Question 1

A country has $3 billion of domestic investment and net exports of $2 billion. What is its saving?

Accepted Answer

A) $1 billion 
B) $2billion 
C) $3 billion 
D) $5 billion 
A) $1 billion 
B) $2billion 
C) $3 billion 
D) $5 billion

Question 2

According to purchasing-power parity, if prices in the United States increase by a smaller percentage than prices in the United Kingdom, then the

Accepted Answer

A) real exchange rate rises. 
B) nominal exchange rate rises. 
C) real exchange rate falls. 
D) nominal exchange rate falls. 
A) real exchange rate rises. 
B) nominal exchange rate rises. 
C) real exchange rate falls. 
D) nominal exchange rate falls.

Question 3

Last year a country sold $500 billion euros worth of goods to foreigners and had a trade deficit of $100 billion euros. What was the value of its imports?

Accepted Answer

The answer of Last year a country sold $500 billion...

Question 4

According to purchasing-power parity, if the price of a basket of goods in the U.S. rose from $2,000 to $2,104 and the price of the same basket of goods rose from 800 units to 832 units of some other country's currency, then the

Accepted Answer

A) nominal exchange rate would appreciate. 
B) nominal exchange rate would depreciate. 
C) real exchange rate would appreciate. 
D) real exchange rate would depreciate. 
A) nominal exchange rate would appreciate. 
B) nominal exchange rate would depreciate. 
C) real exchange rate would appreciate. 
D) real exchange rate would depreciate.

Question 5

Use the (hypothetical) information in the following table to answer the following questions.
Table 31-2  
-Refer to Table 31-2. Which currency(ies) is(are) have a nominal exchange rate less than that predicted by the doctrine of purchasing-power parity?

Accepted Answer

A) the euro and the riyal 
B) the pound and the yen 
C) the bolivar 
D) the yen 
A) the euro and the riyal 
B) the pound and the yen 
C) the bolivar 
D) the yen

Question 6

If the American company Stryker builds and operates a new factory in France,

Accepted Answer

A) it engages in foreign direct investment. By itself this action lowers U.S. net capital outflow. 
B) it engages in foreign direct investment. By itself this action raises U.S. net capital outflow. 
C) it engages in foreign portfolio investment. By itself this action lowers U.S. net capital outflow. 
D) it engages in foreign portfolio investment. By itself this action raises U.S. net capital outflow. 
A) it engages in foreign direct investment. By itself this action lowers U.S. net capital outflow. 
B) it engages in foreign direct investment. By itself this action raises U.S. net capital outflow. 
C) it engages in foreign portfolio investment. By itself this action lowers U.S. net capital outflow. 
D) it engages in foreign portfolio investment. By itself this action raises U.S. net capital outflow.

Question 7

If the unit of foreign currency is the peso, in which case is the real exchange rate 1.2?

Accepted Answer

A) the U.S. price is $2, the foreign price is 5 pesos, and the exchange rate is 3 pesos per dollar. 
B) the U.S. price is $3, the foreign price is 18 pesos, and the exchange rate is 5 pesos per dollar. 
C) the U.S. price is $5, the foreign price 12 pesos, and the exchange rate is 2 pesos per dollar. 
D) the U.S. price is $10, the foreign price is 3 pesos, and the exchange rate is 4 pesos per dollar. 
A) the U.S. price is $2, the foreign price is 5 pesos, and the exchange rate is 3 pesos per dollar. 
B) the U.S. price is $3, the foreign price is 18 pesos, and the exchange rate is 5 pesos per dollar. 
C) the U.S. price is $5, the foreign price 12 pesos, and the exchange rate is 2 pesos per dollar. 
D) the U.S. price is $10, the foreign price is 3 pesos, and the exchange rate is 4 pesos per dollar.

Question 8

From 1980 to 1987

Accepted Answer

A) foreigners were buying more assets from the United States than Americans were buying abroad. The United States was going into debt. 
B) Americans were buying more assets abroad than foreigners were buying from the United States. The United States was going into debt. 
C) foreigners were buying more assets from the United States than Americans were buying abroad. The United States was moving into surplus. 
D) Americans were buying more assets abroad than foreigners were buying from the United States. The United States was moving into surplus. 
A) foreigners were buying more assets from the United States than Americans were buying abroad. The United States was going into debt. 
B) Americans were buying more assets abroad than foreigners were buying from the United States. The United States was going into debt. 
C) foreigners were buying more assets from the United States than Americans were buying abroad. The United States was moving into surplus. 
D) Americans were buying more assets abroad than foreigners were buying from the United States. The United States was moving into surplus.

Question 9

A basket of goods costs $800 in the U.S. In Canada the same basket of goods costs 800 Canadian dollars and the exchange rate is 1.25 Canadian dollars per U.S. dollars. In Turkey the same basket of goods costs 2400 lira and the exchange rate is 3 lira per dollar. Which country has purchasing-power parity with the U.S.?

Accepted Answer

A) Both Canada and Turkey 
B) Canada but not Turkey 
C) Turkey but not Canada 
D) neither Canada or Turkey 
A) Both Canada and Turkey 
B) Canada but not Turkey 
C) Turkey but not Canada 
D) neither Canada or Turkey

Question 10

If the real exchange rate is 5/4 pounds of Chilean beef per pound of U.S. beef, a pound of U.S. beef costs $2 and the nominal exchange rate is 500 Chilean pesos per dollar, then Chilean beef costs

Accepted Answer

A) 1,250 pesos per pound. 
B) 800 pesos per pound 
C) 250 pesos per pound. 
D) None of the above is correct. 
A) 1,250 pesos per pound. 
B) 800 pesos per pound 
C) 250 pesos per pound. 
D) None of the above is correct.

Question 11

The country of Sylvania has a GDP of $900, investment of $200, government purchases of $200, and net capital outflow of -$100. What is consumption?

Accepted Answer

A) $700 
B) $600 
C) $500 
D) $300 
A) $700 
B) $600 
C) $500 
D) $300

Question 12

Other things the same, according to purchasing-power parity, if over the next few years Mexico has a higher money supply growth rate than the U.S., then

Accepted Answer

A) prices in Mexico will rise by a larger percentage than in the U.S. So, the dollar will appreciate against the Mexican peso. 
B) prices in Mexico will rise by larger percentage than in the U.S. So, the dollar will depreciate against the Mexican peso. 
C) prices in Mexico will rise by a smaller percentage than in the U.S. So, the dollar will appreciate against the Mexican peso. 
D) prices in Mexico will rise by a smaller percentage than in the U.S. So, the dollar will depreciate against the Mexican peso. 
A) prices in Mexico will rise by a larger percentage than in the U.S. So, the dollar will appreciate against the Mexican peso. 
B) prices in Mexico will rise by larger percentage than in the U.S. So, the dollar will depreciate against the Mexican peso. 
C) prices in Mexico will rise by a smaller percentage than in the U.S. So, the dollar will appreciate against the Mexican peso. 
D) prices in Mexico will rise by a smaller percentage than in the U.S. So, the dollar will depreciate against the Mexican peso.

Question 13

According to purchasing-power parity, if the same basket of goods costs $100 in the U.S. and 50 pounds in Britain, then what is the nominal exchange rate?

Accepted Answer

A) 2 pounds per dollar 
B) 1 pound per dollar 
C) 1/2 pound per dollar 
D) None of the above is correct 
A) 2 pounds per dollar 
B) 1 pound per dollar 
C) 1/2 pound per dollar 
D) None of the above is correct

Question 14

Why are net exports and net capital outflow always equal?

Accepted Answer

Net exports and net capital outflow are

Question 15

Other things the same, if a country's domestic investment decreases, then

Accepted Answer

A) net capital outflow rises, so net exports rise. 
B) net capital outflow rises, so net exports fall. 
C) net capital outflow falls, so net exports rise. 
D) net capital outflow falls, so net exports fall. 
A) net capital outflow rises, so net exports rise. 
B) net capital outflow rises, so net exports fall. 
C) net capital outflow falls, so net exports rise. 
D) net capital outflow falls, so net exports fall.

Question 16

If it took as many dollars to buy goods in the United States as it did to buy enough currency to buy the same goods in India, the real exchange rate would be computed as how many Indian goods per U.S. goods?

Accepted Answer

A) one 
B) the number of dollars needed to buy U.S. goods divided by the number of rupees needed to buy Indian goods 
C) the number of rupees needed to buy Indian goods divided by the number of dollars needed to buy U.S. goods 
D) None of the above is correct. 
A) one 
B) the number of dollars needed to buy U.S. goods divided by the number of rupees needed to buy Indian goods 
C) the number of rupees needed to buy Indian goods divided by the number of dollars needed to buy U.S. goods 
D) None of the above is correct.

Question 17

The nominal exchange rate is 32 Russian rubles per dollar. The price of a bushel of wheat is 260 rubles in Russia and $7 in the U.S.
A. What is the real exchange rate? Show your work.
B. Can arbitragers make a profit?
C. If your answer to B is yes, where would arbitragers buy and where would they sell.

Accepted Answer

A. The real exchange rate = $7

Question 18

Gabrielle, an Italian citizen, uses some previously obtained dollars to purchase a bond issued by a U.S. company. This transaction

Accepted Answer

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

Question 19

What is the logic behind the theory of purchasing-power parity?

Accepted Answer

The logic behind purchasing-power parity

Question 20

Other things the same, which of the following would both make foreigners more willing to engage in U.S. portfolio investment?

Accepted Answer

A) U.S. interest rates rise, the default risk of U.S. assets rise 
B) U.S. interest rates rise, the default risk of U.S. assets fall 
C) U.S. interest rates fall, the default risk of U.S. assets rise 
D) U.S. interest rates fall, the default risk of U.S. assets fall 
A) U.S. interest rates rise, the default risk of U.S. assets rise 
B) U.S. interest rates rise, the default risk of U.S. assets fall 
C) U.S. interest rates fall, the default risk of U.S. assets rise 
D) U.S. interest rates fall, the default risk of U.S. assets fall

Exam 31: Open-Economy Macroeconomics: Basic Concepts

A country has $3 billion of domestic investment and net exports of $2 billion. What is its saving?

According to purchasing-power parity, if prices in the United States increase by a smaller percentage than prices in the United Kingdom, then the

Last year a country sold $500 billion euros worth of goods to foreigners and had a trade deficit of $100 billion euros. What was the value of its imports?

According to purchasing-power parity, if the price of a basket of goods in the U.S. rose from $2,000 to $2,104 and the price of the same basket of goods rose from 800 units to 832 units of some other country's currency, then the

Use the (hypothetical) information in the following table to answer the following questions. Table 31-2 -Refer to Table 31-2. Which currency(ies) is(are) have a nominal exchange rate less than that predicted by the doctrine of purchasing-power parity?

If the American company Stryker builds and operates a new factory in France,

If the unit of foreign currency is the peso, in which case is the real exchange rate 1.2?

From 1980 to 1987

If the real exchange rate is 5/4 pounds of Chilean beef per pound of U.S. beef, a pound of U.S. beef costs $2 and the nominal exchange rate is 500 Chilean pesos per dollar, then Chilean beef costs

The country of Sylvania has a GDP of $900, investment of $200, government purchases of $200, and net capital outflow of -$100. What is consumption?

Other things the same, according to purchasing-power parity, if over the next few years Mexico has a higher money supply growth rate than the U.S., then

According to purchasing-power parity, if the same basket of goods costs $100 in the U.S. and 50 pounds in Britain, then what is the nominal exchange rate?

Why are net exports and net capital outflow always equal?

Other things the same, if a country's domestic investment decreases, then

If it took as many dollars to buy goods in the United States as it did to buy enough currency to buy the same goods in India, the real exchange rate would be computed as how many Indian goods per U.S. goods?

Gabrielle, an Italian citizen, uses some previously obtained dollars to purchase a bond issued by a U.S. company. This transaction

What is the logic behind the theory of purchasing-power parity?

Other things the same, which of the following would both make foreigners more willing to engage in U.S. portfolio investment?

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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