Question 1

If Chileans buy more U.S. stocks and bonds and U.S. residents buy more Chilean wine, then

Accepted Answer

A)   both U.S. net exports and U.S. net capital outflows rise.
B)   U.S. net exports rise and U.S. net capital outflows fall.
C)   U.S. net exports fall and U.S. net capital outflows rise.
D)   both U.S. net exports and U.S. net capital outflows fall.E) A) and D)
F) B) and C)

Question 2

Ivan, a Russian citizen, sells several hundred cases of caviar to a restaurant chain in the United States. By itself, this sale

Accepted Answer

A)   increases U.S. net exports and decreases Russian net exports.
B)   increases U.S. net exports and has no effect on Russian net exports.
C)   decreases U.S. net exports and increases Russian net exports.
D)   decreases U.S. net exports and has no effect on Russian net exports.E) B) and C)
F) None of the above

Question 3

If the nominal exchange rate e is foreign currency per dollar, the domestic price is P, and the foreign price is P*, then the real exchange rate is defined as

Accepted Answer

A)   e(P*/P) .
B)   e(P/P*) .
C)   e + P*/P.
D)   e - P/P*.E) C) and D)
F) None of the above

Question 4

If the exchange rate rises from .65 British pounds per dollar to .70 pounds per dollar, then compared to British goods, U.S. goods become

Accepted Answer

A)   relatively more expensive for both British and U.S. residents.
B)   relatively more expensive for British residents and relatively less expensive for U.S. residents.
C)   relatively less expensive for British residents and relatively more expensive for U.S. residents.
D)   relatively less expensive for both British and U.S. residents.E) A) and B)
F) A) and C)

Question 5

U.S- based Dell sells computers to an Irish company that pays with previously obtained U.S. currency. This exchange

Accepted Answer

A)   increases U.S. net capital outflow because the U.S. acquires foreign-owned assets.
B)   decreases U.S. net capital outflow because the U.S. acquires foreign-owned assets.
C)   increases U.S. net capital outflow because the U.S. sells capital goods.
D)   decreases U.S. net capital outflow because the U.S. sells capital goods.E) A) and B)
F) None of the above

Question 6

A firm in China sells toys to a U.S. department store chain. Other things the same, these sales

Accepted Answer

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

Question 7

A Portuguese company exchanges euros for $60,000 from a U.S. bank. The Portuguese firm then uses the dollars to purchase $60,000 of canning equipment from a U.S. company. As a result of these two transactions alone

Accepted Answer

A)   both U.S. net capital outflow and U.S. net exports rise.
B)   U.S. net capital outflow rose and U.S. net exports fall.
C)   U.S. net capital outflow fell and U.S. net exports rise.
D)   both U.S. net capital and U.S. net exports fall.E) A) and B)
F) A) and C)

Question 8

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

Question 9

Eric, a resident of Sweden, purchases a book printed in the U.S. Which country's exports increase?

Accepted Answer

A)   Sweden's
B)   the U.S.'s
C)   Sweden's and the U.S.'s
D)   neither Sweden's nor the U.S.'sE) A) and D)
F) A) and C)

Question 10

Over the past five decades, the U.S. economy has become

Accepted Answer

A)   more closed.
B)   more open.
C)   less trade-oriented.
D)   more self-sufficient.E) B) and C)
F) C) and D)

Question 11

A U.S. purchase of oil from overseas paid for with foreign currency it already owned

Accepted Answer

A)   increases U.S. net exports, and increases U.S. net capital outflow.
B)   increases U.S. net exports, and decreases U.S. net capital outflow.
C)   decreases U.S. net exports, and increases U.S. net capital outflow.
D)   decreases U.S. net exports, and decreases U.S. net capital outflow.E) B) and D)
F) A) and D)

Question 12

In an open economy national saving equals domestic investment plus net capital outflow.

Accepted Answer

A) True 
 B)False

Question 13

List the factors that might influence a country's exports, imports, and trade balance.

Accepted Answer

a. the tastes of consumers for domestic ...

Question 14

If the Mexican nominal exchange rate does not change, but prices rise faster in Mexico than in all other countries, then the Mexican real exchange rate

Accepted Answer

A)   does not change.
B)   rises.
C)   declines.
D)   There is not enough information to answer the questionE) A) and D)
F) C) and D)

Question 15

If a McDonald's Big Mac cost $4.50 in the United States and 3.60 euros in the Euro area, then purchasing-power parity implies the nominal exchange rate is how many euros per dollar?

Accepted Answer

A)   1.25 If the value is less than this, it costs more dollars to buy a Big Mac in the U.S. than in the Euro area.
B)   1.25 If the value is less than this, it costs fewer dollars to buy a Big Mac in the U.S. then in the Euro area.
C)   .80 If the value is less than this, it costs more dollars to buy a Big Mac in the U.S. than in the Euro area.
D)   .80 If the value is less than this, it costs fewer dollars to buy a Big Mac in the U.S. than in the Euro area.E) A) and B)
F) C) and D)

Question 16

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

Accepted Answer

A)   A U.S. legal office opens a branch office in Holland.
B)   Erica, a U.S. resident, buys bonds issued by the Swiss government.
C)   Both A and B are examples of U.S. portfolio investment.
D)   Neither A nor B are examples of U.S. portfolio investment.E) All of the above
F) None of the above

Question 17

If you go to the bank and notice that a dollar buys more Japanese yen than it used to, then the dollar has

Accepted Answer

A)   appreciated. Other things the same, the appreciation would make Americans less likely to travel to Japan.
B)   appreciated. Other things the same, the appreciation would make Americans more likely to travel to Japan.
C)   depreciated. Other things the same, the depreciation would make Americans less likely to travel to Japan.
D)   depreciated. Other things the same, the depreciation would make Americans more likely to travel to Japan.E) B) and C)
F) C) and D)

Question 18

Suppose that the real exchange rate between the United States and Kenya 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 Kenyan goods a basket of U.S. goods buys) ?

Accepted Answer

A)   an increase in the number of Kenyan shillings that can be purchased with a dollar
B)   an increase in the price of U.S. goods
C)   a decrease in the price in Kenyan shillings of Kenyan goods
D)   All of the above are correct.E) A) and D)
F) None of the above

Question 19

Last year a country had $700 billion of saving and $900 of investment. What was its net capital outflow? How is it possible for a country to have investment that exceeds saving?

Accepted Answer

Net capital outflow equals saving - dome...

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 31: Open-Economy Macroeconomics: Basic Concepts

If a McDonald's Big Mac cost $4.50 in the United States and 3.60 euros in the Euro area, then purchasing-power parity implies the nominal exchange rate is how many euros per dollar?

Correct AnswerverifiedShow Answer

A firm in China sells toys to a U.S. department store chain. Other things the same, these sales

Correct AnswerverifiedShow Answer

Last year a country had $700 billion of saving and $900 of investment. What was its net capital outflow? How is it possible for a country to have investment that exceeds saving?

Correct AnswerverifiedNet capital outflow equals saving - dome...View AnswerShow Answer

Suppose that the real exchange rate between the United States and Kenya 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 Kenyan goods a basket of U.S. goods buys) ?

Correct AnswerverifiedShow Answer

If the exchange rate rises from .65 British pounds per dollar to .70 pounds per dollar, then compared to British goods, U.S. goods become

Correct AnswerverifiedShow Answer

U.S- based Dell sells computers to an Irish company that pays with previously obtained U.S. currency. This exchange

Correct AnswerverifiedShow Answer

Ivan, a Russian citizen, sells several hundred cases of caviar to a restaurant chain in the United States. By itself, this sale

Correct AnswerverifiedShow Answer

List the factors that might influence a country's exports, imports, and trade balance.

Correct Answerverifieda. the tastes of consumers for domestic ...View AnswerShow Answer

If you go to the bank and notice that a dollar buys more Japanese yen than it used to, then the dollar has

Correct AnswerverifiedShow Answer

In an open economy national saving equals domestic investment plus net capital outflow.

Correct AnswerverifiedShow Answer

A Portuguese company exchanges euros for $60,000 from a U.S. bank. The Portuguese firm then uses the dollars to purchase $60,000 of canning equipment from a U.S. company. As a result of these two transactions alone

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If Chileans buy more U.S. stocks and bonds and U.S. residents buy more Chilean wine, then

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

If the nominal exchange rate e is foreign currency per dollar, the domestic price is P, and the foreign price is P*, then the real exchange rate is defined as

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A U.S. purchase of oil from overseas paid for with foreign currency it already owned

Correct AnswerverifiedShow Answer

If the Mexican nominal exchange rate does not change, but prices rise faster in Mexico than in all other countries, then the Mexican real exchange rate

Correct AnswerverifiedShow Answer

Over the past five decades, the U.S. economy has become

Correct AnswerverifiedShow Answer

Eric, a resident of Sweden, purchases a book printed in the U.S. Which country's exports increase?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Net capital outflow equals saving - dome...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a. the tastes of consumers for domestic ...
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