Question 1

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) C) and D)

Question 2

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

Accepted Answer

A)   A Greek company opens a cheese factory in the U.S.
B)   A German mutual fund buys stock issued by a U.S. corporation.
C)   A U.S. beverage company opens a bottling plant in Russia.
D)   A U.S. bank buys bonds issued by an Argentinean company.E) None of the above
F) B) and C)

Question 3

Last year a country had exports of $50 billion, imports of $60 billion, and domestic investment of $40 billion. What was its saving last year?

Accepted Answer

A)   $30 billion
B)   $20 billion
C)   $10 billion
D)   -$10 billionE) All of the above
F) A) and D)

Question 4

The nominal exchange rate is 4 Saudi Arabian riyals, 8 Moroccan dirham, 60 Indian rupees, or .8 euros per U.S. dollar. A fast food breakfast costs $5 in the U.S., 30 riyals in Saudi Arabia, 40 Moroccan dirham in Morocco, 250 Indian rupees in India, and 5 euros in France. According to these numbers, where is the real exchange rate between American and foreign goods the lowest?

Accepted Answer

A)   Saudi Arabia
B)   Morocco
C)   India
D)   BritainE) B) and D)
F) A) and D)

Question 5

If a country has net exports of $8 billion and sold $40 billion of goods and services abroad, then it has

Accepted Answer

A)   $48 billion of imports and $40 billion of exports.
B)   $48 billion of exports and $40 billion of imports.
C)   $40 billion of imports and $32 billion of exports.
D)   $40 billion of exports and $32 billion of imports.E) All of the above
F) A) and C)

Question 6

During 2011, the price level in the U.S. rose at a faster rate than the price level in Japan. Other things the same, according to purchasing-power parity, this difference in inflation rates should have caused

Accepted Answer

A)   the nominal exchange rate of the dollar to appreciate relative to the yen.
B)   the real exchange rate of the dollar to appreciate relative to the yen.
C)   the nominal exchange rate of the dollar to depreciate relative to the yen.
D)   the real exchange rate of the dollar to depreciate relative to the yen.E) A) and D)
F) A) and C)

Question 7

Suppose that the nominal exchange rate is 80 yen 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 Japan is 50,000 yen. Suppose that these values change to 100 yen per dollar, $600, and 70,000 yen. 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) B) and D)
F) B) and C)

Question 8

A Swiss company sells chocolates to a retailer in the United States. These sales by themselves

Accepted Answer

A)   decrease U.S. net export and Swiss net exports.
B)   decrease U.S. net exports and increase Swiss net exports.
C)   increase U.S. and Swiss net exports.
D)   increase U.S. net exports and decrease Swiss net exports.E) C) and D)
F) None of the above

Question 9

Suppose a Starbucks tall latte cost $4.00 in the United States and 3.20 euros in the Euro area. Also, suppose a McDonald's Big Mac costs $4.40 in the United States and 5.50 euros in Euro area. If the nominal exchange rate is .80 euros per dollar, the prices of 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 tall latte nor the Big MacE) C) and D)
F) B) and C)

Question 10

According to purchasing-power parity, what is the relationship between changes in price levels between two countries and changes in nominal exchange rates?

Accepted Answer

Purchasing-power parity asserts that the...

Question 11

In the U.S. a delivery van costs $30,000. In Uruguay the same delivery van costs 720,000 pesos. The nominal exchange rate is 20 pesos per dollar.
A. Find the real exchange rate. Show your work.
B. In terms of dollars where is the television cheaper?

Accepted Answer

The real exchange rate = 30,00...

Question 12

Greg, a U.S. citizen, opens an ice cream store in Bermuda. His 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) None of the above

Question 13

By itself, when a Japanese bank purchases a bond issued by a U.S. corporation, U.S. net capital outflow rises.

Accepted Answer

A) True 
 B)False

Question 14

If a country sells more goods and services abroad than it purchases abroad, it has positive net exports and a trade surplus.

Accepted Answer

A) True 
 B)False

Question 15

If citizens of a country are not saving much, it is better to

Accepted Answer

A)   force citizens to save.
B)   reduce investment.
C)   have foreigners invest in the domestic economy than no one at all.
D)   to prevent opportunities for citizens to buy capital assets abroad.E) B) and D)
F) C) and D)

Question 16

The nominal exchange rate is about 2 Aruban florin per dollar. If a basket of goods in the United States costs $40, how many florins must a basket of goods in Aruba cost for purchasing-power parity to hold?

Accepted Answer

A)   20 florin
B)   40 florin
C)   60 florin
D)   80 florinE) None of the above
F) B) and C)

Question 17

Prices in both the U.S. and China rise, but prices in China increase by a larger percentage. According to purchasing- power parity, the U.S. dollar

Accepted Answer

A)   gains value both in terms of the domestic goods and services it can buy and in terms of the Chinese currency it can buy.
B)   gains value in terms of the domestic goods and services it can buy, but loses value in terms of the Chinese currency it can buy.
C)   loses value in terms of the domestic goods and services it can buy, but gains value in terms of the Chinese currency it can buy.
D)   loses value both in terms of the domestic goods and services it can buy and in terms of the Chinese currency it can buy.E) All of the above
F) C) and D)

Question 18

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) A) and D)

Question 19

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 20

A firm in the United Kingdom hires a firm in the U.S. to train its managers. By itself this transaction

Accepted Answer

A)   increases U.S. imports and decreases U.S. net exports.
B)   increases U.S. imports and increases U.S. net exports.
C)   increases U.S. exports and decreases U.S. net exports.
D)   increases U.S. exports and increases U.S. net exports.E) None of the above
F) A) and B)

Exam 31: Open-Economy Macroeconomics: Basic Concepts

By itself, when a Japanese bank purchases a bond issued by a U.S. corporation, U.S. net capital outflow rises.

Correct Answer
verified

Greg, a U.S. citizen, opens an ice cream store in Bermuda. His expenditures are U.S.

Correct Answer
verified

The nominal exchange rate is about 2 Aruban florin per dollar. If a basket of goods in the United States costs $40, how many florins must a basket of goods in Aruba cost for purchasing-power parity to hold?

Correct Answer
verified

If a country sells more goods and services abroad than it purchases abroad, it has positive net exports and a trade surplus.

Correct Answer
verified

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 Answer
verified

Suppose that the nominal exchange rate is 80 yen 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 Japan is 50,000 yen. Suppose that these values change to 100 yen per dollar, $600, and 70,000 yen. Then the real exchange rate would

Correct Answer
verified

Last year a country had exports of $50 billion, imports of $60 billion, and domestic investment of $40 billion. What was its saving last year?

Correct Answer
verified

A firm in the United Kingdom hires a firm in the U.S. to train its managers. By itself this transaction

Correct Answer
verified

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

Correct Answer
verified

If citizens of a country are not saving much, it is better to

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

Correct Answer
verified

If a country has net exports of $8 billion and sold $40 billion of goods and services abroad, then it has

Correct Answer
verified

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

Correct Answer
verified

Prices in both the U.S. and China rise, but prices in China increase by a larger percentage. According to purchasing- power parity, the U.S. dollar

Correct Answer
verified

In the U.S. a delivery van costs $30,000. In Uruguay the same delivery van costs 720,000 pesos. The nominal exchange rate is 20 pesos per dollar. A. Find the real exchange rate. Show your work. B. In terms of dollars where is the television cheaper?

Correct Answer
verified
The real exchange rate = 30,00...
View Answer

Correct Answer
verified

During 2011, the price level in the U.S. rose at a faster rate than the price level in Japan. Other things the same, according to purchasing-power parity, this difference in inflation rates should have caused

Correct Answer
verified

According to purchasing-power parity, what is the relationship between changes in price levels between two countries and changes in nominal exchange rates?

Correct Answer
verified
Purchasing-power parity asserts that the...
View Answer

A Swiss company sells chocolates to a retailer in the United States. These sales by themselves

Correct Answer
verified

Exam 31: Open-Economy Macroeconomics: Basic Concepts

By itself, when a Japanese bank purchases a bond issued by a U.S. corporation, U.S. net capital outflow rises.

Correct AnswerverifiedShow Answer

Greg, a U.S. citizen, opens an ice cream store in Bermuda. His expenditures are U.S.

Correct AnswerverifiedShow Answer

The nominal exchange rate is about 2 Aruban florin per dollar. If a basket of goods in the United States costs $40, how many florins must a basket of goods in Aruba cost for purchasing-power parity to hold?

Correct AnswerverifiedShow Answer

If a country sells more goods and services abroad than it purchases abroad, it has positive net exports and a trade surplus.

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

Suppose that the nominal exchange rate is 80 yen 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 Japan is 50,000 yen. Suppose that these values change to 100 yen per dollar, $600, and 70,000 yen. Then the real exchange rate would

Correct AnswerverifiedShow Answer

Last year a country had exports of $50 billion, imports of $60 billion, and domestic investment of $40 billion. What was its saving last year?

Correct AnswerverifiedShow Answer

A firm in the United Kingdom hires a firm in the U.S. to train its managers. By itself this transaction

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

If citizens of a country are not saving much, it is better to

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

Correct AnswerverifiedShow Answer

If a country has net exports of $8 billion and sold $40 billion of goods and services abroad, then it has

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Prices in both the U.S. and China rise, but prices in China increase by a larger percentage. According to purchasing- power parity, the U.S. dollar

Correct AnswerverifiedShow Answer

In the U.S. a delivery van costs $30,000. In Uruguay the same delivery van costs 720,000 pesos. The nominal exchange rate is 20 pesos per dollar. A. Find the real exchange rate. Show your work. B. In terms of dollars where is the television cheaper?

Correct AnswerverifiedThe real exchange rate = 30,00...View AnswerShow Answer

Correct AnswerverifiedShow Answer

During 2011, the price level in the U.S. rose at a faster rate than the price level in Japan. Other things the same, according to purchasing-power parity, this difference in inflation rates should have caused

Correct AnswerverifiedShow Answer

According to purchasing-power parity, what is the relationship between changes in price levels between two countries and changes in nominal exchange rates?

Correct AnswerverifiedPurchasing-power parity asserts that the...View AnswerShow Answer

A Swiss company sells chocolates to a retailer in the United States. These sales by themselves

Correct AnswerverifiedShow Answer

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The real exchange rate = 30,00...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified
Purchasing-power parity asserts that the...
View Answer

Correct Answer
verified