Question 1

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

Accepted Answer

A)   the U.S. real exchange rate, but not the U.S. nominal exchange rate
B)   the U.S. nominal exchange rate, but not the U.S. real exchange rate
C)   the U.S. nominal exchange rate and the U.S. real exchange rate
D)   neither the real exchange rate nor the nominal exchange rateE) None of the above
F) A) and C)

Question 2

A U.S. company uses U.K. pounds it already owned to purchase bonds issued by a company in the U.K. Which of these countries has an increase in net capital outflow?

Accepted Answer

A)   The U.S. and the U.K.
B)   The U.S. but not the U.K.
C)   The U.K. but not the U.S.
D)   Neither the U.S. nor the U.K.E) B) and C)
F) C) and D)

Question 3

In which of the following situations must national saving rise?

Accepted Answer

A)   Both domestic investment and net capital outflow increase.
B)   Domestic investment increases and net capital outflow decreases.
C)   Domestic investment decreases and net capital outflow increases.
D)   Both domestic investment and net capital outflow decrease.E) A) and D)
F) A) and C)

Question 4

Purchasing-power parity describes the forces that determine

Accepted Answer

A)   prices in the short run.
B)   prices in the long run.
C)   exchange rates in the short run.
D)   exchange rates in the long run.E) B) and C)
F) All of the above

Question 5

If a country's net exports fall, then its net capital outflow falls by the same amount.

Accepted Answer

A) True 
 B)False

Question 6

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) C) and D)

Question 7

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

Question 8

Over the past six decades, the U.S. economy has experienced a dramatic increase in the relative importance of international trade and finance.

Accepted Answer

A) True 
 B)False

Question 9

If you are vacationing in France and the dollar depreciates relative to the euro, then

Accepted Answer

A)   the dollar buys more euros. It will take fewer dollars to buy a good that costs 50 euros.
B)   the dollar buys more euros. It will take more dollars to buy a good that costs 50 euros.
C)   the dollar buys fewer euros. It will take fewer dollars to buy a good that costs 50 euros.
D)   the dollar buys fewer euros. It will take more dollars to buy a good that costs 50 euros.E) B) and D)
F) A) and D)

Question 10

Other things the same, an increase in the foreign price level

Accepted Answer

A)   reduces the real exchange rate. This reduction could be offset by a decrease in the domestic price level.
B)   reduces the real exchange rate. This reduction could be offset by an increase in the domestic price level.
C)   increases the real exchange rate. This increase could be offset by a decrease in the domestic price level.
D)   increases the real exchange rate. This increase could be offset by an increase in the domestic price level.E) All of the above
F) A) and D)

Question 11

Which of the following equations is always correct in an open economy?

Accepted Answer

A)   NX = Y - C - G - I
B)   NX = S - I
C)   NX = NCO
D)   All of the above are correct.E) A) and C)
F) None of the above

Question 12

Which of the following is inconsistent with the others?

Accepted Answer

A)   Y - C - G > I
B)   this country had a trade surplus
C)   the purchase of foreign assets by this country's residents exceed foreigner's purchases of this country's assets
D)   this country's investment exceeded its domestic savingE) A) and B)
F) None of the above

Question 13

U.S. exports are $300 billion, U.S. imports are $500 billion. Which of the following are consistent with the level of net exports?

Accepted Answer

A)   The U.S has a trade surplus. The U.S. purchases $800 billion worth of foreign assets and foreign countries purchase $600 billion worth of U.S. assets.
B)   The U.S. has a trade surplus. The U.S. purchases $600 billion worth of foreign assets and foreign countries purchase $800 billion worth of U.S. assets.
C)   The U.S has a trade deficit. The U.S. purchases $800 billion worth of foreign assets and foreign countries purchase $600 billion worth of U.S. assets.
D)   The U.S. has a trade deficit. The U.S. purchases $600 billion worth of foreign assets and foreign countries purchase $800 billion worth of U.S. asset.E) A) and B)
F) B) and D)

Question 14

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

Question 15

Other things the same, if a country saves more, then

Accepted Answer

A)   net capital outflow rises, so net exports rise.
B)   net capital outflow rises, so net exports fall.
C)   net capital outflow falls, so net exports rise.
D)   net capital outflow falls, so net exports fall.E) C) and D)
F) A) and B)

Question 16

Which of the following does purchasing-power parity imply?

Accepted Answer

A)   the foreign price level times the nominal exchange rate given as amount of foreign currency per dollar)  equals the U.S. price level.
B)   The price of domestic goods relative to foreign goods cannot change.
C)   The nominal exchange rate is the ratio of foreign prices to U.S. prices.
D)   All of the above are correct.E) None of the above
F) A) and B)

Question 17

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

Question 18

In the U.S. a box of tea costs $5. The same box of tea in Uganda costs 10,000 schillings the currency of Uganda). If the real exchange rate is 5/4, what is the nominal exchange rate? Show your work.

Accepted Answer

The real exchange rate 5/4 = $...

Question 19

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

Question 20

U.S. exports make up less than 20 percent of GDP.

Accepted Answer

A) True 
 B)False

Exam 18: Open-Economy Macroeconomics: Basic Concepts

In the U.S. a box of tea costs $5. The same box of tea in Uganda costs 10,000 schillings the currency of Uganda). If the real exchange rate is 5/4, what is the nominal exchange rate? Show your work.

Correct AnswerverifiedThe real exchange rate 5/4 = $...View AnswerShow Answer

U.S. exports make up less than 20 percent of GDP.

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

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

U.S. exports are $300 billion, U.S. imports are $500 billion. Which of the following are consistent with the level of net exports?

Correct AnswerverifiedShow Answer

Over the past six decades, the U.S. economy has experienced a dramatic increase in the relative importance of international trade and finance.

Correct AnswerverifiedShow Answer

In which of the following situations must national saving rise?

Correct AnswerverifiedShow Answer

Purchasing-power parity describes the forces that determine

Correct AnswerverifiedShow Answer

Which of the following equations is always correct in an open economy?

Correct AnswerverifiedShow Answer

Which of the following is inconsistent with the others?

Correct AnswerverifiedShow Answer

A U.S. company uses U.K. pounds it already owned to purchase bonds issued by a company in the U.K. Which of these countries has an increase in net capital outflow?

Correct AnswerverifiedShow Answer

If a country's net exports fall, then its net capital outflow falls by the same amount.

Correct AnswerverifiedShow Answer

If you are vacationing in France and the dollar depreciates relative to the euro, then

Correct AnswerverifiedShow Answer

Other things the same, an increase in the foreign price level

Correct AnswerverifiedShow Answer

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

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

Which of the following does purchasing-power parity imply?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Other things the same, if a country saves more, then

Correct AnswerverifiedShow Answer

Correct Answer
verified
The real exchange rate 5/4 = $...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified