in the Netherlands.
C)   A Swiss bank buys a U.S. government bond.
D)   A German tractor factory opens a plant in Waterloo, Iowa.E) A) and B)
F) None of the above

Question 4

Paul, a Canadian citizen, purchases oranges grown in Florida. This purchase is an example of

Accepted Answer

A)   a U.S. import and a Canadian export
B)   a U.S. export and a Canadian import
C)   an export for both the U.S. and Canada
D)   an import for both Canada and the U.S.E) A) and B)
F) A) and C)

Question 5

Suppose a Starbucks tall latte cost $4.00 in the United States and 2.50 euros in the Euro area. Also, suppose a McDonald's Big Mac costs $4.50 in the United States and 3.60 euros in the Euro area. If the nominal exchange rate is .80 euros per dollar, which goods have prices that are consistent with purchasing-power parity?

Accepted Answer

A)   both the tall latte and the Big Mac
B)   the tall latte but not the Big Mac
C)   the Big Mac but not the tall latte
D)   neither the Big Mac nor the tall latteE) A) and B)
F) A) and C)

Question 6

In an open economy, gross domestic product equals $1,650 billion, government expenditure equals $250 billion, and savings equals $550 billion. What is consumption expenditure?

Accepted Answer

A)   $250 billion
B)   $300 billion
C)   $550 billion
D)   $850 billionE) B) and D)
F) B) and C)

Question 7

Net exports of a country are the value of

Accepted Answer

A)   goods and services imported minus the value of goods and services exported.
B)   goods and services exported minus the value of goods and services imported.
C)   goods exported minus the value of goods imported.
D)   goods imported minus the value of goods exported.E) All of the above
F) A) and D)

Question 8

Both foreign direct investment and foreign portfolio investment by U.S. residents increase U.S. net capital outflow.

Accepted Answer

A) True 
 B)False

Question 9

Other things the same, the real exchange rate between U.S. and Belgian goods would be higher if

Accepted Answer

A)   prices in the U.S. were higher, or the number of euro the dollar purchased were higher.
B)   prices in the U.S. were higher, or the number of euro the dollar purchased were lower.
C)   prices in the U.S. were lower, or the number of euro the dollar purchased were higher.
D)   prices in the U.S. were lower, or the number of euro the dollar purchased were lower.E) A) and D)
F) B) and D)

Question 10

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) All of the above
F) None of the above

Question 11

If a county has 25 billion euros of imports, 15 billion euros of exports, and sells 20 billion euros of assets to foreigners, how many foreign assets do domestic residents purchase?

Accepted Answer

A)   5 billion euros
B)   10 billion euros
C)   30 billion euros
D)   None of the above are correct.E) All of the above
F) A) and C)

Question 12

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 13

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

Question 14

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) All of the above
F) B) and C)

Question 15

From 2008 to 2012 both U.S. saving and U.S. investment fell.

Accepted Answer

A) True 
 B)False

Question 16

A U.S. grocery chain buys bananas from Honduras and pays for them with U.S. dollars.

Accepted Answer

A)   The purchase of the bananas increases U.S. net exports and the payment with dollars increases U.S. net capital outflow.
B)   The purchase of bananas increases U.S. net exports and the payment with dollars decreases U.S. net capital outflow.
C)   The purchase of bananas decreases U.S. net exports and the payment with dollars increases U.S. net capital outflow.
D)   The purchase of bananas decreases U.S. net exports and the payment with dollars decreases U.S. net capital outflow.E) B) and C)
F) A) and D)

Question 17

Last year residents of country A purchased $400 billion of foreign assets and $200 of foreign goods. Foreigners purchased $300 billion dollars of country A's assets. What was the value of country A's exports?

Accepted Answer

The value of country...

Question 18

If a U.S. firm buys Chinese toys using previously obtained Chinese currency, then both U.S. net exports and U.S. net capital outflow decrease.

Accepted Answer

A) True 
 B)False

Question 19

If the nominal exchange rate e is foreign currency per dollar, the domestic price is P, and the foreign price is P*, then the real exchange rate is defined as

Accepted Answer

A)   eP*/P) .
B)   eP/P*) .
C)   e + P*/P.
D)   e - P/P*.E) A) and B)
F) A) and C)

Question 20

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

Exam 18: Open-Economy Macroeconomics: Basic Concepts

If the nominal exchange rate e is foreign currency per dollar, the domestic price is P, and the foreign price is P*, then the real exchange rate is defined as

Correct Answer
verified

If a U.S. firm buys Chinese toys using previously obtained Chinese currency, then both U.S. net exports and U.S. net capital outflow decrease.

Correct Answer
verified

From 2008 to 2012 both U.S. saving and U.S. investment fell.

Correct Answer
verified

Both foreign direct investment and foreign portfolio investment by U.S. residents increase U.S. net capital outflow.

Correct Answer
verified

Correct Answer
verified

From 1970 to 1998 the U.S. dollar

Correct Answer
verified

Paul, a Canadian citizen, purchases oranges grown in Florida. This purchase is an example of

Correct Answer
verified

In an open economy, gross domestic product equals $1,650 billion, government expenditure equals $250 billion, and savings equals $550 billion. What is consumption expenditure?

Correct Answer
verified

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

Correct Answer
verified

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?

Correct Answer
verified

If a county has 25 billion euros of imports, 15 billion euros of exports, and sells 20 billion euros of assets to foreigners, how many foreign assets do domestic residents purchase?

Correct Answer
verified

The large trade deficits in the U.S. during the 1990's were primarily associated with a rise in domestic investment spending rather than a rise in the budget deficit.

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

Last year residents of country A purchased $400 billion of foreign assets and $200 of foreign goods. Foreigners purchased $300 billion dollars of country A's assets. What was the value of country A's exports?

Correct Answer
verified
The value of country...
View Answer

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

Correct Answer
verified

A U.S. grocery chain buys bananas from Honduras and pays for them with U.S. dollars.

Correct Answer
verified

Which of the following is an example of U.S. foreign direct investment?

Correct Answer
verified

Net exports of a country are the value of

Correct Answer
verified

Other things the same, the real exchange rate between U.S. and Belgian goods would be higher if

Correct Answer
verified

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 Answer
verified

Exam 18: Open-Economy Macroeconomics: Basic Concepts

If the nominal exchange rate e is foreign currency per dollar, the domestic price is P, and the foreign price is P*, then the real exchange rate is defined as

Correct AnswerverifiedShow Answer

If a U.S. firm buys Chinese toys using previously obtained Chinese currency, then both U.S. net exports and U.S. net capital outflow decrease.

Correct AnswerverifiedShow Answer

From 2008 to 2012 both U.S. saving and U.S. investment fell.

Correct AnswerverifiedShow Answer

Both foreign direct investment and foreign portfolio investment by U.S. residents increase U.S. net capital outflow.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

From 1970 to 1998 the U.S. dollar

Correct AnswerverifiedShow Answer

Paul, a Canadian citizen, purchases oranges grown in Florida. This purchase is an example of

Correct AnswerverifiedShow Answer

In an open economy, gross domestic product equals $1,650 billion, government expenditure equals $250 billion, and savings equals $550 billion. What is consumption expenditure?

Correct AnswerverifiedShow Answer

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

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?

Correct AnswerverifiedShow Answer

If a county has 25 billion euros of imports, 15 billion euros of exports, and sells 20 billion euros of assets to foreigners, how many foreign assets do domestic residents purchase?

Correct AnswerverifiedShow Answer

The large trade deficits in the U.S. during the 1990's were primarily associated with a rise in domestic investment spending rather than a rise in the budget deficit.

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

Last year residents of country A purchased $400 billion of foreign assets and $200 of foreign goods. Foreigners purchased $300 billion dollars of country A's assets. What was the value of country A's exports?

Correct AnswerverifiedThe value of country...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

A U.S. grocery chain buys bananas from Honduras and pays for them with U.S. dollars.

Correct AnswerverifiedShow Answer

Which of the following is an example of U.S. foreign direct investment?

Correct AnswerverifiedShow Answer

Net exports of a country are the value of

Correct AnswerverifiedShow Answer

Other things the same, the real exchange rate between U.S. and Belgian goods would be higher if

Correct AnswerverifiedShow 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

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The value of country...
View Answer

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