Question 1

If a country has business opportunities that are relatively attractive to other countries, we would expect it to have

Accepted Answer

A) both positive net exports and positive net capital outflow. 
B) both negative net exports and negative net capital outflow. 
C) positive net exports and negative net capital outflow. 
D) negative net exports and positive net capital outflow. 
A) both positive net exports and positive net capital outflow. 
B) both negative net exports and negative net capital outflow. 
C) positive net exports and negative net capital outflow. 
D) negative net exports and positive net capital outflow.

Question 2

A U.S. fast food restaurant chain sells dollars for Argentinean pesos and then uses the pesos to buy Argentinean beef. Which of the following do these transactions increase?

Accepted Answer

A) Argentinean net capital outflow and Argentinean net exports 
B) only Argentinean net exports 
C) only Argentinean net capital outflow 
D) neither Argentinean net exports nor Argentinean capital outflow 
A) Argentinean net capital outflow and Argentinean net exports 
B) only Argentinean net exports 
C) only Argentinean net capital outflow 
D) neither Argentinean net exports nor Argentinean capital outflow

Question 3

If the real exchange rate for coal is 1.5, the price of coal in the U.S. is $50 per ton, and the price of coal in Britain is 20 British pounds per ton, what is the nominal exchange rate?

Accepted Answer

A) 15/4 
B) 5/3 
C) 3/5 
D) 4/15 
A) 15/4 
B) 5/3 
C) 3/5 
D) 4/15

Question 4

Firms in Saudi Arabia sell oil to the U.S. Other things the same, these oil sales

Accepted Answer

A) increase Saudi net exports and net capital outflow. 
B) decrease Saudi net exports and net capital outflow. 
C) increase Saudi net exports and decrease Saudi net capital outflow. 
D) decrease Saudi net exports and increase Saudi net capital outflow. 
A) increase Saudi net exports and net capital outflow. 
B) decrease Saudi net exports and net capital outflow. 
C) increase Saudi net exports and decrease Saudi net capital outflow. 
D) decrease Saudi net exports and increase Saudi net capital outflow.

Question 5

If U.S. residents purchase $600 billion worth of foreign assets and foreigners purchase $300 billion worth of U.S. assets,

Accepted Answer

A) U.S. net capital outflow is $300 billion; capital is flowing into the U.S. 
B) U.S. net capital outflow is $300 billion; capital is flowing out of the U.S. 
C) U.S. net capital outflow is -$300 billion; capital is flowing into the U.S. 
D) U.S. net capital outflow is -$300 billion; capital is flowing out of the U.S. 
A) U.S. net capital outflow is $300 billion; capital is flowing into the U.S. 
B) U.S. net capital outflow is $300 billion; capital is flowing out of the U.S. 
C) U.S. net capital outflow is -$300 billion; capital is flowing into the U.S. 
D) U.S. net capital outflow is -$300 billion; capital is flowing out of the U.S.

Question 6

According to the theory of purchasing-power parity, the nominal exchange rate between two countries must reflect the differing

Accepted Answer

A) price levels in those countries. 
B) resource endowments in those countries. 
C) income levels in those countries. 
D) standards of living between those countries. 
A) price levels in those countries. 
B) resource endowments in those countries. 
C) income levels in those countries. 
D) standards of living between those countries.

Question 7

One year a country has positive net exports. The next year it still has positive but larger net exports

Accepted Answer

A) its trade surplus fell. 
B) its trade surplus rose. 
C) its trade deficit fell. 
D) its trade deficit rose 
A) its trade surplus fell. 
B) its trade surplus rose. 
C) its trade deficit fell. 
D) its trade deficit rose

Question 8

Mark, a U.S. citizen, buys stock in a British Shipping company. This purchase is an example of

Accepted Answer

A) investment for Mark and U.S. foreign direct investment. 
B) investment for Mark and U.S. foreign portfolio investment. 
C) saving for Mark and U.S. foreign direct investment. 
D) saving for Mark and U.S. foreign portfolio investment. 
A) investment for Mark and U.S. foreign direct investment. 
B) investment for Mark and U.S. foreign portfolio investment. 
C) saving for Mark and U.S. foreign direct investment. 
D) saving for Mark and U.S. foreign portfolio investment.

Question 9

If Chileans buy more U.S. stocks and bonds and U.S. residents buy more Chilean wine, then

Accepted Answer

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

Question 10

A Chinese company exchanges yuan (Chinese currency) for dollars. It uses these dollars to purchase scrap metal from a U.S. company. As a result of these transactions, Chinese

Accepted Answer

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

Question 11

If the exchange rate is 8 Moroccan dirhams per U.S. dollars, a crate of oranges costs 400 dirhams in the Moroccan capital of Rabat, and a similar crate of oranges in Miami sells for $55 dollars, then

Accepted Answer

A) the real exchange rate is greater than one and arbitrageurs could profit by buying oranges in the U.S. and selling them in Morocco. 
B) the real exchange rate is greater than one and arbitrageurs could profit by buying oranges in Morocco and selling them in the U.S. 
C) the real exchange rate is less than one and arbitrageurs could profit by buying oranges in the U.S. and selling them in Morocco. 
D) the real exchange rate is less than one and arbitrageurs could profit by buying oranges in Morocco and selling them in the U.S. 
A) the real exchange rate is greater than one and arbitrageurs could profit by buying oranges in the U.S. and selling them in Morocco. 
B) the real exchange rate is greater than one and arbitrageurs could profit by buying oranges in Morocco and selling them in the U.S. 
C) the real exchange rate is less than one and arbitrageurs could profit by buying oranges in the U.S. and selling them in Morocco. 
D) the real exchange rate is less than one and arbitrageurs could profit by buying oranges in Morocco and selling them in the U.S.

Question 12

Most of the change from 1991 to 2000 in U.S. net capital outflow as a percent of GDP was due to a(n)

Accepted Answer

A) decrease in U.S. investment. 
B) decrease in U.S. national saving. 
C) increase in U.S. investment. 
D) increase in U.S. national saving. 
A) decrease in U.S. investment. 
B) decrease in U.S. national saving. 
C) increase in U.S. investment. 
D) increase in U.S. national saving.

Question 13

Ann, a U.S. citizen, uses some previously obtained euros to purchase a bond issued by a Spanish company. This transaction

Accepted Answer

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

Question 14

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

Accepted Answer

A) A U.S. based mutual fund buys stock in Eastern European companies. 
B) A U.S. citizen builds and operates a coffee shop in the Netherlands. 
C) A Swiss bank buys a U.S. government bond. 
D) A German tractor factory opens a plant in Waterloo, Iowa. 
A) A U.S. based mutual fund buys stock in Eastern European companies. 
B) A U.S. citizen builds and operates a coffee shop in the Netherlands. 
C) A Swiss bank buys a U.S. government bond. 
D) A German tractor factory opens a plant in Waterloo, Iowa.

Question 15

A rational investor will always purchase the bond that pays the highest real interest rate.

Accepted Answer

A) True 
 B)False

Question 16

Suppose the real exchange rate is 1.25 pounds of bananas in Guatemala per pound of bananas in the U.S. If a pound of bananas in the U.S. costs $.50, and the exchange rate is 10 Guatemalan Quetzals per dollar, what is the price of bananas in Guatemala?

Accepted Answer

A) 2.50 Quetzals per pound 
B) 4.00 Quetzals per pound 
C) 5.75 Quetzals per pound 
D) 6.25 Quetzals per pound 
A) 2.50 Quetzals per pound 
B) 4.00 Quetzals per pound 
C) 5.75 Quetzals per pound 
D) 6.25 Quetzals per pound

Question 17

If a country had a trade surplus of $100 billion and then its exports rose by $40 billion and its imports rose by $30 billion, its net exports would now be

Accepted Answer

A) $110 billion 
B) $90 billion. 
C) $70 billion. 
D) $60 billion. 
A) $110 billion 
B) $90 billion. 
C) $70 billion. 
D) $60 billion.

Question 18

If the U.S. real exchange rate is greater than 1, then there is the possibility of arbitraging by buying foreign goods to sell in the U.S.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) A U.S. legal office opens a branch office in Holland. 
B) Erica, a U.S. resident, buys bonds issued by the Swiss government. 
C) Both A and B are examples of U.S. portfolio investment. 
D) Neither A nor B are examples of U.S. portfolio investment. 
A) A U.S. legal office opens a branch office in Holland. 
B) Erica, a U.S. resident, buys bonds issued by the Swiss government. 
C) Both A and B are examples of U.S. portfolio investment. 
D) Neither A nor B are examples of U.S. portfolio investment.

Question 20

Which of the following equations is always correct in an open economy?

Accepted Answer

A) NX = Y - C - G - I 
B) NX = S - I 
C) NX = NCO 
D) All of the above are correct. 
A) NX = Y - C - G - I 
B) NX = S - I 
C) NX = NCO 
D) All of the above are correct.

Exam 31: Open-Economy Macroeconomics: Basic Concepts

If a country has business opportunities that are relatively attractive to other countries, we would expect it to have

A U.S. fast food restaurant chain sells dollars for Argentinean pesos and then uses the pesos to buy Argentinean beef. Which of the following do these transactions increase?

If the real exchange rate for coal is 1.5, the price of coal in the U.S. is $50 per ton, and the price of coal in Britain is 20 British pounds per ton, what is the nominal exchange rate?

Firms in Saudi Arabia sell oil to the U.S. Other things the same, these oil sales

If U.S. residents purchase $600 billion worth of foreign assets and foreigners purchase $300 billion worth of U.S. assets,

According to the theory of purchasing-power parity, the nominal exchange rate between two countries must reflect the differing

One year a country has positive net exports. The next year it still has positive but larger net exports

Mark, a U.S. citizen, buys stock in a British Shipping company. This purchase is an example of

If Chileans buy more U.S. stocks and bonds and U.S. residents buy more Chilean wine, then

A Chinese company exchanges yuan (Chinese currency) for dollars. It uses these dollars to purchase scrap metal from a U.S. company. As a result of these transactions, Chinese

If the exchange rate is 8 Moroccan dirhams per U.S. dollars, a crate of oranges costs 400 dirhams in the Moroccan capital of Rabat, and a similar crate of oranges in Miami sells for $55 dollars, then

Most of the change from 1991 to 2000 in U.S. net capital outflow as a percent of GDP was due to a(n)

Ann, a U.S. citizen, uses some previously obtained euros to purchase a bond issued by a Spanish company. This transaction

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

A rational investor will always purchase the bond that pays the highest real interest rate.

Suppose the real exchange rate is 1.25 pounds of bananas in Guatemala per pound of bananas in the U.S. If a pound of bananas in the U.S. costs $.50, and the exchange rate is 10 Guatemalan Quetzals per dollar, what is the price of bananas in Guatemala?

If a country had a trade surplus of $100 billion and then its exports rose by $40 billion and its imports rose by $30 billion, its net exports would now be

If the U.S. real exchange rate is greater than 1, then there is the possibility of arbitraging by buying foreign goods to sell in the U.S.

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

Which of the following equations is always correct in an open economy?

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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