Exam 12: Open-Economy Macroeconomics: Basic Concepts

Suppose that a country exports $200 million of goods and services and imports $120 million of goods and services. What is the value of that country's net exports?

Suppose the price level in Canada (P) and the nominal exchange rate (e) between the Canadian dollar and the foreign currency remain the same, while the price level abroad increases from P1* to P2*. Let the real exchange rate be X. What is the percentage change in the real exchange rate?

What does purchasing-power parity imply about the real exchange rate?

A Canadian firm buys apples from New Zealand with Canadian currency. The New Zealand firm then uses this money to buy packaging equipment from a Canadian firm. How do these transactions affect net exports or net capital outflow?

When Canada imports more than it exports, it must also buy domestic assets from foreigners.

Which of the following is an example of Canadian foreign portfolio investment?

Assuming all other things equal, what would happen to the Canadian dollar real exchange rate under each of the following circumstances? a. The Canadian nominal exchange rate depreciates. b. Canadian domestic prices increase. c. Prices in the rest of the world rise.

If a Swiss chocolate maker opens a factory in Canada. What is this an example of?

In every economy, national saving equals domestic investment plus net capital outflow.

Suppose that the dollar buys more coffee in Honduras than in Guatemala. How could traders make a profit?

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

Suppose inflation is higher in Canada over the next few months than in foreign countries, and exchange rates are given in terms of how much foreign currency a dollar buys or how many foreign goods Canadian goods buy. According to purchasing-power parity, what should we expect to see?

Suppose the price level in Canada increases from P1 to P2, while the price level abroad (P*) and the nominal exchange rate (e) between the Canadian dollar and the foreign currency remain the same. Let the real exchange rate be X. What is the percentage change in the real exchange rate?

Suppose the real exchange rate is 1 litre of Canadian gasoline per 2 litres of U.S. gasoline, 1 litre of U.S. gasoline costs $0.50 U.S., and a litre of Canadian gas costs $1.20 Canadian. What is the nominal exchange rate?

Suppose Nicholas, a Greek citizen, opens a restaurant in Wasaga Beach, Ontario. What are the effects of this action?

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

If citizens of a country are not saving much, which action should that country's government take?

According to purchasing-power parity theory, if the same fast-food hamburger costs $4.00 in Canada and 20 Tunisian dinars, what should the exchange rate be?

What is the formula for national saving?

Suppose that a country has $80 billion of national saving and $80 billion of domestic investment. Is this possible? Where did the other $60 billion of national saving go?