Question 1

Net capital outflow equals the purchase of

Accepted Answer

A) foreign assets by domestic residents. 
B) domestic assets by foreign residents. 
C) domestic assets by foreign residents - the purchase of foreign assets by domestic residents 
D) foreign assets by domestic residents - the purchase of domestic assets by foreign residents 
A) foreign assets by domestic residents. 
B) domestic assets by foreign residents. 
C) domestic assets by foreign residents - the purchase of foreign assets by domestic residents 
D) foreign assets by domestic residents - the purchase of domestic assets by foreign residents

Question 2

Suppose that the nominal exchange rate is .80 euro 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 Germany is 400 Euro. Suppose that these values change to .90 euro per dollar, $600, and 600 euro. Then the real exchange rate would

Accepted Answer

A) appreciate which by itself would make U.S. net exports fall. 
B) appreciate which by itself would make U.S. net exports rise. 
C) depreciate which by itself would make U.S. net exports fall. 
D) depreciate which by itself would make U.S. net exports rise. 
A) appreciate which by itself would make U.S. net exports fall. 
B) appreciate which by itself would make U.S. net exports rise. 
C) depreciate which by itself would make U.S. net exports fall. 
D) depreciate which by itself would make U.S. net exports rise.

Question 3

If the nominal exchange rate e is foreign currency per dollar, the domestic price is P, and the foreign price is P*, then the real exchange rate is defined as

Accepted Answer

A) e(P*/P). 
B) e(P/P*). 
C) e + P*/P. 
D) e - P/P*. 
A) e(P*/P). 
B) e(P/P*). 
C) e + P*/P. 
D) e - P/P*.

Question 4

If a country has $2.4 billion of net exports and purchases $4.8 billion of goods and services from foreign countries, then it has

Accepted Answer

A) $7.2 billion of exports and $4.8 billion of imports. 
B) $7.2 billion of imports and $4.8 billion of exports. 
C) $4.8 billion of exports and $2.4 billion of imports. 
D) $4.8 billion of imports and $2.4 billion of exports. 
A) $7.2 billion of exports and $4.8 billion of imports. 
B) $7.2 billion of imports and $4.8 billion of exports. 
C) $4.8 billion of exports and $2.4 billion of imports. 
D) $4.8 billion of imports and $2.4 billion of exports.

Question 5

A country recently had saving of 250 billion euro and domestic investment of 400 billion euro. What was the value of this country's net exports? Show your work.

Accepted Answer

saving = investment + net capital outflo

Question 6

Domestic saving must equal domestic investment in

Accepted Answer

A) both closed and open economies. 
B) closed, but not open economies. 
C) open, but not closed economies. 
D) neither closed nor open economies. 
A) both closed and open economies. 
B) closed, but not open economies. 
C) open, but not closed economies. 
D) neither closed nor open economies.

Question 7

U.S.-based John Deere sells machinery to residents of South Africa who pay with South African currency (the rand).

Accepted Answer

A) This increases U.S. net capital outflow because the U.S. acquires foreign assets. 
B) This decreases U.S. net capital outflow because the U.S. acquires foreign assets. 
C) This increases U.S. net capital outflow because the U.S. sells capital goods. 
D) This decreases U.S. net capital outflow because the U.S. sells capital goods. 
A) This increases U.S. net capital outflow because the U.S. acquires foreign assets. 
B) This decreases U.S. net capital outflow because the U.S. acquires foreign assets. 
C) This increases U.S. net capital outflow because the U.S. sells capital goods. 
D) This decreases U.S. net capital outflow because the U.S. sells capital goods.

Question 8

Jason plans to buy shrimp in Florida and sell them in Manhattan, Kansas where the price is higher. Jason plans to engage in arbitrage.

Accepted Answer

A) True 
 B)False

Question 9

Prices in both the U.S. and India rise, but prices in India increase by a smaller percentage. According to purchasing-power parity the U.S. dollar

Accepted Answer

A) gains value both in terms of the domestic goods and services it can buy and in terms of the Indian currency it can buy. 
B) gains value in terms of the domestic goods and services it can buy, but loses value in terms of the Indian currency it can buy. 
C) loses value in terms of the domestic goods and services it can buy, but gains value in terms of the Indian currency it can buy. 
D) loses value both in terms of the domestic goods and services it can buy and in terms of the Indian currency it can buy. 
A) gains value both in terms of the domestic goods and services it can buy and in terms of the Indian currency it can buy. 
B) gains value in terms of the domestic goods and services it can buy, but loses value in terms of the Indian currency it can buy. 
C) loses value in terms of the domestic goods and services it can buy, but gains value in terms of the Indian currency it can buy. 
D) loses value both in terms of the domestic goods and services it can buy and in terms of the Indian currency it can buy.

Question 10

The Norwegian government uses $500,000 of previously obtained U.S. dollars to buy $500,000 of police cars from a U.S. company.
As a result of this exchange, by how much, if at all, 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 11

Reduced barriers to trade help explain an increase in U.S. exports and imports relative to GDP since 1950.

Accepted Answer

A) True 
 B)False

Question 12

A Guatemalan company exchanges quetzal (Guatemalan currency) for dollars and then uses the dollars to purchase construction equipment from a U.S. company. These transactions

Accepted Answer

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

Question 13

In the first quarter of 2015 the U.S. had a trade deficit. In the first quarter of 2016 exports fell and imports rose. According to these numbers what happened to net exports?

Accepted Answer

The answer of In the first quarter of 2015 the...

Question 14

Other things the same, if the exchange rate changes from 75 Algerian dinar per dollar to 72 Algerian dinar per dollar, the dollar has

Accepted Answer

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

Question 15

If a German firm buys goods from a U.S. firm with dollars it obtains by exchanging euros for dollars, both U.S. net exports and U.S. net capital outflow increase.

Accepted Answer

A) True 
 B)False

Question 16

If the U.S. has exports of $1.5 trillion and imports of $2.2 trillion, then the U.S.

Accepted Answer

A) sells more overseas then it buys from overseas; it has a trade deficit. 
B) sells more overseas then it buys from overseas; it has a trade surplus. 
C) buys more from overseas then it sells overseas; it has a trade deficit. 
D) buys more from overseas then it sells overseas; it has a trade surplus. 
A) sells more overseas then it buys from overseas; it has a trade deficit. 
B) sells more overseas then it buys from overseas; it has a trade surplus. 
C) buys more from overseas then it sells overseas; it has a trade deficit. 
D) buys more from overseas then it sells overseas; it has a trade surplus.

Question 17

A depreciation of the U.S. real exchange rate induces U.S. consumers to buy

Accepted Answer

A) fewer domestic goods and fewer foreign goods. 
B) more domestic goods and fewer foreign goods. 
C) fewer domestic goods and more foreign goods. 
D) more domestic goods and more foreign goods. 
A) fewer domestic goods and fewer foreign goods. 
B) more domestic goods and fewer foreign goods. 
C) fewer domestic goods and more foreign goods. 
D) more domestic goods and more foreign goods.

Question 18

If the exchange rate is .70 euro per dollar, the price of an MP3 player in Paris is 150 euros and the price of an MP3 player in the U.S. is $150, then what is the real exchange rate?

Accepted Answer

A) 1/.70 French MP3 players per U.S. MP3 player 
B) 1 French MP3 players per U.S. MP3 player 
C) .70 French MP3 players per U.S. MP3 player. 
D) None of the above are correct. 
A) 1/.70 French MP3 players per U.S. MP3 player 
B) 1 French MP3 players per U.S. MP3 player 
C) .70 French MP3 players per U.S. MP3 player. 
D) None of the above are correct.

Question 19

A country's trade balance

Accepted Answer

A) must be zero. 
B) must be greater than zero. 
C) is greater than zero only if exports are greater than imports. 
D) is greater than zero only if imports are greater than exports. 
A) must be zero. 
B) must be greater than zero. 
C) is greater than zero only if exports are greater than imports. 
D) is greater than zero only if imports are greater than exports.

Question 20

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

Accepted Answer

a.The U.S. dollar real exchang

Exam 31: Open-Economy Macroeconomics: Basic Concepts

Net capital outflow equals the purchase of

Suppose that the nominal exchange rate is .80 euro 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 Germany is 400 Euro. Suppose that these values change to .90 euro per dollar, $600, and 600 euro. Then the real exchange rate would

If the nominal exchange rate e is foreign currency per dollar, the domestic price is P, and the foreign price is P*, then the real exchange rate is defined as

If a country has $2.4 billion of net exports and purchases $4.8 billion of goods and services from foreign countries, then it has

A country recently had saving of 250 billion euro and domestic investment of 400 billion euro. What was the value of this country's net exports? Show your work.

Domestic saving must equal domestic investment in

U.S.-based John Deere sells machinery to residents of South Africa who pay with South African currency (the rand).

Jason plans to buy shrimp in Florida and sell them in Manhattan, Kansas where the price is higher. Jason plans to engage in arbitrage.

Prices in both the U.S. and India rise, but prices in India increase by a smaller percentage. According to purchasing-power parity the U.S. dollar

The Norwegian government uses $500,000 of previously obtained U.S. dollars to buy $500,000 of police cars from a U.S. company. As a result of this exchange, by how much, if at all, and in which direction did: A. U.S. net exports change? B. U.S. net capital outflow change?

Reduced barriers to trade help explain an increase in U.S. exports and imports relative to GDP since 1950.

A Guatemalan company exchanges quetzal (Guatemalan currency) for dollars and then uses the dollars to purchase construction equipment from a U.S. company. These transactions

In the first quarter of 2015 the U.S. had a trade deficit. In the first quarter of 2016 exports fell and imports rose. According to these numbers what happened to net exports?

Other things the same, if the exchange rate changes from 75 Algerian dinar per dollar to 72 Algerian dinar per dollar, the dollar has

If a German firm buys goods from a U.S. firm with dollars it obtains by exchanging euros for dollars, both U.S. net exports and U.S. net capital outflow increase.

If the U.S. has exports of $1.5 trillion and imports of $2.2 trillion, then the U.S.

A depreciation of the U.S. real exchange rate induces U.S. consumers to buy

If the exchange rate is .70 euro per dollar, the price of an MP3 player in Paris is 150 euros and the price of an MP3 player in the U.S. is $150, then what is the real exchange rate?

A country's trade balance

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