Question 1

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. 
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.

Question 2

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. 
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.

Question 3

By itself, if a U.S. firm builds a new factory overseas, U.S. net capital outflow rises.

Accepted Answer

A) True 
 B)False

Question 4

In France a loaf of bread costs 3 euros. In Great Britain a loaf of bread costs 4 pounds. If the exchange rate is .9 pounds per euro, what is the real exchange rate?

Accepted Answer

A) 4/2.7 loaves of British bread per loaf of French bread 
B) 3.6/3 loaves of British bread per loaf of French bread 
C) 3/3.6 loaves of British bread per loaf of French bread 
D) 2.7/4 loaves of British bread per loaf of French bread 
A) 4/2.7 loaves of British bread per loaf of French bread 
B) 3.6/3 loaves of British bread per loaf of French bread 
C) 3/3.6 loaves of British bread per loaf of French bread 
D) 2.7/4 loaves of British bread per loaf of French bread

Question 5

Last month a country sold more goods and services to residents of foreign countries than it purchased from them. What does this imply about this country's trade balance?

Accepted Answer

This count

Question 6

Jen and Alica are both U.S. citizens. Jen opens a cafe in France. Alicia buys equipment from a company in Canada to use in her factory. Whose action is an example of U.S. foreign direct investment?

Accepted Answer

A) Jen's and Alica's 
B) Jen's but not Alicia's 
C) Alicia's but not Jen's 
D) Neither Anthony's nor Tom's. 
A) Jen's and Alica's 
B) Jen's but not Alicia's 
C) Alicia's but not Jen's 
D) Neither Anthony's nor Tom's.

Question 7

Net capital outflow equals

Accepted Answer

A) the value of domestic assets purchased by foreigners. 
B) the value of foreign assets purchased by domestic residents. 
C) the value of domestic assets purchased by foreigners - the value of foreign assets purchased by domestic residents. 
D) the value of foreign assets purchased by domestic residents - the value of domestic assets purchased by foreigners. 
A) the value of domestic assets purchased by foreigners. 
B) the value of foreign assets purchased by domestic residents. 
C) the value of domestic assets purchased by foreigners - the value of foreign assets purchased by domestic residents. 
D) the value of foreign assets purchased by domestic residents - the value of domestic assets purchased by foreigners.

Question 8

Other things the same, an increase in the nominal exchange rate raises the real exchange rate.

Accepted Answer

A) True 
 B)False

Question 9

In an open economy, gross domestic product equals $1,650 billion, government expenditure equals $250 billion, and savings equals $550 billion. What is consumption expenditure?

Accepted Answer

A) $250 billion 
B) $300 billion 
C) $550 billion 
D) $850 billion 
A) $250 billion 
B) $300 billion 
C) $550 billion 
D) $850 billion

Question 10

If U.S. consumers decrease their demand for cell phones from Finland, then other things the same Finland's

Accepted Answer

A) exports and net exports fall. 
B) exports fall and net exports rise. 
C) imports and net exports fall. 
D) imports fall and net exports rise. 
A) exports and net exports fall. 
B) exports fall and net exports rise. 
C) imports and net exports fall. 
D) imports fall and net exports rise.

Question 11

While vacationing in Turkey you see a rug you consider purchasing. The seller tells you the rug costs 1,200 Turkish lire.
A. If the exchange rate is .60 lira per dollar, how many dollars does the rug cost?
B. If the dollar depreciates against the lira, will it take more or fewer dollars to buy the rug? Explain.

Accepted Answer

A. 1200 lire = $x times .60 li

Question 12

If a country had a trade deficit of $20 billion and then its exports rose by $7 billion and its imports fell by $10 billion, its net exports would now be

Accepted Answer

A) $37 billion 
B) $3 billion 
C) -$3 billion 
D) -$37 billion 
A) $37 billion 
B) $3 billion 
C) -$3 billion 
D) -$37 billion

Question 13

Other things the same, if the exchange rate changes from 30 Thai bhat per dollar to 25 Thai bhat per dollar, then the dollar has

Accepted Answer

A) appreciated and so buys more Thai goods. 
B) appreciated and so buys fewer Thai goods. 
C) depreciated and so buys more Thai goods. 
D) depreciated and so buys fewer Thai goods. 
A) appreciated and so buys more Thai goods. 
B) appreciated and so buys fewer Thai goods. 
C) depreciated and so buys more Thai goods. 
D) depreciated and so buys fewer Thai goods.

Question 14

The nominal exchange rate is 90 Pakistani rupees per dollar. The price of a shirt in Pakistan is 1800 rupees. The same shirt sells for $25 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 C is yes, where would they buy and where would they sell?

Accepted Answer

A. The real exchange rate = $2

Question 15

If a country had a trade deficit of $10 billion and then its exports rose by $20 billion and its imports rose by $10 billion, its net exports would now be

Accepted Answer

A) $0 
B) $10 billion. 
C) -$10 billion. 
D) -$20 billion. 
A) $0 
B) $10 billion. 
C) -$10 billion. 
D) -$20 billion.

Question 16

From 2008 to 2012 both U.S. saving and U.S. investment fell.

Accepted Answer

A) True 
 B)False

Question 17

A U.S. grocery store chain bought $800,000 worth of Kenyan currency from a bank in Kenya. It then used these funds to buy $800,000 worth of coffee from Kenyan coffee growers.
As a result of this exchange, by how much and in which direction did:
A. U.S. net exports change?
B. U.S. net capital outflow change?

Accepted Answer

A. U.S. net exports

Question 18

If a country has net exports of $8 billion and sold $40 billion of goods and services abroad, then it has

Accepted Answer

A) $48 billion of imports and $40 billion of exports. 
B) $48 billion of exports and $40 billion of imports. 
C) $40 billion of imports and $32 billion of exports. 
D) $40 billion of exports and $32 billion of imports. 
A) $48 billion of imports and $40 billion of exports. 
B) $48 billion of exports and $40 billion of imports. 
C) $40 billion of imports and $32 billion of exports. 
D) $40 billion of exports and $32 billion of imports.

Question 19

A nation with a trade surplus will necessarily have saving that is greater than domestic investment.

Accepted Answer

A) True 
 B)False

Question 20

A U.S. firm buys apples from New Zealand with New Zealand dollars it got in exchange for U.S. dollars. New Zealand residents then use these dollars to purchase oranges from the U.S. Which of the following increases?

Accepted Answer

A) New Zealand's net capital outflow and New Zealand's net exports 
B) only New Zealand's net exports 
C) only New Zealand's net capital outflow 
D) neither New Zealand's net exports nor New Zealand's capital outflow 
A) New Zealand's net capital outflow and New Zealand's net exports 
B) only New Zealand's net exports 
C) only New Zealand's net capital outflow 
D) neither New Zealand's net exports nor New Zealand's capital outflow

Exam 31: Open-Economy Macroeconomics: Basic Concepts

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

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

By itself, if a U.S. firm builds a new factory overseas, U.S. net capital outflow rises.

In France a loaf of bread costs 3 euros. In Great Britain a loaf of bread costs 4 pounds. If the exchange rate is .9 pounds per euro, what is the real exchange rate?

Last month a country sold more goods and services to residents of foreign countries than it purchased from them. What does this imply about this country's trade balance?

Jen and Alica are both U.S. citizens. Jen opens a cafe in France. Alicia buys equipment from a company in Canada to use in her factory. Whose action is an example of U.S. foreign direct investment?

Net capital outflow equals

Other things the same, an increase in the nominal exchange rate raises the real exchange rate.

In an open economy, gross domestic product equals $1,650 billion, government expenditure equals $250 billion, and savings equals $550 billion. What is consumption expenditure?

If U.S. consumers decrease their demand for cell phones from Finland, then other things the same Finland's

If a country had a trade deficit of $20 billion and then its exports rose by $7 billion and its imports fell by $10 billion, its net exports would now be

Other things the same, if the exchange rate changes from 30 Thai bhat per dollar to 25 Thai bhat per dollar, then the dollar has

If a country had a trade deficit of $10 billion and then its exports rose by $20 billion and its imports rose by $10 billion, its net exports would now be

From 2008 to 2012 both U.S. saving and U.S. investment fell.

If a country has net exports of $8 billion and sold $40 billion of goods and services abroad, then it has

A nation with a trade surplus will necessarily have saving that is greater than domestic investment.

A U.S. firm buys apples from New Zealand with New Zealand dollars it got in exchange for U.S. dollars. New Zealand residents then use these dollars to purchase oranges from the U.S. Which of the following increases?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Applications: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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