Question 1

China's high net exports must be balanced by:

Accepted Answer

A)   low net capital outflows.
B)   high net capital outflows.
C)   lownet imports.
D)   high net capital inflows.E) A) and B)
F) B) and C)

Question 2

Anheuser-Busch purchased the Labatt brewery in Canada and has expanded its market and product offerings. This is an example of:

Accepted Answer

A)   foreign direct investment.
B)   foreign portfolio investment.
C)   importing.
D)   exporting.E) None of the above
F) B) and C)

Question 3

If the U.S. dollar was worth 0.8 euros, and the dollar appreciated, it might now be worth:

Accepted Answer

A)   0.7 euros.
B)   0.9 euros.
C)   0.8 euros.
D)   None of these statements is possible.E) C) and D)
F) None of the above

Question 4

A speculative attack:

Accepted Answer

A)   can occur with any currency.
B)   can occur to currencies with floating exchange rates.
C)   can occur to currencies with fixed exchange rates.
D)   are illegal and no longer occur.E) A) and B)
F) A) and C)

Question 5

Ford opens a parts manufacturing plant in Haiti, which ships its parts back to the U.S. to be assembled in Detroit. Running the factory in Haiti is an example of:

Accepted Answer

A)   foreign direct investment.
B)   foreign portfolio investment.
C)   importing.
D)   exporting.E) A) and D)
F) A) and C)

Question 6

A country who has a trade deficit:

Accepted Answer

A)   imports less than it exports.
B)   has a negative trade balance.
C)   sells more goods at home than it sells abroad.
D)   requires more trade in order to solve a budgetary deficit.E) A) and D)
F) A) and C)

Question 7

In the U.S. over the last 50 years:

Accepted Answer

A)   imports have grown and exports have fallen.
B)   both imports and exports have grown dramatically.
C)   both imports and exports have fallen dramatically.
D)   the percent of GDP that represents imports and exports has remained fairly steady.E) A) and C)
F) A) and B)

Question 8

For any given country, the net capital outflows to all other countries equal:

Accepted Answer

A)   net exports to all other countries.
B)   net capital inflows from all other countries.
C)   national savings.
D)   net foreign direct investment to all other countries.E) B) and C)
F) A) and B)

Question 9

Opportunities for arbitrage in the foreign exchange markets throughout the world are:

Accepted Answer

A)   plentiful, particularly in developing nations.
B)   plentiful, particularly in markets trading in U.S. dollars.
C)   fleeting, because technology today allows quick trading that eliminate them quickly.
D)   fleeting, because most governments â€˜peg' or fix their currency's value to another's.E) All of the above
F) C) and D)

Question 10

When Dave in Detroit, MI buys stock in Ford Motor Co., NCO:

Accepted Answer

A)   increases.
B)   is unaffected.
C)   decreases.
D)   is zero.E) C) and D)
F) A) and B)

Question 11

Countries that typically run a trade surplus are:

Accepted Answer

A)   China, Germany and the US.
B)   China, Germany, and Japan.
C)   Japan, Germany and the US
D)   China, Japan, and the US.E) A) and B)
F) A) and D)

Question 12

When interest rates in the U.S. decline, we can expect net capital outflow to:

Accepted Answer

A)   increase.
B)   decrease.
C)   be unaffected.
D)   be zero.E) A) and C)
F) None of the above

Question 13

When a country's ability to maintain its fixed exchange rate is doubted by investors:

Accepted Answer

A)   it may fall under a speculative attack.
B)   the exchange rate is likely to spiral upward, out of control.
C)   the value of its currency tends to appreciate too quickly.
D)   All of these statements are true.E) A) and D)
F) C) and D)

Question 14

The exchange rate is the:

Accepted Answer

A)   value of one currency expressed in terms of another currency.
B)   reciprocal of the currency's real value.
C)   value of one currency expressed in terms of the goods and services it can buy.
D)   value of currency adjusted for inflation.E) A) and D)
F) A) and C)

Question 15

The income-expenditure identity for an open economy is:

Accepted Answer

A)   Im − Ex = C + I.
B)   Y = C + I +G
C)   Y = C + I + G + NX.
D)   Y + G = C + I − NX.E) A) and C)
F) A) and B)

Question 16

When the U.S. dollar appreciates against a foreign currency, U.S. goods become:

Accepted Answer

A)   more expensive to people abroad, and we expect net exports to decrease.
B)   less expensive to people abroad, and we expect net exports to increase.
C)   more expensive to people abroad, and we expect net exports to increase.
D)   less expensive to people abroad, and we expect net exports to decrease.E) A) and B)
F) All of the above

Question 17

The balance-of-payments identity is an equation that shows that the value of:

Accepted Answer

A)   net exports equals the net capital outflow.
B)   net capital inflow equals the net capital outflow.
C)   imports must equal exports.
D)   payments from a country exceeds payments to a country.E) A) and C)
F) C) and D)

Question 18

If the cost of a typical basket of goods in the U.S. is $100 and in Germany it is 200 euros, and the nominal exchange rate is 0.7 euro per dollar, what is the real exchange rate?

Accepted Answer

A)   0.35.
B)   0.50.
C)   3.50.
D)   1.50.E) None of the above
F) A) and D)

Question 19

Savings for an economy is equal to:

Accepted Answer

A)   private savings − public savings.
B)   public savings − private savings.
C)   private savings + public savings.
D)   investment − net exports.E) A) and B)
F) A) and C)

Question 20

A main trading partner with the U.S. is:

Accepted Answer

A)   South Africa.
B)   Mexico.
C)   Russia.
D)   Saudi Arabia.E) C) and D)
F) B) and C)

Exam 18: Open-Market Macroeconomics

A country who has a trade deficit:

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A speculative attack:

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When a country's ability to maintain its fixed exchange rate is doubted by investors:

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When Dave in Detroit, MI buys stock in Ford Motor Co., NCO:

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For any given country, the net capital outflows to all other countries equal:

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When the U.S. dollar appreciates against a foreign currency, U.S. goods become:

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A main trading partner with the U.S. is:

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Countries that typically run a trade surplus are:

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If the cost of a typical basket of goods in the U.S. is $100 and in Germany it is 200 euros, and the nominal exchange rate is 0.7 euro per dollar, what is the real exchange rate?

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In the U.S. over the last 50 years:

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The exchange rate is the:

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The income-expenditure identity for an open economy is:

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Ford opens a parts manufacturing plant in Haiti, which ships its parts back to the U.S. to be assembled in Detroit. Running the factory in Haiti is an example of:

Correct AnswerverifiedShow Answer

Opportunities for arbitrage in the foreign exchange markets throughout the world are:

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If the U.S. dollar was worth 0.8 euros, and the dollar appreciated, it might now be worth:

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When interest rates in the U.S. decline, we can expect net capital outflow to:

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Savings for an economy is equal to:

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China's high net exports must be balanced by:

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Anheuser-Busch purchased the Labatt brewery in Canada and has expanded its market and product offerings. This is an example of:

Correct AnswerverifiedShow Answer

The balance-of-payments identity is an equation that shows that the value of:

Correct AnswerverifiedShow Answer

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