Question 1

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

Question 2

Table 31-1 
-Refer to Table 31-1. What are Bolivia's net exports?

Accepted Answer

A)   $30 billion
B)   $5 billion
C)   -$5 billion
D)   -$25 billionE) B) and C)
F) A) and C)

Question 3

Net capital outflow equals the purchase of

Accepted Answer

A)   foreign assets by domestic residents.
B)   domestic assets by foreign residents.
C)   domestic assets by foreign residents - the purchase of foreign assets by domestic residents
D)   foreign assets by domestic residents - the purchase of domestic assets by foreign residentsE) A) and D)
F) A) and C)

Question 4

Assuming all other things equal, what would happen to the U.S. dollar real exchange rate under each of the following circumstances?
a. The U.S. nominal exchange rate depreciates.
b. U.S. domestic prices increase.
c. Prices in the rest of the world rise.

Accepted Answer

a. The U.S. dollar real exchan...

Question 5

A country with negative net exports has a trade surplus.

Accepted Answer

A) True 
 B)False

Question 6

Net capital outflow equals the difference between a country's

Accepted Answer

A)   income and expenditure.
B)   investment and saving.
C)   purchases of foreign goods and services and sales of goods and services abroad.
D)   purchases of foreign assets and sales of domestic assets abroad.E) B) and C)
F) A) and B)

Question 7

In the United States, a cup of hot chocolate costs $5. In a foreign country, the same hot chocolate costs 6.5 units of that country's currency. If the exchange rate were 1.3 units of foreign currency per U.S. dollar, what is the real exchange rate?

Accepted Answer

A)   1/2 cup of that country's hot chocolate per cup of U.S. hot chocolate
B)   1 cup of that country's hot chocolate per cup of U.S. hot chocolate
C)   2 cups of that country's hot chocolate per cup of U.S. hot chocolate
D)   None of the above is correct.E) A) and B)
F) A) and D)

Question 8

The country of Elbia has a GDP of $2,000, consumption of $1,300, and government purchases of $400. Which of the following is equal to $300?

Accepted Answer

A)   domestic investment
B)   domestic investment plus net capital outflow
C)   domestic investment minus net capital outflow
D)   None of the above is correct.E) A) and B)
F) All of the above

Question 9

A U.S. corporation builds a restaurant in China. Its expenditures are U.S.

Accepted Answer

A)   foreign portfolio investment that increase U.S. net capital outflow.
B)   foreign portfolio investment that decrease U.S. net capital outflow.
C)   foreign direct investment that increase U.S. net capital outflow.
D)   foreign direct investment that decrease U.S. net capital outflow.E) A) and B)
F) All of the above

Question 10

A country recently had a trade deficit of 350 billion euros. Its residents also purchased 400 billion euros of foreign assets. What was the value of this country's assets purchased by foreigners?

Accepted Answer

Foreigners purchased...

Question 11

A Starbucks Grande Latte costs $3.75 in the U.S. and 28 yuan in China. The nominal exchange rate is 6.75 yuan per dollar. The real exchange rate is

Accepted Answer

A)   1.106. If purchasing-power parity held the nominal exchange rate would be higher.
B)   1.106. If purchasing-power parity held the nominal exchange rate would be lower.
C)   .904. If purchasing power parity held the nominal exchange rate would be higher.
D)   .904. If purchasing-power parity held the nominal exchange rate would be lower.E) All of the above
F) B) and D)

Question 12

In an open economy, gross domestic product equals $3,500 billion, consumption expenditure equals $2100 billion, government expenditure equals $400 billion, investment equals $800 billion, and net exports equals $200 billion. What is national savings?

Accepted Answer

A)   $200 billion
B)   $600 billion
C)   $800 billion
D)   $1,000 billionE) None of the above
F) A) and B)

Question 13

U.S. international trade has

Accepted Answer

A)   decreased because of a decrease in the trade of goods with a high value per pound.
B)   decreased because of an increase in the trade of goods with a high value per pound.
C)   increased because of a decrease in trade of goods with a high value per pound.
D)   increased because of an increase in trade of goods with a high value per pound.E) C) and D)
F) B) and C)

Question 14

Over the last 5 years the amount of country A's currency it took to buy a unit of country B's currency more than doubled.
A. Did country A's currency depreciate or appreciate?
B. According to purchasing­power parity, what explains the change in the value of country B's currency?

Accepted Answer

A. It depreciated.
P...

Question 15

In the 1970s and 1980s the U.S. dollar depreciated against the German mark and appreciated against the Italian lira because U.S. inflation was lower than in Germany but higher than in Italy.

Accepted Answer

A) True 
 B)False

Question 16

If a dollar currently purchases 12.5 pesos and someone forecasts that in a year it will purchase 14 pesos, then the forecast is given in

Accepted Answer

A)   real terms and implies the dollar will appreciate.
B)   real terms and implies the dollar will depreciate.
C)   nominal terms and implies the dollar will appreciate.
D)   nominal terms and implies the dollar will depreciate.E) A) and C)
F) None of the above

Question 17

Table 31-1 
-Refer to Table 31-1. What are Bolivia's exports?

Accepted Answer

A)   $60 billion
B)   $35 billion
C)   $10 billion
D)   None of the above are correct.E) A) and B)
F) A) and C)

Question 18

If a country changes its corporate tax laws so that domestic businesses build and manage more business in other countries, then the net capital outflow of that country

Accepted Answer

A)   and the net capital outflow of other countries rise.
B)   rises and the net capital outflow of other countries fall.
C)   falls and the net capital outflow of other countries rise.
D)   None of the above are correct.E) C) and D)
F) A) and B)

Question 19

If the price of a good in the U.S. is $10 and the unit of foreign currency is the dinar, in which case is the real exchange rate 5/4?

Accepted Answer

A)   the foreign price is 4 dinars and the exchange rate is 1/2 dinars per dollar
B)   the foreign price is 5 dinars and the exchange rate is 2.5 dinars per dollar
C)   the foreign price is 4 dinars and the exchange rate is 2 dinars per dollar
D)   the foreign price is 5 dinars and the exchange rate is 2/5 dinars per dollarE) C) and D)
F) B) and D)

Question 20

If the exchange rate is .70 euro per dollar, the price of an MP3 player in Paris is 150 euros and the price of an MP3 player in the U.S. is $150, then what is the real exchange rate?

Accepted Answer

A)   1/.70 French MP3 players per U.S. MP3 player
B)   1 French MP3 players per U.S. MP3 player
C)   .70 French MP3 players per U.S. MP3 player.
D)   None of the above are correct.E) None of the above
F) C) and D)

Exam 31: Open-Economy Macroeconomics: Basic Concepts

If a country changes its corporate tax laws so that domestic businesses build and manage more business in other countries, then the net capital outflow of that country

Correct AnswerverifiedShow Answer

If the price of a good in the U.S. is $10 and the unit of foreign currency is the dinar, in which case is the real exchange rate 5/4?

Correct AnswerverifiedShow Answer

Over the last 5 years the amount of country A's currency it took to buy a unit of country B's currency more than doubled. A. Did country A's currency depreciate or appreciate? B. According to purchasing­power parity, what explains the change in the value of country B's currency?

Correct AnswerverifiedA. It depreciated.P...View AnswerShow Answer

Table 31-1 -Refer to Table 31-1. What are Bolivia's exports?

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The country of Elbia has a GDP of $2,000, consumption of $1,300, and government purchases of $400. Which of the following is equal to $300?

Correct AnswerverifiedShow Answer

Table 31-1 -Refer to Table 31-1. What are Bolivia's net exports?

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In the 1970s and 1980s the U.S. dollar depreciated against the German mark and appreciated against the Italian lira because U.S. inflation was lower than in Germany but higher than in Italy.

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If the exchange rate is .70 euro per dollar, the price of an MP3 player in Paris is 150 euros and the price of an MP3 player in the U.S. is $150, then what is the real exchange rate?

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

Correct AnswerverifiedShow Answer

In the United States, a cup of hot chocolate costs $5. In a foreign country, the same hot chocolate costs 6.5 units of that country's currency. If the exchange rate were 1.3 units of foreign currency per U.S. dollar, what is the real exchange rate?

Correct AnswerverifiedShow Answer

If a dollar currently purchases 12.5 pesos and someone forecasts that in a year it will purchase 14 pesos, then the forecast is given in

Correct AnswerverifiedShow Answer

Net capital outflow equals the difference between a country's

Correct AnswerverifiedShow Answer

U.S. international trade has

Correct AnswerverifiedShow Answer

A country with negative net exports has a trade surplus.

Correct AnswerverifiedShow Answer

A U.S. corporation builds a restaurant in China. Its expenditures are U.S.

Correct AnswerverifiedShow Answer

A Starbucks Grande Latte costs $3.75 in the U.S. and 28 yuan in China. The nominal exchange rate is 6.75 yuan per dollar. The real exchange rate is

Correct AnswerverifiedShow Answer

Assuming all other things equal, what would happen to the U.S. dollar real exchange rate under each of the following circumstances? a. The U.S. nominal exchange rate depreciates. b. U.S. domestic prices increase. c. Prices in the rest of the world rise.

Correct Answerverifieda. The U.S. dollar real exchan...View AnswerShow Answer

In an open economy, gross domestic product equals $3,500 billion, consumption expenditure equals $2100 billion, government expenditure equals $400 billion, investment equals $800 billion, and net exports equals $200 billion. What is national savings?

Correct AnswerverifiedShow Answer

A country recently had a trade deficit of 350 billion euros. Its residents also purchased 400 billion euros of foreign assets. What was the value of this country's assets purchased by foreigners?

Correct AnswerverifiedForeigners purchased...View AnswerShow Answer

Net capital outflow equals the purchase of

Correct AnswerverifiedShow Answer

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Over the last 5 years the amount of country A's currency it took to buy a unit of country B's currency more than doubled. A. Did country A's currency depreciate or appreciate? B. According to purchasingpower parity, what explains the change in the value of country B's currency?

Correct Answer
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A. It depreciated.
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a. The U.S. dollar real exchan...
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Foreigners purchased...
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