Question 1

For an economy as a whole, net exports must equal minus one times net capital outflow.

Accepted Answer

A) True 
 B)False

Question 2

Over the last 5 years the amount of country A's currency it took to buy a unit of country B's currency more than doubled.
A. Did country A's currency depreciate or appreciate?
B. According to purchasing-power parity, what explains the change in the value of country B's currency?

Accepted Answer

A. It depreciated.B.

Question 3

Suppose that more British decide to vacation in the U.S. and that the British purchase more U.S. Treasury bonds. Ignoring how payments are made for these purchases,

Accepted Answer

A) the first action by itself raises U.S. net exports, the second action by itself raises U.S. net capital outflow. 
B) the first action by itself raises U.S. net exports, the second action by itself lowers U.S. net capital outflow. 
C) the first action by itself lowers U.S. net exports, the second action by itself raises U.S. net capital outflow. 
D) the first action by itself lowers U.S. net exports, the second action by itself lowers U.S. net capital outflow. 
A) the first action by itself raises U.S. net exports, the second action by itself raises U.S. net capital outflow. 
B) the first action by itself raises U.S. net exports, the second action by itself lowers U.S. net capital outflow. 
C) the first action by itself lowers U.S. net exports, the second action by itself raises U.S. net capital outflow. 
D) the first action by itself lowers U.S. net exports, the second action by itself lowers U.S. net capital outflow.

Question 4

Foreign-produced goods and services that are purchased domestically are called

Accepted Answer

A) imports. 
B) exports. 
C) net imports. 
D) net exports. 
A) imports. 
B) exports. 
C) net imports. 
D) net exports.

Question 5

In an open economy, gross domestic product equals $1,970 billion, government expenditure equals $300 billion, investment equals $500 billion, and net capital outflow equals $280 billion. What is consumption expenditure?

Accepted Answer

A) $280 billion 
B) $780 billion 
C) $890 billion 
D) $1,170 billion 
A) $280 billion 
B) $780 billion 
C) $890 billion 
D) $1,170 billion

Question 6

Net capital outflow

Accepted Answer

A) is always greater than net exports. 
B) is always less than net exports. 
C) is always equal to net exports. 
D) could be any of the above. 
A) is always greater than net exports. 
B) is always less than net exports. 
C) is always equal to net exports. 
D) could be any of the above.

Question 7

According to purchasing-power parity, inflation in the U.S. causes the dollar to

Accepted Answer

A) depreciate relative to all other currencies. 
B) depreciate relative to currencies of countries that have lower inflation rates. 
C) appreciate relative to all other countries. 
D) appreciate relative to currencies of countries that have lower inflation rates. 
A) depreciate relative to all other currencies. 
B) depreciate relative to currencies of countries that have lower inflation rates. 
C) appreciate relative to all other countries. 
D) appreciate relative to currencies of countries that have lower inflation rates.

Question 8

Table 31-1  
-Refer to Table 31-1. What are Bolivia's exports?

Accepted Answer

A) $60 billion 
B) $35 billion 
C) $10 billion 
D) None of the above are correct. 
A) $60 billion 
B) $35 billion 
C) $10 billion 
D) None of the above are correct.

Question 9

A country has net capital outflow of -10 billion euros and domestic investment of 20 billion euros. What is its national saving?

Accepted Answer

A) 30 billion euros 
B) 10 billion euros 
C) -10 billion euros 
D) -30 billion euros 
A) 30 billion euros 
B) 10 billion euros 
C) -10 billion euros 
D) -30 billion euros

Question 10

A country has $20 billion of domestic investment and net capital outflow of $10 billion. What is saving?

Accepted Answer

A) $10 billion 
B) $30 billion 
C) -$20 billion 
D) -$30 billion 
A) $10 billion 
B) $30 billion 
C) -$20 billion 
D) -$30 billion

Question 11

Other things the same, the real exchange rate between U.S. and Belgian goods would be higher if

Accepted Answer

A) ​prices in the U.S. were higher, or the number of euro the dollar purchased were higher. 
B) ​prices in the U.S. were higher, or the number of euro the dollar purchased were lower. 
C) ​prices in the U.S. were lower, or the number of euro the dollar purchased were higher. 
D) ​prices in the U.S. were lower, or the number of euro the dollar purchased were lower. 
A) ​prices in the U.S. were higher, or the number of euro the dollar purchased were higher. 
B) ​prices in the U.S. were higher, or the number of euro the dollar purchased were lower. 
C) ​prices in the U.S. were lower, or the number of euro the dollar purchased were higher. 
D) ​prices in the U.S. were lower, or the number of euro the dollar purchased were lower.

Question 12

When making investment decisions, investors

Accepted Answer

A) compare the real interest rates offered on different bonds. 
B) compare the nominal, but not the real, interest rates offered on different bonds. 
C) purchase the highest-priced bond available. 
D) All of the above are correct. 
A) compare the real interest rates offered on different bonds. 
B) compare the nominal, but not the real, interest rates offered on different bonds. 
C) purchase the highest-priced bond available. 
D) All of the above are correct.

Question 13

Suppose that in 2015 the nominal exchange rate was 9 Egyptian pounds per dollar, the price of a basket of goods in the U.S. was $600 and the price of the same basket of goods in Egypt was 6000 pounds. Suppose that in 2016 these values were 10 Egyptian pounds per dollar, $620, and 7200 pounds. From 2015 to 2016 U.S. real exchange rate

Accepted Answer

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

Question 14

Other things the same, a country could move from having a trade surplus to having a trade deficit if either

Accepted Answer

A) saving rose or domestic investment rose. 
B) saving rose or domestic investment fell. 
C) saving fell or domestic investment rose. 
D) saving fell or domestic investment fell. 
A) saving rose or domestic investment rose. 
B) saving rose or domestic investment fell. 
C) saving fell or domestic investment rose. 
D) saving fell or domestic investment fell.

Question 15

Reductions in transportation costs help explain the increase in U.S. trade flows.

Accepted Answer

A) True 
 B)False

Question 16

In the U.S. a digital camera costs $200. The same camera in London sells for 90 pounds. If the exchange rate were .50 pounds per dollar, then which of the following would be correct?

Accepted Answer

A) The real exchange rate is greater than 1. A person in London with $200 could exchange them for pounds and have more than enough to buy the camera there. 
B) The real exchange rate is greater than 1. A person in London with $200 could exchange them for pounds but then wouldn't have enough to buy the camera there. 
C) The real exchange rate is less than 1. A person in London with $200 could exchange them for pounds and have more than enough to buy the camera there. 
D) The real exchange rate is less than 1. A person in London with $200 could exchange them for pounds but then wouldn't have enough to buy the camera. 
A) The real exchange rate is greater than 1. A person in London with $200 could exchange them for pounds and have more than enough to buy the camera there. 
B) The real exchange rate is greater than 1. A person in London with $200 could exchange them for pounds but then wouldn't have enough to buy the camera there. 
C) The real exchange rate is less than 1. A person in London with $200 could exchange them for pounds and have more than enough to buy the camera there. 
D) The real exchange rate is less than 1. A person in London with $200 could exchange them for pounds but then wouldn't have enough to buy the camera.

Question 17

Net capital outflow measures the imbalance between the amount of

Accepted Answer

A) foreign assets held by domestic residents and domestic assets held by foreign residents. 
B) foreign assets bought by domestic residents and the amount of domestic assets bought by foreigners. 
C) foreign assets bought by domestic residents and the amount of domestic goods and services sold to foreigners. 
D) None of the above is correct. 
A) foreign assets held by domestic residents and domestic assets held by foreign residents. 
B) foreign assets bought by domestic residents and the amount of domestic assets bought by foreigners. 
C) foreign assets bought by domestic residents and the amount of domestic goods and services sold to foreigners. 
D) None of the above is correct.

Question 18

Which of the following equations is correct?

Accepted Answer

A) S = I + C 
B) S = I - NX 
C) S = I + NCO 
D) S = NX - NCO. 
A) S = I + C 
B) S = I - NX 
C) S = I + NCO 
D) S = NX - NCO.

Question 19

Suppose that a country imports $90 million worth of goods and services and exports $80 million worth of goods and services. What is the value of net exports?

Accepted Answer

A) $170 million 
B) $80 million 
C) $10 million 
D) -$10 million 
A) $170 million 
B) $80 million 
C) $10 million 
D) -$10 million

Question 20

A U.S. bank loaned a Canadian oil company 1 million U.S. dollars. The Canadian company then used the entire loan to buy mining equipment from a U.S. company.
As a result of these transactions, 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

Exam 31: Open-Economy Macroeconomics: Basic Concepts

For an economy as a whole, net exports must equal minus one times net capital outflow.

Over the last 5 years the amount of country A's currency it took to buy a unit of country B's currency more than doubled. A. Did country A's currency depreciate or appreciate? B. According to purchasing-power parity, what explains the change in the value of country B's currency?

Suppose that more British decide to vacation in the U.S. and that the British purchase more U.S. Treasury bonds. Ignoring how payments are made for these purchases,

Foreign-produced goods and services that are purchased domestically are called

In an open economy, gross domestic product equals $1,970 billion, government expenditure equals $300 billion, investment equals $500 billion, and net capital outflow equals $280 billion. What is consumption expenditure?

Net capital outflow

According to purchasing-power parity, inflation in the U.S. causes the dollar to

Table 31-1 -Refer to Table 31-1. What are Bolivia's exports?

A country has net capital outflow of -10 billion euros and domestic investment of 20 billion euros. What is its national saving?

A country has $20 billion of domestic investment and net capital outflow of $10 billion. What is saving?

Other things the same, the real exchange rate between U.S. and Belgian goods would be higher if

When making investment decisions, investors

Other things the same, a country could move from having a trade surplus to having a trade deficit if either

Reductions in transportation costs help explain the increase in U.S. trade flows.

In the U.S. a digital camera costs $200. The same camera in London sells for 90 pounds. If the exchange rate were .50 pounds per dollar, then which of the following would be correct?

Net capital outflow measures the imbalance between the amount of

Which of the following equations is correct?

Suppose that a country imports $90 million worth of goods and services and exports $80 million worth of goods and services. What is the value of net exports?

A U.S. bank loaned a Canadian oil company 1 million U.S. dollars. The Canadian company then used the entire loan to buy mining equipment from a U.S. company. As a result of these transactions, by how much and in which direction did: A. U.S. net exports change? B. U.S. net capital outflow change?

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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