Question 1

Table 31-2 
-Refer to Table 31-2. Which currency(ies)  is(are)  have a higher nominal exchange rate than predicted by the doctrine of purchasing-power parity?

Accepted Answer

A)   the bolivar and the pound
B)   the euro and the riyal
C)   the yen
D)   the poundE) None of the above
F) A) and B)

Question 2

If purchasing-power parity holds, when a country's central bank decreases the money supply, its

Accepted Answer

A)   price level rises and its currency appreciates relative to other currencies in the world.
B)   price level falls and its currency appreciates relative to other currencies in the world.
C)   price level rises and its currency depreciates relative to other currencies in the world.
D)   price level falls and its currency depreciates relative to other currencies in the world.E) None of the above
F) B) and D)

Question 3

In Ireland, a pint of beer costs 3 euros. In Australia, a pint of beer costs 4 Australian dollars. If the exchange rate is .8 euros per Australian dollar, what is the real exchange rate?

Accepted Answer

A)   4/2.4 pints of Irish beer per pint of Australian beer
B)   3/3.2 pint of Irish beer per pint of Australian beer
C)   3.2/3 pints of Irish beer per pint of Australian beer
D)   2.4/4 pints of Irish beer per pint of Australian beerE) B) and C)
F) A) and C)

Question 4

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) A) and C)

Question 5

The price of a basket of goods and services in the U.S. is $600. In Canada the same basket of goods costs 700 Canadian dollars. If the nominal exchange rate were 1.2 Canadian dollars per U.S. dollar, what would be the real exchange rate?

Accepted Answer

A)   700/600
B)   600/700
C)   700/720
D)   None of the above is correct.E) A) and B)
F) None of the above

Question 6

If Saudi Arabia had negative net exports last year, then it

Accepted Answer

A)   sold more abroad than it purchased abroad and had a trade surplus.
B)   sold more abroad than it purchased abroad and had a trade deficit.
C)   bought more abroad than it sold abroad and had a trade surplus.
D)   bought more abroad than it sold abroad and had a trade deficit.E) All of the above
F) C) and D)

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Reductions in transportation costs help explain the increase in U.S. trade flows.

Accepted Answer

A) True 
 B)False

Question 9

Bob, a Greek citizen, opens a restaurant in Chicago. His expenditures

Accepted Answer

A)   increase U.S. net capital outflow and have no affect on Greek net capital outflow.
B)   increase U.S. net capital outflow and increase Greek net capital outflow.
C)   increase U.S. net capital outflow, but decrease Greek net capital outflow.
D)   decrease U.S. net capital outflow, but increase Greek net capital outflow.E) A) and B)
F) A) and C)

Question 10

Suppose that a U.S. dollar buys more gold in Australia than it buys in Russia. What does purchasing-power parity imply should happen?

Accepted Answer

People can make a profit by buying gold ...

Question 11

Purchasing-power parity says that the nominal exchange rate must equal the real exchange rate.

Accepted Answer

A) True 
 B)False

Question 12

Other things the same, the real exchange rate between American and Chinese goods would be higher if

Accepted Answer

A)   prices of Chinese goods were higher, or the number of yuan a dollar purchased was higher.
B)   prices of Chinese goods were higher, or the number of yuan a dollar purchased was lower.
C)   prices of Chinese goods were lower, or the number of yuan a dollar purchased was higher.
D)   prices of Chinese goods were lower, or the number of yuan a dollar purchased was lower.E) B) and C)
F) A) and D)

Question 13

Good that cost one half dollar in the U.S. cost one euro in Germany, the real exchange rate would be computed as how many German goods per U.S. goods?

Accepted Answer

A)   one half
B)   one half the price of the U.S. goods
C)   one half the number of euros it takes to buy a U.S. dollar
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 14

If a country's government reduced corruption and reformed its tax system so that businesses found operating there less risky, it's likely that this country's

Accepted Answer

A)   net exports and net capital outflows would increase.
B)   net exports would increase and its net capital outflows would decrease.
C)   net exports and net capital outflow would decrease.
D)   net exports would decrease and its net capital outflow would increase.E) A) and B)
F) All of the above

Question 15

Which of the following equations is correct?

Accepted Answer

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

Question 16

If a country has a trade surplus then

Accepted Answer

A) S > I and Y > C + I + G. B) S > I and Y C) S C + I + G. D) S < I and Y < C + I + G.E) A) and B) F) A) and C)

Question 17

During the tough economic times from 2008-2012,

Accepted Answer

A)   investment fell but saving rose, so net capital outflow rose.
B)   investment fell by more than saving fell, so net capital outflow rose
C)   investment fell by less than saving fell, so net capital outflow fell.
D)   investment and saving both fell by about the same percent.E) None of the above
F) A) and D)

Question 18

If a country has a trade deficit

Accepted Answer

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

Question 19

If the U.S. real exchange rate appreciates, U.S. exports to Europe

Accepted Answer

A)   and European exports to the U.S. both rise.
B)   and European exports to the U.S. both fall.
C)   rise, and European exports to the U.S. fall.
D)   fall, and European exports to the U.S. rise.E) B) and C)
F) A) and D)

Question 20

The increase in the trade deficit in the 1980's reflected a decrease in national saving that is associated with an increase in the government budget deficit.

Accepted Answer

A) True 
 B)False

Exam 31: Open-Economy Macroeconomics: Basic Concepts

During the tough economic times from 2008-2012,

Correct AnswerverifiedShow Answer

If purchasing-power parity holds, when a country's central bank decreases the money supply, its

Correct AnswerverifiedShow Answer

In Ireland, a pint of beer costs 3 euros. In Australia, a pint of beer costs 4 Australian dollars. If the exchange rate is .8 euros per Australian dollar, what is the real exchange rate?

Correct AnswerverifiedShow Answer

Good that cost one half dollar in the U.S. cost one euro in Germany, the real exchange rate would be computed as how many German goods per U.S. goods?

Correct AnswerverifiedShow Answer

Purchasing-power parity says that the nominal exchange rate must equal the real exchange rate.

Correct AnswerverifiedShow Answer

The increase in the trade deficit in the 1980's reflected a decrease in national saving that is associated with an increase in the government budget deficit.

Correct AnswerverifiedShow Answer

Reductions in transportation costs help explain the increase in U.S. trade flows.

Correct AnswerverifiedShow Answer

If the U.S. real exchange rate appreciates, U.S. exports to Europe

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

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Which of the following equations is correct?

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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

Other things the same, the real exchange rate between American and Chinese goods would be higher if

Correct AnswerverifiedShow Answer

Suppose that a U.S. dollar buys more gold in Australia than it buys in Russia. What does purchasing-power parity imply should happen?

Correct AnswerverifiedPeople can make a profit by buying gold ...View AnswerShow Answer

If Saudi Arabia had negative net exports last year, then it

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Table 31-2 -Refer to Table 31-2. Which currency(ies) is(are) have a higher nominal exchange rate than predicted by the doctrine of purchasing-power parity?

Correct AnswerverifiedShow Answer

If a country has a trade deficit

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If a country has a trade surplus then

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If a country's government reduced corruption and reformed its tax system so that businesses found operating there less risky, it's likely that this country's

Correct AnswerverifiedShow Answer

The price of a basket of goods and services in the U.S. is $600. In Canada the same basket of goods costs 700 Canadian dollars. If the nominal exchange rate were 1.2 Canadian dollars per U.S. dollar, what would be the real exchange rate?

Correct AnswerverifiedShow Answer

Bob, a Greek citizen, opens a restaurant in Chicago. His expenditures

Correct AnswerverifiedShow Answer

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People can make a profit by buying gold ...
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