Question 1

If the Canadian real exchange rate appreciates relative to the euro,which of the following best describes the consequences?

Accepted Answer

A) Canadian exports to Europe and European exports to Canada both rise. 
B) Canadian exports to Europe and European exports to Canada both fall. 
C) Canadian exports to Europe rise, and European exports to Canada fall. 
D) Canadian exports to Europe fall, and European exports to Canada rise. 
A) Canadian exports to Europe and European exports to Canada both rise. 
B) Canadian exports to Europe and European exports to Canada both fall. 
C) Canadian exports to Europe rise, and European exports to Canada fall. 
D) Canadian exports to Europe fall, and European exports to Canada rise.

Question 2

What does net capital outflow measure?

Accepted Answer

A) foreign assets held by domestic residents minus domestic assets held by foreign residents 
B) the imbalance between the amount of domestic assets bought by domestic residents and the amount of foreign assets bought by foreigners 
C) the imbalance between the amount of foreign assets bought by domestic residents and the amount of domestic goods and services sold to foreigners 
D) domestic assets held by foreigners minus foreign assets held by domestic residents 
A) foreign assets held by domestic residents minus domestic assets held by foreign residents 
B) the imbalance between the amount of domestic assets bought by domestic residents and the amount of foreign assets bought by foreigners 
C) the imbalance between the amount of foreign assets bought by domestic residents and the amount of domestic goods and services sold to foreigners 
D) domestic assets held by foreigners minus foreign assets held by domestic residents

Question 3

Sonya,a citizen of Denmark,sells Danish boots and shoes in Canada.Which of the following correctly identifies the effects of these sales on net exports?

Accepted Answer

A) They increase Canadian net exports and have no effect on Danish net exports. 
B) They decrease Canadian net exports and have no effect on Danish net exports. 
C) They increase Canadian net exports and decrease Danish net exports. 
D) They decrease Canadian net exports and increase Danish net exports. 
A) They increase Canadian net exports and have no effect on Danish net exports. 
B) They decrease Canadian net exports and have no effect on Danish net exports. 
C) They increase Canadian net exports and decrease Danish net exports. 
D) They decrease Canadian net exports and increase Danish net exports.

Question 4

Over the past 50 years,which of the following has happened to Canadian imports as a percentage of GDP?

Accepted Answer

A) They have approximately stayed constant. 
B) They have approximately doubled. 
C) They have approximately tripled. 
D) They have approximately quadrupled. 
A) They have approximately stayed constant. 
B) They have approximately doubled. 
C) They have approximately tripled. 
D) They have approximately quadrupled.

Question 5

Suppose that the real exchange rate between Canada and Kenya is defined in terms of baskets of goods.Which of the following will increase the real exchange rate (that is,increase the number of baskets of Kenyan goods a basket of Canadian goods buys)?

Accepted Answer

A) an increase in the number of Kenyan shillings that can be purchased with a dollar 
B) an increase in the price in Canadian dollars of Kenyan goods 
C) an increase in the price in Kenyan shillings of Kenyan goods 
D) a decrease in the number of Kenyan shillings that can be purchased with a dollar 
A) an increase in the number of Kenyan shillings that can be purchased with a dollar 
B) an increase in the price in Canadian dollars of Kenyan goods 
C) an increase in the price in Kenyan shillings of Kenyan goods 
D) a decrease in the number of Kenyan shillings that can be purchased with a dollar

Question 6

What are foreign-produced goods and services that are sold domestically called?

Accepted Answer

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

Question 7

Sue,a Canadian citizen,buys shares of stock in a French chain of boutiques.Which of the following does her purchase count as?

Accepted Answer

A) investment for Sue and Canadian foreign direct investment 
B) investment for Sue and Canadian foreign portfolio investment 
C) saving for Sue and Canadian foreign direct investment 
D) saving for Sue and Canadian foreign portfolio investment 
A) investment for Sue and Canadian foreign direct investment 
B) investment for Sue and Canadian foreign portfolio investment 
C) saving for Sue and Canadian foreign direct investment 
D) saving for Sue and Canadian foreign portfolio investment

Question 8

Which of the following best defines the nominal exchange rate?

Accepted Answer

A) It is the nominal interest rate in one country divided by the nominal interest rate in the other country. 
B) It is the rate at which a person can trade the currency of one country for the currency of another. 
C) It is the price of a good in one country divided by the price of the same good in another. 
D) It is the number of goods a person can trade for a similar good in another country. 
A) It is the nominal interest rate in one country divided by the nominal interest rate in the other country. 
B) It is the rate at which a person can trade the currency of one country for the currency of another. 
C) It is the price of a good in one country divided by the price of the same good in another. 
D) It is the number of goods a person can trade for a similar good in another country.

Question 9

A Canadian computer maker sells computers to a German firm.This company uses all of the revenues from this sale to purchase stock in a German company.What happens to Canadian net exports and net foreign investment due to these transactions?

Accepted Answer

A) They will increase both Canadian net exports and Canadian net foreign investment. 
B) They will decrease both Canadian net exports and Canadian net foreign investment. 
C) They will increase Canadian net exports and will decrease Canadian net foreign investment. 
D) They will decrease Canadian net exports and will increase Canadian net foreign investment. 
A) They will increase both Canadian net exports and Canadian net foreign investment. 
B) They will decrease both Canadian net exports and Canadian net foreign investment. 
C) They will increase Canadian net exports and will decrease Canadian net foreign investment. 
D) They will decrease Canadian net exports and will increase Canadian net foreign investment.

Question 10

A British pharmacy buys drugs from a Canadian company and pays for them with British pounds.Which of the following correctly identifies the effects of this transaction?

Accepted Answer

A) It increases British net exports and increases Canadian capital outflow. 
B) It increases British net exports and decreases Canadian capital outflow. 
C) It decreases British net exports and increases Canadian capital outflow. 
D) It decreases British net exports and decreases Canadian capital outflow. 
A) It increases British net exports and increases Canadian capital outflow. 
B) It increases British net exports and decreases Canadian capital outflow. 
C) It decreases British net exports and increases Canadian capital outflow. 
D) It decreases British net exports and decreases Canadian capital outflow.

Question 11

Which of the following would an appreciation of the Canadian real exchange rate induce Canadian consumers to buy?

Accepted Answer

A) fewer domestic goods and foreign goods 
B) more domestic goods, but fewer foreign goods 
C) fewer domestic goods, but more foreign goods 
D) more domestic goods and foreign goods 
A) fewer domestic goods and foreign goods 
B) more domestic goods, but fewer foreign goods 
C) fewer domestic goods, but more foreign goods 
D) more domestic goods and foreign goods

Question 12

Mike,a Canadian citizen living in Canada,buys $30 of cheese from France.Which of the following correctly identifies the effects of this transaction?

Accepted Answer

A) It increases Canadian imports by $30 and increases Canadian net exports by $30. 
B) It increases Canadian imports by $30 and decreases Canadian net exports by $30. 
C) It increases Canadian exports by $30 and increases Canadian net exports by $30. 
D) It increases Canadian exports by $30 and decreases Canadian net exports by $30. 
A) It increases Canadian imports by $30 and increases Canadian net exports by $30. 
B) It increases Canadian imports by $30 and decreases Canadian net exports by $30. 
C) It increases Canadian exports by $30 and increases Canadian net exports by $30. 
D) It increases Canadian exports by $30 and decreases Canadian net exports by $30.

Question 13

If the purchasing power of the dollar is always the same at home and abroad,then the nominal exchange rate defined as foreign goods per unit of Canadian goods decreases if the Canadian price level rises more than the price level in foreign countries.

Accepted Answer

A) True 
 B)False

Question 14

The next table shows PPP exchange rates (the price of 1 U.S.dollar in units of the foreign currency)for several countries,determined based on the Big Mac Index.According to this data,what are the predicted exchange rates between the following countries?
a. Argentina and Australia
b. Brazil and Canada
c. Chile and China
d. China and Canada
 $$\begin{array} { | l | c | } 
\hline & \text { pppexchame rate (1US\$=) } \
\hline \text { Urited States (US\$) } & \cdots \
\hline \text { Arentina (Pe50) } & 3.75 \
\hline \text { Australia (As) } & 1.17 \
\hline \text { Brazil (Real) } & 2.33 \
\hline \text { Britain (E) } & 0.61 \
\hline \text { Canada (C) } & 1.12 \
\hline \text { Chile (Pes0) } & 469 \
\hline \text { China (Yuan) } & 3.54 \
\hline
\end{array}$$

Accepted Answer

a.3.75 Peso / 1.17 A$ = 3.2 Pe

Question 15

Starting from a trade surplus,which of the following would create a trade deficit?

Accepted Answer

A) a decline in saving and investment 
B) a rise in saving and investment 
C) a decline in saving and a rise in investment 
D) a rise in saving and a decline in investment 
A) a decline in saving and investment 
B) a rise in saving and investment 
C) a decline in saving and a rise in investment 
D) a rise in saving and a decline in investment

Question 16

What is the formula for investment in an open economy?

Accepted Answer

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

Question 17

Table 12-1
  
-Refer to the Table 12-1.What countries' goods are more expensive than Canadian goods?

Accepted Answer

A) Bolivia and Morocco 
B) Japan, Norway, and Thailand 
C) Japan and Norway 
D) Thailand and Morocco 
A) Bolivia and Morocco 
B) Japan, Norway, and Thailand 
C) Japan and Norway 
D) Thailand and Morocco

Question 18

If the exchange rate changes from 0.35 Kuwaiti dinar per dollar to 0.30 Kuwaiti dinar per dollar,what has happened to the dollar?

Accepted Answer

A) It has appreciated and so buys more Kuwaiti goods. 
B) It has appreciated and so buys fewer Kuwaiti goods. 
C) It has depreciated and so buys more Kuwaiti goods. 
D) It has depreciated and so buys fewer Kuwaiti goods. 
A) It has appreciated and so buys more Kuwaiti goods. 
B) It has appreciated and so buys fewer Kuwaiti goods. 
C) It has depreciated and so buys more Kuwaiti goods. 
D) It has depreciated and so buys fewer Kuwaiti goods.

Question 19

What is the value of Peru's exports minus the value of Peru's imports called?

Accepted Answer

A) Peru's net capital inflow 
B) Peru's foreign direct investment 
C) Peru's net exports 
D) Peru's net imports 
A) Peru's net capital inflow 
B) Peru's foreign direct investment 
C) Peru's net exports 
D) Peru's net imports

Question 20

What type of economy does Canada have?

Accepted Answer

A) a large closed economy 
B) a small closed economy 
C) a large open economy 
D) a small open economy 
A) a large closed economy 
B) a small closed economy 
C) a large open economy 
D) a small open economy

If the Canadian real exchange rate appreciates relative to the euro,which of the following best describes the consequences?

What does net capital outflow measure?

Sonya,a citizen of Denmark,sells Danish boots and shoes in Canada.Which of the following correctly identifies the effects of these sales on net exports?

Over the past 50 years,which of the following has happened to Canadian imports as a percentage of GDP?

Suppose that the real exchange rate between Canada and Kenya is defined in terms of baskets of goods.Which of the following will increase the real exchange rate (that is,increase the number of baskets of Kenyan goods a basket of Canadian goods buys)?

What are foreign-produced goods and services that are sold domestically called?

Sue,a Canadian citizen,buys shares of stock in a French chain of boutiques.Which of the following does her purchase count as?

Which of the following best defines the nominal exchange rate?

A Canadian computer maker sells computers to a German firm.This company uses all of the revenues from this sale to purchase stock in a German company.What happens to Canadian net exports and net foreign investment due to these transactions?

A British pharmacy buys drugs from a Canadian company and pays for them with British pounds.Which of the following correctly identifies the effects of this transaction?

Which of the following would an appreciation of the Canadian real exchange rate induce Canadian consumers to buy?

Mike,a Canadian citizen living in Canada,buys $30 of cheese from France.Which of the following correctly identifies the effects of this transaction?

If the purchasing power of the dollar is always the same at home and abroad,then the nominal exchange rate defined as foreign goods per unit of Canadian goods decreases if the Canadian price level rises more than the price level in foreign countries.

Starting from a trade surplus,which of the following would create a trade deficit?

What is the formula for investment in an open economy?

Table 12-1 -Refer to the Table 12-1.What countries' goods are more expensive than Canadian goods?

If the exchange rate changes from 0.35 Kuwaiti dinar per dollar to 0.30 Kuwaiti dinar per dollar,what has happened to the dollar?

What is the value of Peru's exports minus the value of Peru's imports called?

What type of economy does Canada have?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains from Trade

The Market Forces of Supply and Demand (PART 1)

The Market Forces of Supply and Demand (PART 2)

Measuring a Nation's Income

Measuring the Cost of Living

Production and Growth

Saving,Investment,and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

A Macroeconomic Theory of the Small 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

Five Debates over Macroeconomic Policy

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Exam 12: Open-Economy Macroeconomics: Basic Concepts

If the Canadian real exchange rate appreciates relative to the euro,which of the following best describes the consequences?

What does net capital outflow measure?

Sonya,a citizen of Denmark,sells Danish boots and shoes in Canada.Which of the following correctly identifies the effects of these sales on net exports?

Over the past 50 years,which of the following has happened to Canadian imports as a percentage of GDP?

Suppose that the real exchange rate between Canada and Kenya is defined in terms of baskets of goods.Which of the following will increase the real exchange rate (that is,increase the number of baskets of Kenyan goods a basket of Canadian goods buys)?

What are foreign-produced goods and services that are sold domestically called?

Sue,a Canadian citizen,buys shares of stock in a French chain of boutiques.Which of the following does her purchase count as?

Which of the following best defines the nominal exchange rate?

A Canadian computer maker sells computers to a German firm.This company uses all of the revenues from this sale to purchase stock in a German company.What happens to Canadian net exports and net foreign investment due to these transactions?

A British pharmacy buys drugs from a Canadian company and pays for them with British pounds.Which of the following correctly identifies the effects of this transaction?

Which of the following would an appreciation of the Canadian real exchange rate induce Canadian consumers to buy?

Mike,a Canadian citizen living in Canada,buys $30 of cheese from France.Which of the following correctly identifies the effects of this transaction?

If the purchasing power of the dollar is always the same at home and abroad,then the nominal exchange rate defined as foreign goods per unit of Canadian goods decreases if the Canadian price level rises more than the price level in foreign countries.

Starting from a trade surplus,which of the following would create a trade deficit?

What is the formula for investment in an open economy?

Table 12-1 -Refer to the Table 12-1.What countries' goods are more expensive than Canadian goods?

If the exchange rate changes from 0.35 Kuwaiti dinar per dollar to 0.30 Kuwaiti dinar per dollar,what has happened to the dollar?

What is the value of Peru's exports minus the value of Peru's imports called?

What type of economy does Canada have?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains from Trade

The Market Forces of Supply and Demand (PART 1)

The Market Forces of Supply and Demand (PART 2)

Measuring a Nation's Income

Measuring the Cost of Living

Production and Growth

Saving,Investment,and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

A Macroeconomic Theory of the Small 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

Five Debates over Macroeconomic Policy

Filters