Question 1

Which of the following is inconsistent with the others?

Accepted Answer

A)   Y - C - G > I
B)   this country had a trade surplus
C)   the purchase of foreign assets by this country's residents exceed foreigner's purchases of this country's assets
D)   this country's investment exceeded its domestic savingE) None of the above
F) All of the above

Question 2

The nominal exchange rate is 32 Russian rubles per dollar. The price of a bushel of wheat is 260 rubles in Russia and $7 in the U.S.
A. What is the real exchange rate? Show your work.
B. Can arbitragers make a profit?
C. If your answer to B is yes, where would arbitragers buy and where would they sell.

Accepted Answer

A. The real exchange rate = $7...

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

Question 4

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

Question 5

A country has a trade deficit. Which of the following must also be true?

Accepted Answer

A)   net capital outflow is positive and domestic investment is larger than saving
B)   net capital outflow is positive and saving is larger than domestic investment
C)   net capital outflow is negative and domestic investment is larger than saving
D)   net capital outflow is negative and saving is larger than domestic investmentE) B) and C)
F) A) and D)

Question 6

What does purchasing-power parity imply about the real exchange rate? Explain what this means.

Accepted Answer

That it is equal to one. The n...

Question 7

The purchase of U.S. government bonds by Egyptians is an example of

Accepted Answer

A)   U.S. imports.
B)   U.S. exports.
C)   foreign portfolio investment by Egyptians.
D)   foreign direct investment by Egyptians.E) A) and C)
F) B) and C)

Question 8

If U.S. consumers increase their demand for apples from New Zealand, then other things the same New Zealand's

Accepted Answer

A)   imports and net exports rise.
B)   imports rise and net exports fall.
C)   exports and net exports rise.
D)   exports rise and net exports fall.E) None of the above
F) C) and D)

Question 9

Net capital outflow is the purchase of domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.

Accepted Answer

A) True 
 B)False

Question 10

Other things the same, a country could move from having a trade surplus to having a trade deficit if either

Accepted Answer

A)   saving rose or domestic investment rose.
B)   saving rose or domestic investment fell.
C)   saving fell or domestic investment rose.
D)   saving fell or domestic investment fell.E) A) and C)
F) B) and D)

Question 11

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)   eP*/P) .
B)   eP/P*) .
C)   e + P*/P.
D)   e - P/P*.E) A) and B)
F) B) and C)

Question 12

Mike, a U.S. citizen, buys $1,000 worth of olives from Greece. By itself this purchase

Accepted Answer

A)   increases U.S. imports by $1,000 and increases U.S. net exports by $1,000.
B)   increases U.S. imports by $1,000 and decreases U.S. net exports by $1,000.
C)   increases U.S. exports by $1,000 and increases U.S. net exports by $1,000.
D)   increases U.S. exports by $1,000 and decreases U.S. net exports by $1,000.E) B) and C)
F) A) and D)

Question 13

Table 31-2
 
-Refer to Table 31-2. In real terms, U.S. goods are more expensive than goods in which countries?

Accepted Answer

A)   Britain
B)   Germany and Japan
C)   Japan
D)   Germany and VenezuelaE) B) and D)
F) B) and C)

Question 14

You are planning a graduation trip to Mexico. Other things the same, if the dollar depreciates relative to the peso, then

Accepted Answer

A)   the dollar buys fewer pesos. Your hotel room in Mexico will require fewer dollars.
B)   the dollar buys fewer pesos. Your hotel room in Mexico will require more dollars.
C)   the dollar buys more pesos. Your hotel room in Mexico will require fewer dollars.
D)   the dollar buys more pesos. Your hotel room in Mexico will require more dollars.E) B) and C)
F) A) and D)

Question 15

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

Question 16

If the exchange rate is 60 Indian rupees per dollar and a bushel of rice costs 200 rupees in India and $3 in the U.S., then the real exchange rate is

Accepted Answer

A)   greater than one and arbitrageurs could profit by buying rice in the U.S. and selling it in India.
B)   greater than one and arbitrageurs could profit by buying rice in India and selling it in the U.S..
C)   less than one and arbitrageurs could profit by buying rice in the U.S. and selling it in India.
D)   less than one and arbitrageurs could profit by buying rice in India and selling it in the U.S..E) B) and D)
F) A) and C)

Question 17

If purchasing-power parity holds, a dollar will buy

Accepted Answer

A)   more goods in foreign countries than in the United States.
B)   as many goods in foreign countries as it does in the United States.
C)   fewer goods in foreign countries than it does in the United States.
D)   None of the above is implied by purchasing-power parity.E) None of the above
F) All of the above

Question 18

If a country's purchases of foreign assets exceeds foreign purchases of domestic assets, that country has

Accepted Answer

A)   positive net exports and positive net capital outflows.
B)   positive net exports and negative net capital outflows.
C)   negative net exports and positive net capital outflows.
D)   negative net exports and negative net capital outflows.E) A) and B)
F) None of the above

Question 19

If purchasing-power parity between France and the U.S. holds, but then U.S. prices rise,

Accepted Answer

A)   the real exchange rate is above its purchasing-power parity value. An increase in the nominal exchange rate can move it back.
B)   the real exchange rate is above its purchasing-power parity value. A decrease in the nominal exchange rate can move it back.
C)   the real exchange rate is below its purchasing-power parity value. An increase in the nominal exchange rate can move it back.
D)   the real exchange rate is below its purchasing-power parity value. A decrease in the nominal exchange rate can move it back.E) None of the above
F) All of the above

Question 20

Which of the following is correct? Since 1950

Accepted Answer

A)   U.S. exports and U.S. imports each about doubled.
B)   U.S. exports and U.S. imports each about tripled.
C)   U.S. exports about doubled and U.S. imports about tripled.
D)   U.S. exports about tripled and U.S. imports about doubled.E) B) and C)
F) None of the above

Exam 13: Open-Economy Macroeconomics: Basic Concepts

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 exchange rate is 60 Indian rupees per dollar and a bushel of rice costs 200 rupees in India and $3 in the U.S., then the real exchange rate is

Correct Answer
verified

If purchasing-power parity holds, a dollar will buy

Correct Answer
verified

If U.S. consumers increase their demand for apples from New Zealand, then other things the same New Zealand's

Correct Answer
verified

If purchasing-power parity between France and the U.S. holds, but then U.S. prices rise,

Correct Answer
verified

The purchase of U.S. government bonds by Egyptians is an example of

Correct Answer
verified

Which of the following is inconsistent with the others?

Correct Answer
verified

Table 31-2 -Refer to Table 31-2. In real terms, U.S. goods are more expensive than goods in which countries?

Correct Answer
verified

A country has a trade deficit. Which of the following must also be true?

Correct Answer
verified

Net capital outflow equals the purchase of

Correct Answer
verified

What does purchasing-power parity imply about the real exchange rate? Explain what this means.

Correct Answer
verified
That it is equal to one. The n...
View Answer

You are planning a graduation trip to Mexico. Other things the same, if the dollar depreciates relative to the peso, then

Correct Answer
verified

Which of the following is correct? Since 1950

Correct Answer
verified

Other things the same, a country could move from having a trade surplus to having a trade deficit if either

Correct Answer
verified

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 Answer
verified

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

Correct Answer
verified

Mike, a U.S. citizen, buys $1,000 worth of olives from Greece. By itself this purchase

Correct Answer
verified

Correct Answer
verified
A. The real exchange rate = $7...
View Answer

If a country's purchases of foreign assets exceeds foreign purchases of domestic assets, that country has

Correct Answer
verified

Net capital outflow is the purchase of domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.

Correct Answer
verified

Exam 13: Open-Economy Macroeconomics: Basic Concepts

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 exchange rate is 60 Indian rupees per dollar and a bushel of rice costs 200 rupees in India and $3 in the U.S., then the real exchange rate is

Correct AnswerverifiedShow Answer

If purchasing-power parity holds, a dollar will buy

Correct AnswerverifiedShow Answer

If U.S. consumers increase their demand for apples from New Zealand, then other things the same New Zealand's

Correct AnswerverifiedShow Answer

If purchasing-power parity between France and the U.S. holds, but then U.S. prices rise,

Correct AnswerverifiedShow Answer

The purchase of U.S. government bonds by Egyptians is an example of

Correct AnswerverifiedShow Answer

Which of the following is inconsistent with the others?

Correct AnswerverifiedShow Answer

Table 31-2 -Refer to Table 31-2. In real terms, U.S. goods are more expensive than goods in which countries?

Correct AnswerverifiedShow Answer

A country has a trade deficit. Which of the following must also be true?

Correct AnswerverifiedShow Answer

Net capital outflow equals the purchase of

Correct AnswerverifiedShow Answer

What does purchasing-power parity imply about the real exchange rate? Explain what this means.

Correct AnswerverifiedThat it is equal to one. The n...View AnswerShow Answer

You are planning a graduation trip to Mexico. Other things the same, if the dollar depreciates relative to the peso, then

Correct AnswerverifiedShow Answer

Which of the following is correct? Since 1950

Correct AnswerverifiedShow Answer

Other things the same, a country could move from having a trade surplus to having a trade deficit if either

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

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

Correct AnswerverifiedShow Answer

Mike, a U.S. citizen, buys $1,000 worth of olives from Greece. By itself this purchase

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA. The real exchange rate = $7...View AnswerShow Answer

If a country's purchases of foreign assets exceeds foreign purchases of domestic assets, that country has

Correct AnswerverifiedShow Answer

Net capital outflow is the purchase of domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.

Correct AnswerverifiedShow 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
That it is equal to one. The n...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A. The real exchange rate = $7...
View Answer

Correct Answer
verified

Correct Answer
verified