Question 1

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

Accepted Answer

Yes.
reduced transportation co

Question 2

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 greater than, less than, or equal to net exports. 
A) is always greater than net exports. 
B) is always less than net exports. 
C) is always equal to net exports. 
D) could be greater than, less than, or equal to net exports.

Question 3

If purchasing-power parity holds, then the value of the

Accepted Answer

A) real exchange rate is equal to one. 
B) nominal exchange rate is equal to one. 
C) real exchange rate is equal to the nominal exchange rate. 
D) real exchange rate is equal to the difference in inflation rates between the two countries. 
A) real exchange rate is equal to one. 
B) nominal exchange rate is equal to one. 
C) real exchange rate is equal to the nominal exchange rate. 
D) real exchange rate is equal to the difference in inflation rates between the two countries.

Question 4

Jorge, a Spanish citizen, is contracted by a French architect to design a metal casting factory. Which country's exports increase?

Accepted Answer

A) Spain's 
B) France's 
C) Spain's and France's 
D) Neither Spain's nor France's 
A) Spain's 
B) France's 
C) Spain's and France's 
D) Neither Spain's nor France's

Question 5

If a U.S. dollar purchases 4 Argentinean pesos, and a gallon of milk costs $3 in the U.S. and 6 pesos in Argentina what is the real exchange rate?

Accepted Answer

A) 2 gallons of Argentinean milk/1 gallon of U.S.milk 
B) 3 gallons of Argentinean milk/2 gallon of U.S.milk 
C) 2 gallons of Argentinean milk/3 gallon of U.S.milk 
D) 1 gallons of Argentinean milk/2 gallon of U.S.milk 
A) 2 gallons of Argentinean milk/1 gallon of U.S.milk 
B) 3 gallons of Argentinean milk/2 gallon of U.S.milk 
C) 2 gallons of Argentinean milk/3 gallon of U.S.milk 
D) 1 gallons of Argentinean milk/2 gallon of U.S.milk

Question 6

A country recently had $800 billion worth of domestic investment and its residents purchased $400 billion worth of foreign assets. If foreigners purchased $100 billion of this country's assets, what was this country's saving? Explain how your found your answer.

Accepted Answer

This country had saving of $1,100 billio

Question 7

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

Accepted Answer

A) increase U.S.net capital outflow because Germans obtain U.S.assets. 
B) decrease U.S.net capital outflow because Germans obtain U.S.assets. 
C) increase U.S.net capital outflow because the U.S.buys capital goods. 
D) decrease U.S.net capital outflow because the U.S.buys capital goods. 
A) increase U.S.net capital outflow because Germans obtain U.S.assets. 
B) decrease U.S.net capital outflow because Germans obtain U.S.assets. 
C) increase U.S.net capital outflow because the U.S.buys capital goods. 
D) decrease U.S.net capital outflow because the U.S.buys capital goods.

Question 8

If the price of a good in the U.S. is $10, the exchange rate is 2 units of foreign currency per dollar, and the foreign price of the same good is 30 units of foreign currency, then the real exchange rate is 2/3.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) A Swedish car manufacturer opens a plant in Tennessee. 
B) A Swiss bank buys a U.S.government bond. 
C) A U.S.bank buys bonds issued by an Australian corporation. 
D) A U.S.based restaurant chain opens new restaurants in India. 
A) A Swedish car manufacturer opens a plant in Tennessee. 
B) A Swiss bank buys a U.S.government bond. 
C) A U.S.bank buys bonds issued by an Australian corporation. 
D) A U.S.based restaurant chain opens new restaurants in India.

Question 10

In an open economy, gross domestic product equals $2,460 billion, consumption expenditure equals $1,435 billion, government expenditure equals $325 billion, investment equals $560 billion, and net capital outflow equals $375 billion. What is national saving?

Accepted Answer

A) $1,260 billion 
B) $2,135 billion 
C) $935 billion 
D) $1,900 billion 
A) $1,260 billion 
B) $2,135 billion 
C) $935 billion 
D) $1,900 billion

Question 11

In an open economy national saving equals domestic investment plus net capital outflow.

Accepted Answer

A) True 
 B)False

Question 12

Why are net exports and net capital outflow always equal?

Accepted Answer

Net exports and net capital outflow are

Question 13

A U.S. mutual fund buys stock issued by a corporation in Colombia. A U.S. grocery store chain builds and manages a new warehouse in Honduras. Which one(s) of these is foreign direct investment? Which one(s) would be taken into account when computing U.S. net capital outflows?

Accepted Answer

The building of the

Question 14

A U.S. company uses pound sterlings it already owned to purchase bonds issued by a company in Germany. Which of these countries has an increase in net capital outflow?

Accepted Answer

A) Germany and the U.S. 
B) Germany but not the U.S. 
C) The U.S.but not Germany 
D) Neither Germany nor the U.S. 
A) Germany and the U.S. 
B) Germany but not the U.S. 
C) The U.S.but not Germany 
D) Neither Germany nor the U.S.

Question 15

Maria and Michael are both U.S. citizens. Maria opens a café in Spain. Michael builds a U.S.-based factory using equipment from Japan. Whose action is an example of U.S. foreign direct investment?

Accepted Answer

A) Maria's and Michael's 
B) Maria's but not Michael's 
C) Michael's but not Maria's 
D) Neither Michael's nor Maria's 
A) Maria's and Michael's 
B) Maria's but not Michael's 
C) Michael's but not Maria's 
D) Neither Michael's nor Maria's

Question 16

According to purchasing-power parity, what is the relationship between changes in price levels between two countries and changes in nominal exchange rates?

Accepted Answer

Purchasing-power parity asserts that the

Question 17

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 18

A department store chain in Japan uses yen to purchase 500,000 U.S. dollars from a U.S. bank. It then uses these dollars to buy DVDs from a U.S. filmmaker. As a result of these transactions:
A. By how much and in what direction did U.S. net exports change?
B. By how much and in which direction did U.S. net capital outflow change?

Accepted Answer

A. U.S. net exports

Question 19

A pair of hiking boots costs $120 in the U.S., if the real exchange rate is 6/5 and the nominal exchange rate is 2 Brazilian reais per dollar, what is the price of the same hiking boots in Brazil?
Show your work.

Accepted Answer

The real exchange rate 6/5 = $

Question 20

It is possible for a country to have domestic investment that exceeds national saving.

Accepted Answer

A) True 
 B)False

Exam 31: Open-Economy Macroeconomics: Basic Concepts

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

Net capital outflow

If purchasing-power parity holds, then the value of the

Jorge, a Spanish citizen, is contracted by a French architect to design a metal casting factory. Which country's exports increase?

If a U.S. dollar purchases 4 Argentinean pesos, and a gallon of milk costs $3 in the U.S. and 6 pesos in Argentina what is the real exchange rate?

A country recently had $800 billion worth of domestic investment and its residents purchased $400 billion worth of foreign assets. If foreigners purchased $100 billion of this country's assets, what was this country's saving? Explain how your found your answer.

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

If the price of a good in the U.S. is $10, the exchange rate is 2 units of foreign currency per dollar, and the foreign price of the same good is 30 units of foreign currency, then the real exchange rate is 2/3.

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

In an open economy, gross domestic product equals $2,460 billion, consumption expenditure equals $1,435 billion, government expenditure equals $325 billion, investment equals $560 billion, and net capital outflow equals $375 billion. What is national saving?

In an open economy national saving equals domestic investment plus net capital outflow.

Why are net exports and net capital outflow always equal?

A U.S. mutual fund buys stock issued by a corporation in Colombia. A U.S. grocery store chain builds and manages a new warehouse in Honduras. Which one(s) of these is foreign direct investment? Which one(s) would be taken into account when computing U.S. net capital outflows?

A U.S. company uses pound sterlings it already owned to purchase bonds issued by a company in Germany. Which of these countries has an increase in net capital outflow?

Maria and Michael are both U.S. citizens. Maria opens a café in Spain. Michael builds a U.S.-based factory using equipment from Japan. Whose action is an example of U.S. foreign direct investment?

According to purchasing-power parity, what is the relationship between changes in price levels between two countries and changes in nominal exchange rates?

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

A pair of hiking boots costs $120 in the U.S., if the real exchange rate is 6/5 and the nominal exchange rate is 2 Brazilian reais per dollar, what is the price of the same hiking boots in Brazil? Show your work.

It is possible for a country to have domestic investment that exceeds national saving.

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 Nations 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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