Exam 31: Open-Economy Macroeconomics: Basic Concepts

Suppose that the nominal exchange rate is 80 yen per dollar, that the price of a basket of goods in the U.S. is $500 and the price of a basket of goods in Japan is 50,000 yen. Suppose that these values change to 100 yen per dollar, $600, and 70,000 yen. Then the real exchange rate would

As measured by the amount of trade it does, has the U.S. economy become more internationalized? Provide two reasons for this change.

If prices in Mexico rise at a higher rate than prices in the U.S., then according to purchasing-power parity the U.S. nominal exchange rate with Mexico should rise.

If the exchange rate is 2 Brazilian reals per dollar and a meal in Rio costs 20 reals, then how many dollars does it take to buy a meal in Rio?

If a nation produces less than it spends what do we know about: A. its net exports? B. its net capital outflow? C. its saving in relation to its domestic investment?

If a nation is selling more goods and services to foreigners than it is buying from them, then on net it must be selling assets abroad.

In the United States, a three-pound can of coffee costs about $5. If the exchange rate is 0.8 euros per dollar and a three-pound can of coffee in Belgium costs 7 euros. What is the real exchange rate?

If a U.S. shirt maker purchases cotton from Egypt, U.S. net exports

If the exchange rate is .60 British pounds = $1, a bottle of ale that costs 3 pounds costs

According to purchasing-power parity, if over the course of a year the price level in the U.S. rises more than in Japan, then which of the following falls?

A country must have a positive net outflow of capital if it has a trade deficit.

A firm in China sells toys to a U.S. department store chain. Other things the same, these sales

While vacationing in Agra, India, the price of one night's stay at your hotel room rises from 6600 rupees to 7200 rupees. If the exchange rate was previously 55 rupees per dollar, what would the exchange rate need to be now in order for the number of dollars you pay for your room to remain the same? Does this imply the rupee depreciated or appreciated against the dollar?

Suppose that the real exchange rate between the United States and South Korea is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate (that is increase the number of baskets of South Korean goods a basket of U.S goods buys)?

If a country's purchases of foreign assets exceeds foreign purchases of domestic assets, that country has

If foreign residents purchase 30 billion pesos of Mexican assets and Mexican residents purchase 25 billion pesos of foreign assets, then Mexico has a net capital outflow of 5 billion pesos.

An American brewery sells dollars to obtain euros. It then uses the euros to buy brewing equipment from a German company. These transactions

Suppose that foreign citizens decide to purchase more U.S. pharmaceuticals and U.S. citizens decide to buy more stock in foreign corporations. Other things the same, these actions

All saving in the U.S. economy shows up as

If the exchange rate is 12.5 pesos per U.S. dollar, it is also 1/12.5 U.S. dollars per peso.