Question 1

A country has $20 billion of domestic investment and net capital outflow of $10 billion. What is saving?

Accepted Answer

A)   $10 billion
B)   $30 billion
C)   -$20 billion
D)   -$30 billionE) B) and C)
F) C) and D)

Question 2

A Turkish firm exchanges lira (Turkish currency) for dollars. It then uses these dollars to purchase computers from the U.S. These actions decrease U.S. net capital outflow and increase U.S. net exports.

Accepted Answer

A) True 
 B)False

Question 3

The nominal exchange rate is .80 euros per U.S. dollar and a basket of goods in France costs 1,000 euros while the same basket costs $800 in the U.S. The nominal exchange rate is 1.2 Australian dollars per U.S. dollar and a basket of goods in Australia costs 960 Australian dollars while the same basket costs $800 in the U.S.. Which country has purchasing-power parity with the U.S.?

Accepted Answer

A)   both France and Australia
B)   France but not Australia
C)   Australia but not France
D)   neither France nor AustraliaE) All of the above
F) A) and D)

Question 4

If a nation produces more than it spends what do we know about:
A. its net exports?
B. its net capital outflow?
C. its saving in relation to its domestic investment?

Accepted Answer

A. Its net exports are positiv...

Question 5

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

Question 6

If a dollar buys more corn in the U.S. than in Mexico, then

Accepted Answer

A)   the real exchange rate is greater than 1; a profit might be made by buying corn in the U.S. and selling it in Mexico.
B)   the real exchange rate is greater than 1; a profit might be made by buying corn in Mexico and selling it in the U.S.
C)   the real exchange rate is less than 1; a profit might be made by buying corn in the U.S. and selling it in Mexico.
D)   the real exchange rate is less than 1; a profit might be made by buying corn in Mexico and selling it in the U.S.E) None of the above
F) B) and C)

Question 7

When the Mexican peso gets "stronger" relative to the dollar,

Accepted Answer

A)   the U.S. trade deficit with Mexico rises.
B)   the U.S. trade deficit with Mexico falls.
C)   the U.S. trade deficit with Mexico is unchanged.
D)   None of the above necessarily happens.E) A) and B)
F) A) and C)

Question 8

Most of the change from 1991 to 2000 in U.S. net capital outflow as a percent of GDP was due to a(n)

Accepted Answer

A)   decrease in U.S. investment.
B)   decrease in U.S. national saving.
C)   increase in U.S. investment.
D)   increase in U.S. national saving.E) A) and B)
F) All of the above

Question 9

Other things the same, if a country saves less, 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) A) and B)
F) A) and C)

Question 10

If Spain has a trade deficit, then

Accepted Answer

A)   foreign countries purchase more Spanish assets than Spain purchases from them. This makes Spanish saving greater than Spanish domestic investment.
B)   foreign countries purchase more Spanish assets than Spain purchases from them. This makes Spanish saving smaller then Spanish domestic investment.
C)   foreign countries purchase fewer Spanish assets than Spain purchases from them. This makes Spanish saving greater than Spanish domestic investment.
D)   foreign countries purchase fewer Spanish assets than Spain purchases from them. This makes Spanish saving greater than Spanish domestic investment.E) B) and C)
F) C) and D)

Question 11

In France a loaf of bread costs 3 euros. In Great Britain a loaf of bread costs 4 pounds. If the exchange rate is .9 pounds per euro, what is the real exchange rate?

Accepted Answer

A)   4/2.7 loaves of British bread per loaf of French bread
B)   3.6/3 loaves of British bread per loaf of French bread
C)   3/3.6 loaves of British bread per loaf of French bread
D)   2.7/4 loaves of British bread per loaf of French breadE) B) and C)
F) A) and D)

Question 12

When a company from Germany builds an automobile factory in the United States, the German firm has engaged in foreign direct investment.

Accepted Answer

A) True 
 B)False

Question 13

A country has $45 million of domestic investment and net capital outflow of -$60 million. What is its saving?

Accepted Answer

A)   $15 million
B)   -$15 million
C)   $105 million
D)   -$105 millionE) A) and B)
F) A) and C)

Question 14

Suppose that the real exchange rate between the United States and Brazil is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate (that is increase the number of baskets of Brazilian goods a basket of U.S. goods buys) ?

Accepted Answer

A)   an increase in the quantity of Brazilian currency that can be purchased with a dollar
B)   a decrease in the price of U.S. goods
C)   an increase in the price in Brazilian currency of Brazilian goods
D)   All of the above are correct.E) B) and C)
F) A) and B)

Question 15

When U.S. national saving rises, domestic investment also necessarily rises.

Accepted Answer

A) True 
 B)False

Question 16

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) All of the above

Question 17

Other things the same, if the exchange rate changes from 75 Algerian dinar per dollar to 72 Algerian dinar per dollar, the dollar has

Accepted Answer

A)   appreciated and so buys more Algerian goods.
B)   appreciated and so buys fewer Algerian goods.
C)   depreciated and so buys more Algerian goods.
D)   depreciated and so buys fewer Algerian goods.E) A) and D)
F) A) and C)

Question 18

According to purchasing-power parity, which of the following necessarily equals the ratio of the foreign price level divided by the domestic price level?

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

Question 19

A Swiss watchmaker opens a factory in the United States. This is an example of Swiss

Accepted Answer

A)   exports.
B)   imports.
C)   foreign portfolio investment.
D)   foreign direct investment.E) B) and D)
F) All of the above

Question 20

Which of the following does purchasing-power parity conclude should equal 1?

Accepted Answer

A)   both the nominal and the real exchange rate.
B)   the nominal exchange rate but not the real exchange rate
C)   the real exchange rate but not the nominal exchange rate
D)   neither the nominal exchange rate nor the real exchange rateE) A) and C)
F) A) and D)

Exam 31: Open-Economy Macroeconomics: Basic Concepts

A Swiss watchmaker opens a factory in the United States. This is an example of Swiss

Correct Answer
verified

Other things the same, if the exchange rate changes from 75 Algerian dinar per dollar to 72 Algerian dinar per dollar, the dollar has

Correct Answer
verified

When the Mexican peso gets "stronger" relative to the dollar,

Correct Answer
verified

According to purchasing-power parity, which of the following necessarily equals the ratio of the foreign price level divided by the domestic price level?

Correct Answer
verified

If Spain has a trade deficit, then

Correct Answer
verified

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

Correct Answer
verified

A Turkish firm exchanges lira (Turkish currency) for dollars. It then uses these dollars to purchase computers from the U.S. These actions decrease U.S. net capital outflow and increase U.S. net exports.

Correct Answer
verified

Suppose that the real exchange rate between the United States and Brazil is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate (that is increase the number of baskets of Brazilian goods a basket of U.S. goods buys) ?

Correct Answer
verified

Most of the change from 1991 to 2000 in U.S. net capital outflow as a percent of GDP was due to a(n)

Correct Answer
verified

When a company from Germany builds an automobile factory in the United States, the German firm has engaged in foreign direct investment.

Correct Answer
verified

If a nation produces more than it spends what do we know about: A. its net exports? B. its net capital outflow? C. its saving in relation to its domestic investment?

Correct Answer
verified
A. Its net exports are positiv...
View Answer

When U.S. national saving rises, domestic investment also necessarily rises.

Correct Answer
verified

Which of the following does purchasing-power parity conclude should equal 1?

Correct Answer
verified

If a dollar buys more corn in the U.S. than in Mexico, then

Correct Answer
verified

A country has $45 million of domestic investment and net capital outflow of -$60 million. What is its saving?

Correct Answer
verified

A country has $20 billion of domestic investment and net capital outflow of $10 billion. What is saving?

Correct Answer
verified

In France a loaf of bread costs 3 euros. In Great Britain a loaf of bread costs 4 pounds. If the exchange rate is .9 pounds per euro, what is the real exchange rate?

Correct Answer
verified

Correct Answer
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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 Answer
verified

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 Answer
verified

Exam 31: Open-Economy Macroeconomics: Basic Concepts

A Swiss watchmaker opens a factory in the United States. This is an example of Swiss

Correct AnswerverifiedShow Answer

Other things the same, if the exchange rate changes from 75 Algerian dinar per dollar to 72 Algerian dinar per dollar, the dollar has

Correct AnswerverifiedShow Answer

When the Mexican peso gets "stronger" relative to the dollar,

Correct AnswerverifiedShow Answer

According to purchasing-power parity, which of the following necessarily equals the ratio of the foreign price level divided by the domestic price level?

Correct AnswerverifiedShow Answer

If Spain has a trade deficit, then

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A Turkish firm exchanges lira (Turkish currency) for dollars. It then uses these dollars to purchase computers from the U.S. These actions decrease U.S. net capital outflow and increase U.S. net exports.

Correct AnswerverifiedShow Answer

Suppose that the real exchange rate between the United States and Brazil is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate (that is increase the number of baskets of Brazilian goods a basket of U.S. goods buys) ?

Correct AnswerverifiedShow Answer

Most of the change from 1991 to 2000 in U.S. net capital outflow as a percent of GDP was due to a(n)

Correct AnswerverifiedShow Answer

When a company from Germany builds an automobile factory in the United States, the German firm has engaged in foreign direct investment.

Correct AnswerverifiedShow Answer

If a nation produces more than it spends what do we know about: A. its net exports? B. its net capital outflow? C. its saving in relation to its domestic investment?

Correct AnswerverifiedA. Its net exports are positiv...View AnswerShow Answer

When U.S. national saving rises, domestic investment also necessarily rises.

Correct AnswerverifiedShow Answer

Which of the following does purchasing-power parity conclude should equal 1?

Correct AnswerverifiedShow Answer

If a dollar buys more corn in the U.S. than in Mexico, then

Correct AnswerverifiedShow Answer

A country has $45 million of domestic investment and net capital outflow of -$60 million. What is its saving?

Correct AnswerverifiedShow Answer

A country has $20 billion of domestic investment and net capital outflow of $10 billion. What is saving?

Correct AnswerverifiedShow Answer

In France a loaf of bread costs 3 euros. In Great Britain a loaf of bread costs 4 pounds. If the exchange rate is .9 pounds per euro, what is the real exchange rate?

Correct AnswerverifiedShow Answer

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 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

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A. Its net exports are positiv...
View Answer

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