Question 1

If U.S. exports are $150 billion and U.S. imports are $100 billion, which of the following is correct?

Accepted Answer

A)   The U.S. has a trade surplus of $100 billion.
B)   The U.S. has a trade surplus of $50 billion.
C)   The U.S. has a trade deficit of $100 billion.
D)   The U.S. has a trade deficit of $50 billion.E) B) and C)
F) B) and D)

Question 2

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 3

Gabrielle, an Italian citizen, uses some previously obtained dollars to purchase a bond issued by a U.S. company. This transaction

Accepted Answer

A)   decreases U.S. net capital outflow.
B)   does not change U.S. net capital outflow.
C)   increases U.S. net capital outflow by more than the value of the bond.
D)   increases U.S. net capital outflow by the value of the bond.E) A) and B)
F) B) and C)

Question 4

During the tough economic times from 2008-2012,

Accepted Answer

A)   investment fell but saving rose, so net capital outflow rose.
B)   investment fell by more than saving fell, so net capital outflow rose
C)   investment fell by less than saving fell, so net capital outflow fell.
D)   investment and saving both fell by about the same percent.E) A) and B)
F) A) and C)

Question 5

In the U.S. a digital camera costs $200. The same camera in London sells for 90 pounds. If the exchange rate were .50 pounds per dollar, then which of the following would be correct?

Accepted Answer

A)   The real exchange rate is greater than 1. A person in London with $200 could exchange them for pounds and have more than enough to buy the camera there.
B)   The real exchange rate is greater than 1. A person in London with $200 could exchange them for pounds but then wouldn't have enough to buy the camera there.
C)   The real exchange rate is less than 1. A person in London with $200 could exchange them for pounds and have more than enough to buy the camera there.
D)   The real exchange rate is less than 1. A person in London with $200 could exchange them for pounds but then wouldn't have enough to buy the camera.E) C) and D)
F) B) and D)

Question 6

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) A) and D)
F) A) and C)

Question 7

It is possible for a country to have domestic investment that exceeds national saving.

Accepted Answer

A) True 
 B)False

Question 8

When the Sykes Corporation an American company)  buys shares of Audi stock a German company)  for its pension fund, U.S. net capital outflow

Accepted Answer

A)   increases because an American company makes a portfolio investment in Germany.
B)   declines because an American company makes a portfolio investment in Germany.
C)   increases because an American company makes a direct investment in Germany.
D)   declines because an American company makes a direct investment in Germany.E) A) and D)
F) B) and C)

Question 9

According to purchasing-power parity, if the Federal Reserve increased the money supply

Accepted Answer

A)   U.S. prices would rise and the nominal exchange rate would rise.
B)   U.S. prices would rise and the nominal exchange rate would fall.
C)   U.S. prices would fall and the nominal exchange rate would rise.
D)   U.S. prices and the nominal exchange rate would fall.E) A) and C)
F) A) and D)

Question 10

If the exchange rate changes from 148 Kazakhstan tenge per dollar to 155 Kazakhstan tenge per dollar, the dollar has

Accepted Answer

A)   appreciated. Other things the same, it now takes fewer dollars to buy Kazakhstani goods.
B)   appreciated. Other things the same, it now takes more dollars to buy Kazakhstani goods.
C)   depreciated. Other things the same, it now takes fewer dollars to buy Kazakhstani goods.
D)   depreciated. Other things the same, it now takes more dollars to buy Kazakhstani goods.E) A) and B)
F) B) and C)

Question 11

If purchasing-power parity holds, the price level in the U.S. is 140, and the price level in Canada is 120, which of the following is true?

Accepted Answer

A)   the real exchange rate is 120/140.
B)   the real exchange rate is 140/120.
C)   the nominal exchange rate is 120/140
D)   the nominal exchange rate is 140/120E) None of the above
F) A) and B)

Question 12

A country recently had a trade deficit of $2.5 trillion and purchased $3 trillion of foreign assets. How many of its assets did foreigners purchase?

Accepted Answer

The answer of A country recently had a trade deficit...

Question 13

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 14

A country had a net capital outflow of $1.5 trillion and imports of $0.5 trillion. What was the value of its exports?

Accepted Answer

The answer of A country had a net capital outflow...

Question 15

Table 31-1
 
-Refer to Table 31-1. What are Bolivia's net exports?

Accepted Answer

A)   $30 billion
B)   $5 billion
C)   -$5 billion
D)   -$25 billionE) A) and C)
F) None of the above

Question 16

From 1970 to 1998 the U.S. dollar

Accepted Answer

A)   gained value compared to the Italian lira because inflation was higher in the U.S.
B)   gained value compared to the Italian lira because inflation was lower in the U.S.
C)   lost value compared to the Italian lira because inflation was higher in the U.S.
D)   lost value compared to the Italian lira because inflation was lower in the U.S.E) C) and D)
F) A) and C)

Question 17

If a U.S. textbook publishing company sells texts overseas, U.S. net exports

Accepted Answer

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

Question 18

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) B) and D)
F) B) and C)

Question 19

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

Question 20

Suppose a Starbucks tall latte cost $4.00 in the United States, 5.00 euros in the euro area and $2.50 Australian dollars in Australia. Nominal exchange rates are .80 euros per dollar and 1.4 Australian dollars per U.S. dollar. Where does purchasing-power parity hold?

Accepted Answer

A)   both the euro area and Australia
B)   the euro area but not Australia
C)   Australia but not the euro area
D)   neither the euro area or AustraliaE) A) and B)
F) B) and C)

Exam 18: Open-Economy Macroeconomics: Basic Concepts

If purchasing-power parity holds, the price level in the U.S. is 140, and the price level in Canada is 120, which of the following is true?

Correct AnswerverifiedShow Answer

It is possible for a country to have domestic investment that exceeds national saving.

Correct AnswerverifiedShow Answer

A country had a net capital outflow of $1.5 trillion and imports of $0.5 trillion. What was the value of its exports?

Correct AnswerverifiedShow Answer

If U.S. exports are $150 billion and U.S. imports are $100 billion, which of the following is correct?

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

A country recently had a trade deficit of $2.5 trillion and purchased $3 trillion of foreign assets. How many of its assets did foreigners purchase?

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

Suppose a Starbucks tall latte cost $4.00 in the United States, 5.00 euros in the euro area and $2.50 Australian dollars in Australia. Nominal exchange rates are .80 euros per dollar and 1.4 Australian dollars per U.S. dollar. Where does purchasing-power parity hold?

Correct AnswerverifiedShow Answer

If Spain has a trade deficit, then

Correct AnswerverifiedShow Answer

Gabrielle, an Italian citizen, uses some previously obtained dollars to purchase a bond issued by a U.S. company. This transaction

Correct AnswerverifiedShow Answer

During the tough economic times from 2008-2012,

Correct AnswerverifiedShow Answer

According to purchasing-power parity, if the Federal Reserve increased the money supply

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

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

When the Sykes Corporation an American company) buys shares of Audi stock a German company) for its pension fund, U.S. net capital outflow

Correct AnswerverifiedShow Answer

Table 31-1 -Refer to Table 31-1. What are Bolivia's net exports?

Correct AnswerverifiedShow Answer

From 1970 to 1998 the U.S. dollar

Correct AnswerverifiedShow Answer

If a U.S. textbook publishing company sells texts overseas, U.S. net exports

Correct AnswerverifiedShow Answer

If the exchange rate changes from 148 Kazakhstan tenge per dollar to 155 Kazakhstan tenge per dollar, the dollar has

Correct AnswerverifiedShow Answer

In the U.S. a digital camera costs $200. The same camera in London sells for 90 pounds. If the exchange rate were .50 pounds per dollar, then which of the following would be correct?

Correct AnswerverifiedShow Answer

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