Question 1

A country's exports are $500 billion, and imports are $700 billion. What is the country's trade balance?

Accepted Answer

A)   $200 billion deficit
B)   $200 billion surplus
C)   $1200 billion deficit
D)   $1200 billion surplusE) A) and C)
F) None of the above

Question 2

Canadian exports make up less than 20 percent of GDP.

Accepted Answer

A) True 
 B)False

Question 3

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 4

The country of Sylvania has a GDP of $4000, investment of $1500, government purchases of $400, and net capital outflow of negative $300. What is consumption?

Accepted Answer

A)   $700
B)   $800
C)   $2400
D)   $2700E) None of the above
F) B) and C)

Question 5

-Refer to the Table 12-1. What country's good are less expensive than Canadian goods?

Accepted Answer

A)   Bolivia
B)   Japan
C)   Norway
D)   ThailandE) All of the above
F) C) and D)

Question 6

Suppose a lobster supper in Nova Scotia costs fewer dollars than a lobster supper in Moscow. Explain why this is inconsistent with purchasing-power parity and explain why the inconsistency may exist.

Accepted Answer

According to purchasing-power parity, a ...

Question 7

Suppose that the exchange rate is 50 Bangladesh taka per Canadian dollar, and that a bushel of rice costs 200 taka in Bangladesh and $3 in Canada. Which statement is consistent with these facts?

Accepted Answer

A)   The real exchange rate is greater than one, and arbitrageurs could profit by buying rice in Canada and selling it in Bangladesh.
B)   The real exchange rate is greater than one, and arbitrageurs could profit by buying rice in Bangladesh and selling it in Canada.
C)   The real exchange rate is less than one, and arbitrageurs could profit by buying rice in Canada and selling it in Bangladesh.
D)   The real exchange rate is less than one, and arbitrageurs could profit by buying rice in Bangladesh and selling it in Canada.E) None of the above
F) A) and B)

Question 8

In 2009, approximately what was Canadian net capital outflow as a percent of GDP?

Accepted Answer

A)   -4.5 percent
B)   -2.5 percent
C)   2.5 percent
D)   4.5 percentE) A) and B)
F) A) and C)

Question 9

If the exchange rate changes from 0.35 ? HYPERLINK "http://en.wikipedia.org/wiki/Saudi_riyal" ?Saudi riyal? per dollar to 0.30 ? HYPERLINK "http://en.wikipedia.org/wiki/Saudi_riyal" ?Saudi riyal? per dollar, what has happened to the dollar?

Accepted Answer

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

Question 10

Which statement best defines net capital outflow?

Accepted Answer

A)   It is the purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreign residents.
B)   It is the purchase of foreign assets by domestic residents minus the purchase of foreign goods and services by domestic residents.
C)   It is the purchase of domestic assets by foreign residents minus the purchase of domestic goods and services by foreign residents.
D)   It is the purchase of domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.E) A) and B)
F) None of the above

Question 11

How does international trade affect the standard of living?

Accepted Answer

A)   It raises the standard of living in all trading countries.
B)   It lowers the standard of living in all trading countries.
C)   It raises the standard of living in the exporting country and lowers it in the importing country.
D)   It raises the standard of living in the importing country and lowers it in the exporting country.E) B) and C)
F) A) and C)

Question 12

In 2006, Canada had positive net exports. What does this fact imply?

Accepted Answer

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

Question 13

In which situation must domestic saving equal investment?

Accepted Answer

A)   when NX is negative
B)   when NX is zero
C)   when NCO is negative
D)   when imports are zeroE) B) and D)
F) None of the above

Question 14

What partly caused the increase in international trade in Canada since 1989?

Accepted Answer

A)   an increase in Canadian GDP
B)   an appreciation of the dollar
C)   better quality of Canadian products
D)   the free trade agreement between Canada and the United StatesE) B) and C)
F) None of the above

Question 15

How do nominal exchange rates change over time?

Accepted Answer

A)   They vary little over time.
B)   They vary substantially over time.
C)   They appreciate over time for most countries.
D)   They depreciate over time for most countries.E) All of the above
F) None of the above

Question 16

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

Accepted Answer

a. the tastes of consumers for domestic ...

Question 17

Suppose the price level in Canada was P = 124 last year; it is up by 3 points this year. In the U.S., the price level was 112 last year; it is up by 2 points this year. The exchange rate was US$0.96 per C$1 last year. (For part a, approximate all results to two decimals.)
a) Compare the rate of change in the exchange rate with the difference between the foreign and domestic inflation rates. Are they equal?
b) In theory, the rate of change in the nominal exchange rate should be about the same as the inflation difference. Redo the calculations from part a, retaining this time at least four decimals in your intermediate results. Does your answer to the question in part a change?
c) What have you learned from this exercise?

Accepted Answer

a)The inflation rate in Canada = (127 - ...

Question 18

A country has $120 million of net exports and $150 million of saving. What is net capital outflow?

Accepted Answer

A)   -$30 million
B)   $30 million
C)   $120 million
D)   $150 millionE) A) and B)
F) B) and D)

Question 19

If a country has business opportunities that become relatively attractive to other countries, what best predicts the effects of this change?

Accepted Answer

A)   Both net exports and net capital outflow increase.
B)   Both net exports and net capital outflow decrease.
C)   Net exports increase, but net capital outflow decreases.
D)   Net exports decrease, but net capital outflow increases.E) A) and B)
F) None of the above

Question 20

In Ireland, a pint of beer costs 4 Irish punts. In Australia, a pint of beer costs 6 Australian dollars. If the exchange rate is 0.8 punts per Australian dollar, what is the real exchange rate?

Accepted Answer

A)   0.53 pints of Irish beer per pint of Australian beer
B)   0.8 pints of Irish beer per pint of Australian beer
C)   1.11 pints of Irish beer per pint of Australian beer
D)   1.25 pints of Irish beer per pint of Australian beerE) A) and C)
F) None of the above

Exam 12: Open-Economy Macroeconomics: Basic Concepts

Suppose that the exchange rate is 50 Bangladesh taka per Canadian dollar, and that a bushel of rice costs 200 taka in Bangladesh and $3 in Canada. Which statement is consistent with these facts?

Correct Answer
verified

A country's exports are $500 billion, and imports are $700 billion. What is the country's trade balance?

Correct Answer
verified

A country has $120 million of net exports and $150 million of saving. What is net capital outflow?

Correct Answer
verified

How does international trade affect the standard of living?

Correct Answer
verified

Correct Answer
verified
a)The inflation rate in Canada = (127 - ...
View Answer

-Refer to the Table 12-1. What country's good are less expensive than Canadian goods?

Correct Answer
verified

If a country has business opportunities that become relatively attractive to other countries, what best predicts the effects of this change?

Correct Answer
verified

How do nominal exchange rates change over time?

Correct Answer
verified

In 2009, approximately what was Canadian net capital outflow as a percent of GDP?

Correct Answer
verified

In 2006, Canada had positive net exports. What does this fact imply?

Correct Answer
verified

Canadian exports make up less than 20 percent of GDP.

Correct Answer
verified

In Ireland, a pint of beer costs 4 Irish punts. In Australia, a pint of beer costs 6 Australian dollars. If the exchange rate is 0.8 punts per Australian dollar, what is the real exchange rate?

Correct Answer
verified

In which situation must domestic saving equal investment?

Correct Answer
verified

If the exchange rate changes from 0.35 ? HYPERLINK "http://en.wikipedia.org/wiki/Saudi_riyal" ?Saudi riyal? per dollar to 0.30 ? HYPERLINK "http://en.wikipedia.org/wiki/Saudi_riyal" ?Saudi riyal? per dollar, what has happened to the dollar?

Correct Answer
verified

Suppose a lobster supper in Nova Scotia costs fewer dollars than a lobster supper in Moscow. Explain why this is inconsistent with purchasing-power parity and explain why the inconsistency may exist.

Correct Answer
verified
According to purchasing-power parity, a ...
View Answer

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

The country of Sylvania has a GDP of $4000, investment of $1500, government purchases of $400, and net capital outflow of negative $300. What is consumption?

Correct Answer
verified

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

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

What partly caused the increase in international trade in Canada since 1989?

Correct Answer
verified

Which statement best defines net capital outflow?

Correct Answer
verified

Exam 12: Open-Economy Macroeconomics: Basic Concepts

Suppose that the exchange rate is 50 Bangladesh taka per Canadian dollar, and that a bushel of rice costs 200 taka in Bangladesh and $3 in Canada. Which statement is consistent with these facts?

Correct AnswerverifiedShow Answer

A country's exports are $500 billion, and imports are $700 billion. What is the country's trade balance?

Correct AnswerverifiedShow Answer

A country has $120 million of net exports and $150 million of saving. What is net capital outflow?

Correct AnswerverifiedShow Answer

How does international trade affect the standard of living?

Correct AnswerverifiedShow Answer

Correct Answerverifieda)The inflation rate in Canada = (127 - ...View AnswerShow Answer

-Refer to the Table 12-1. What country's good are less expensive than Canadian goods?

Correct AnswerverifiedShow Answer

If a country has business opportunities that become relatively attractive to other countries, what best predicts the effects of this change?

Correct AnswerverifiedShow Answer

How do nominal exchange rates change over time?

Correct AnswerverifiedShow Answer

In 2009, approximately what was Canadian net capital outflow as a percent of GDP?

Correct AnswerverifiedShow Answer

In 2006, Canada had positive net exports. What does this fact imply?

Correct AnswerverifiedShow Answer

Canadian exports make up less than 20 percent of GDP.

Correct AnswerverifiedShow Answer

In Ireland, a pint of beer costs 4 Irish punts. In Australia, a pint of beer costs 6 Australian dollars. If the exchange rate is 0.8 punts per Australian dollar, what is the real exchange rate?

Correct AnswerverifiedShow Answer

In which situation must domestic saving equal investment?

Correct AnswerverifiedShow Answer

If the exchange rate changes from 0.35 ? HYPERLINK "http://en.wikipedia.org/wiki/Saudi_riyal" ?Saudi riyal? per dollar to 0.30 ? HYPERLINK "http://en.wikipedia.org/wiki/Saudi_riyal" ?Saudi riyal? per dollar, what has happened to the dollar?

Correct AnswerverifiedShow Answer

Suppose a lobster supper in Nova Scotia costs fewer dollars than a lobster supper in Moscow. Explain why this is inconsistent with purchasing-power parity and explain why the inconsistency may exist.

Correct AnswerverifiedAccording to purchasing-power parity, a ...View AnswerShow 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

The country of Sylvania has a GDP of $4000, investment of $1500, government purchases of $400, and net capital outflow of negative $300. What is consumption?

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

What partly caused the increase in international trade in Canada since 1989?

Correct AnswerverifiedShow Answer

Which statement best defines net capital outflow?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a)The inflation rate in Canada = (127 - ...
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
According to purchasing-power parity, a ...
View Answer

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified