Exam 11: Open-Economy Macroeconomics: Basic Concepts

If SA has R25 billion in imports, R15 billion in exports, and sells R20 billion of assets to foreigners, how many foreign assets do domestic residents purchase?

The exchange rate is the

If a bottle of mineral water is priced at R8 in South Africa and 720 yen in Japan, then according to the purchasing power parity theory of exchange rates, the yen/rand exchange rate should be 5,760 yen/rand.

Suppose that Thabo, a resident of SA, buys software from a company in Japan.Explain what this is and in what directions this changes SA net exports and SA net capital outflow.

What does purchasing power parity imply about the real exchange rate?

Which of the following statements is true about a country with a trade deficit?

Under what circumstances does purchasing power parity explain how exchange rates are determined, and why is it not completely accurate?

How do the nominal exchange rate and the real exchange rate differ?

Which of the following statements is not true about the relationship between national saving, investment, and net capital outflow?

If SA's money supply grows faster than Zimbabwe's, the value of the rand should rise relative to the value of the Zimbabwean dollar.

Which of the following is a statement of the purchasing power parity (PPP) theory of exchange rate determination? The exchange rate will adjust in the

Arbitrage is the process of taking advantage of differences in prices of the same good by buying where the good is cheap and selling where it is expensive.

Suppose a resident of the USA buys a Jaguar car from SA, and the SA exporter uses the receipts to buy shares in Boeing.Which of the following statements is true from the perspective of SA?

Suppose that money supply growth continues to be higher in SA than it is in the United States.What does purchasing power parity imply will happen to the real and to the nominal exchange rate?

If one country has a lower inflation rate than other countries, its

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

If the nominal exchange rate between SA rands and US dollars is R0.50 per $1.00, how many dollars can you get for a rand?

If the rand/euro exchange rate rises, the euro has appreciated.

When people take advantage of differences in prices for the same good by buying it where it is cheap and selling it where it is expensive, it is known as