Question 1

A Japanese bank buys U.S. government bonds, this purchase

Accepted Answer

A) increases U.S. net capital outflow and has no affect on Japanese net capital outflow. 
B) increases U.S. net capital outflow and increases Japanese net capital outflow. 
C) increases U.S. net capital outflow, but decreases Japanese net capital outflow. 
D) decreases U.S. net capital outflow, but increases Japanese net capital outflow. 
A) increases U.S. net capital outflow and has no affect on Japanese net capital outflow. 
B) increases U.S. net capital outflow and increases Japanese net capital outflow. 
C) increases U.S. net capital outflow, but decreases Japanese net capital outflow. 
D) decreases U.S. net capital outflow, but increases Japanese net capital outflow.

Question 2

If the U.S. has a trade deficit and the nominal exchange rate depreciates, then other things the same

Accepted Answer

A) the trade deficit rises and net capital outflow rises. 
B) the trade deficit rises and net capital outflow falls. 
C) the trade deficit falls and net capital outflows rise. 
D) the trade deficit falls and net capital outflows fall. 
A) the trade deficit rises and net capital outflow rises. 
B) the trade deficit rises and net capital outflow falls. 
C) the trade deficit falls and net capital outflows rise. 
D) the trade deficit falls and net capital outflows fall.

Question 3

You are staying in London over the summer and you have a number of dollars with you. If the dollar appreciates relative to the British pound, then other things the same,

Accepted Answer

A) the dollar would buy more pounds. The appreciation would discourage you from buying as many British goods and services. 
B) the dollar would buy more pounds. The appreciation would encourage you to buy more British goods and services. 
C) the dollar would buy fewer pounds. The appreciation would discourage you from buying as many British goods and services. 
D) the dollar would buy fewer pounds. The appreciation would encourage you to buy more British goods and services. 
A) the dollar would buy more pounds. The appreciation would discourage you from buying as many British goods and services. 
B) the dollar would buy more pounds. The appreciation would encourage you to buy more British goods and services. 
C) the dollar would buy fewer pounds. The appreciation would discourage you from buying as many British goods and services. 
D) the dollar would buy fewer pounds. The appreciation would encourage you to buy more British goods and services.

Question 4

If the exchange rate is 80 yen per dollar, then a hotel room in Tokyo that costs 25,000 yen costs $200.

Accepted Answer

A) True 
 B)False

Question 5

If a country has positive net capital outflows, then its net exports are

Accepted Answer

A) positive, and its saving is larger than its domestic investment. 
B) positive, and its saving is smaller than its domestic investment. 
C) negative, and its saving is larger than its domestic investment. 
D) negative, and its saving is smaller than its domestic investment. 
A) positive, and its saving is larger than its domestic investment. 
B) positive, and its saving is smaller than its domestic investment. 
C) negative, and its saving is larger than its domestic investment. 
D) negative, and its saving is smaller than its domestic investment.

Question 6

A British grocery chain uses previously obtained U.S. dollars to purchase oranges from the United States. This transaction

Accepted Answer

A) increases British net capital outflow, and increases U.S. net exports. 
B) increases British net capital outflow, and decreases U.S. net exports. 
C) decreases British net capital outflow, and increases U.S. net exports. 
D) decreases British net capital outflow, and decreases U.S. net exports. 
A) increases British net capital outflow, and increases U.S. net exports. 
B) increases British net capital outflow, and decreases U.S. net exports. 
C) decreases British net capital outflow, and increases U.S. net exports. 
D) decreases British net capital outflow, and decreases U.S. net exports.

Question 7

A Japanese bank buys bonds sold by Minnesota Manufacturing. Minnesota Manufacturing then uses these funds to buy machinery from Canada. Which of the following decreases?

Accepted Answer

A) U.S. net exports but not US net capital outflow 
B) U.S. net capital outflow but not U.S. net exports 
C) U.S. net exports and U.S. net capital outflow 
D) neither U.S. net exports nor U.S. net capital outflow 
A) U.S. net exports but not US net capital outflow 
B) U.S. net capital outflow but not U.S. net exports 
C) U.S. net exports and U.S. net capital outflow 
D) neither U.S. net exports nor U.S. net capital outflow

Question 8

Suppose the real exchange rate is 5/4 of a Canadian textbook per U.S. textbook , a U.S. textbook costs $150, and a Canadian one costs 120 Canadian dollars. To the nearest penny, what is the nominal exchange rate?

Accepted Answer

A) .64 Canadian dollars per U.S. dollar 
B) 1 Canadian dollar per U.S. dollar 
C) 1.56 Canadian dollars per U.S. dollar 
D) None of the above is correct. 
A) .64 Canadian dollars per U.S. dollar 
B) 1 Canadian dollar per U.S. dollar 
C) 1.56 Canadian dollars per U.S. dollar 
D) None of the above is correct.

Question 9

Jill, a U.S. citizen, uses some euros to purchase a bond issued by a French vineyard. This exchange

Accepted Answer

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

Question 10

A Starbucks Grande Latte costs $3.75 in the U.S. and 28 yuan in China. The nominal exchange rate is 6.75 yuan per dollar. The real exchange rate is

Accepted Answer

A) 1.106. If purchasing-power parity held the nominal exchange rate would be higher. 
B) 1.106. If purchasing-power parity held the nominal exchange rate would be lower. 
C) .904. If purchasing power parity held the nominal exchange rate would be higher. 
D) .904. If purchasing-power parity held the nominal exchange rate would be lower. 
A) 1.106. If purchasing-power parity held the nominal exchange rate would be higher. 
B) 1.106. If purchasing-power parity held the nominal exchange rate would be lower. 
C) .904. If purchasing power parity held the nominal exchange rate would be higher. 
D) .904. If purchasing-power parity held the nominal exchange rate would be lower.

Question 11

If the real exchange rate is less than 1, then the

Accepted Answer

A) nominal exchange rate x U.S. price > foreign price. The dollars required to purchase a good in the U.S. would buy more than enough foreign currency to buy the same good overseas. B) nominal exchange rate x U.S. price > foreign price. The dollars required to purchase a good in the U.S. would not buy enough foreign currency to buy the same good overseas. C) nominal exchange rate x U.S. price < foreign price. The dollars required to purchase a good in the U.S. would buy more than enough foreign currency to buy the same good overseas. D) nominal exchange rate x U.S. price < foreign price. The dollars required to purchase a good in the U.S. would not buy enough foreign currency to buy the same good overseas. A) nominal exchange rate x U.S. price > foreign price. The dollars required to purchase a good in the U.S. would buy more than enough foreign currency to buy the same good overseas. B) nominal exchange rate x U.S. price > foreign price. The dollars required to purchase a good in the U.S. would not buy enough foreign currency to buy the same good overseas. C) nominal exchange rate x U.S. price < foreign price. The dollars required to purchase a good in the U.S. would buy more than enough foreign currency to buy the same good overseas. D) nominal exchange rate x U.S. price < foreign price. The dollars required to purchase a good in the U.S. would not buy enough foreign currency to buy the same good overseas.

Question 12

If business opportunities in a country become relatively less attractive relative to those of other countries, then

Accepted Answer

A) both its net exports and net capital outflows fall. 
B) both its net exports and net capital outflows rise. 
C) its net exports fall and its net capital outflows fall. 
D) its net exports rise and its net capital outflows fall 
A) both its net exports and net capital outflows fall. 
B) both its net exports and net capital outflows rise. 
C) its net exports fall and its net capital outflows fall. 
D) its net exports rise and its net capital outflows fall

Question 13

Which of the following is an example of U.S. foreign direct investment?

Accepted Answer

A) A Greek company opens a cheese factory in the U.S. 
B) A German mutual fund buys stock issued by a U.S. corporation. 
C) A U.S. beverage company opens a bottling plant in Russia. 
D) A U.S. bank buys bonds issued by an Argentinean company. 
A) A Greek company opens a cheese factory in the U.S. 
B) A German mutual fund buys stock issued by a U.S. corporation. 
C) A U.S. beverage company opens a bottling plant in Russia. 
D) A U.S. bank buys bonds issued by an Argentinean company.

Question 14

From 1970 to 1998 the U.S. dollar

Accepted Answer

A) gained value compared to the German mark because inflation was higher in the U.S. 
B) gained value compared to the German mark because inflation was lower in the U.S. 
C) lost value compared to the German mark because inflation was higher in the U.S. 
D) lost value compared to the German mark because inflation was lower in the U.S. 
A) gained value compared to the German mark because inflation was higher in the U.S. 
B) gained value compared to the German mark because inflation was lower in the U.S. 
C) lost value compared to the German mark because inflation was higher in the U.S. 
D) lost value compared to the German mark because inflation was lower in the U.S.

Question 15

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. 
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.

Question 16

In the U.S. a box of tea costs $5. The same box of tea in Uganda costs 10,000 schillings (the currency of Uganda). If the real exchange rate is 5/4, what is the nominal exchange rate? Show your work.

Accepted Answer

The real exchange rate 5/4 = $

Question 17

A U.S. mutual fund buys stock issued by a corporation in Colombia. A U.S. grocery store chain builds and manages a new warehouse in Honduras. Which one(s) of these is foreign direct investment? Which one(s) would be taken into account when computing U.S. net capital outflows?

Accepted Answer

The building of the

Question 18

Suppose a Starbucks tall latte costs $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 Australia 
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 Australia

Question 19

If the price of a good in the U.S. is $10, the exchange rate is 2 units of foreign currency per dollar, and the foreign price of the same good is 30 units of foreign currency, then the real exchange rate is 2/3.

Accepted Answer

A) True 
 B)False

Question 20

If over the next few years inflation is higher in Mexico than in the U.S., then according to purchasing-power parity which of the following should rise?

Accepted Answer

A) the U.S. real exchange rate but not the U.S. nominal exchange rate 
B) the U.S. nominal exchange rate but not the U.S. real exchange rate 
C) The U.S. real exchange rate but not the U.S. nominal exchange rate 
D) neither the U.S. real nor the U.S. nominal exchange rate 
A) the U.S. real exchange rate but not the U.S. nominal exchange rate 
B) the U.S. nominal exchange rate but not the U.S. real exchange rate 
C) The U.S. real exchange rate but not the U.S. nominal exchange rate 
D) neither the U.S. real nor the U.S. nominal exchange rate

Exam 31: Open-Economy Macroeconomics: Basic Concepts

A Japanese bank buys U.S. government bonds, this purchase

If the U.S. has a trade deficit and the nominal exchange rate depreciates, then other things the same

You are staying in London over the summer and you have a number of dollars with you. If the dollar appreciates relative to the British pound, then other things the same,

If the exchange rate is 80 yen per dollar, then a hotel room in Tokyo that costs 25,000 yen costs $200.

If a country has positive net capital outflows, then its net exports are

A British grocery chain uses previously obtained U.S. dollars to purchase oranges from the United States. This transaction

A Japanese bank buys bonds sold by Minnesota Manufacturing. Minnesota Manufacturing then uses these funds to buy machinery from Canada. Which of the following decreases?

Suppose the real exchange rate is 5/4 of a Canadian textbook per U.S. textbook , a U.S. textbook costs $150, and a Canadian one costs 120 Canadian dollars. To the nearest penny, what is the nominal exchange rate?

Jill, a U.S. citizen, uses some euros to purchase a bond issued by a French vineyard. This exchange

A Starbucks Grande Latte costs $3.75 in the U.S. and 28 yuan in China. The nominal exchange rate is 6.75 yuan per dollar. The real exchange rate is

If the real exchange rate is less than 1, then the

If business opportunities in a country become relatively less attractive relative to those of other countries, then

Which of the following is an example of U.S. foreign direct investment?

From 1970 to 1998 the U.S. dollar

Which of the following is correct? Since 1950

In the U.S. a box of tea costs $5. The same box of tea in Uganda costs 10,000 schillings (the currency of Uganda). If the real exchange rate is 5/4, what is the nominal exchange rate? Show your work.

A U.S. mutual fund buys stock issued by a corporation in Colombia. A U.S. grocery store chain builds and manages a new warehouse in Honduras. Which one(s) of these is foreign direct investment? Which one(s) would be taken into account when computing U.S. net capital outflows?

Suppose a Starbucks tall latte costs $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?

If the price of a good in the U.S. is $10, the exchange rate is 2 units of foreign currency per dollar, and the foreign price of the same good is 30 units of foreign currency, then the real exchange rate is 2/3.

If over the next few years inflation is higher in Mexico than in the U.S., then according to purchasing-power parity which of the following should rise?

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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