Question 1

What partly caused the increase in international trade in Canada since 1989?

Accepted Answer

A)  an increase in Canadian GDP 
B)  an appreciation of the dollar 
C)  better quality of Canadian products 
D)  the free trade agreement between Canada and the United States 
A)  an increase in Canadian GDP 
B)  an appreciation of the dollar 
C)  better quality of Canadian products 
D)  the free trade agreement between Canada and the United States

Question 2

If a country has business opportunities that become relatively attractive to other countries, what best predicts the effects of this change?

Accepted Answer

A)  Both net exports and net capital outflow increase. 
B)  Both net exports and net capital outflow decrease. 
C)  Net exports increase, but net capital outflow decreases. 
D)  Net exports decrease, but net capital outflow increases. 
A)  Both net exports and net capital outflow increase. 
B)  Both net exports and net capital outflow decrease. 
C)  Net exports increase, but net capital outflow decreases. 
D)  Net exports decrease, but net capital outflow increases.

Question 3

In Ireland, a pint of beer costs 4 Irish punts. In Australia, a pint of beer costs 6 Australian dollars. If the exchange rate is 0.8 punts per Australian dollar, what is the real exchange rate?

Accepted Answer

A)  0.53 pints of Irish beer per pint of Australian beer 
B)  0.8 pints of Irish beer per pint of Australian beer 
C)  1.11 pints of Irish beer per pint of Australian beer 
D)  1.25 pints of Irish beer per pint of Australian beer 
A)  0.53 pints of Irish beer per pint of Australian beer 
B)  0.8 pints of Irish beer per pint of Australian beer 
C)  1.11 pints of Irish beer per pint of Australian beer 
D)  1.25 pints of Irish beer per pint of Australian beer

Question 4

In 2009, approximately what was Canadian net capital outflow as a percent of GDP?

Accepted Answer

A)  -4.5 percent 
B)  -2.5 percent 
C)  2.5 percent 
D)  4.5 percent 
A)  -4.5 percent 
B)  -2.5 percent 
C)  2.5 percent 
D)  4.5 percent

Question 5

How do nominal exchange rates change over time?

Accepted Answer

A)  They vary little over time. 
B)  They vary substantially over time. 
C)  They appreciate over time for most countries. 
D)  They depreciate over time for most countries. 
A)  They vary little over time. 
B)  They vary substantially over time. 
C)  They appreciate over time for most countries. 
D)  They depreciate over time for most countries.

Question 6

If the exchange rate changes from 0.35 ? HYPERLINK "http://en.wikipedia.org/wiki/Saudi_riyal" ?Saudi riyal? per dollar to 0.30 ? HYPERLINK "http://en.wikipedia.org/wiki/Saudi_riyal" ?Saudi riyal? 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 7

The country of Sylvania has a GDP of $4000, investment of $1500, government purchases of $400, and net capital outflow of negative $300. What is consumption?

Accepted Answer

A)  $700 
B)  $800 
C)  $2400 
D)  $2700 
A)  $700 
B)  $800 
C)  $2400 
D)  $2700

Question 8

Suppose a lobster supper in Nova Scotia costs fewer dollars than a lobster supper in Moscow. Explain why this is inconsistent with purchasing-power parity and explain why the inconsistency may exist.

Accepted Answer

According to purchasing-power parity, a

Question 9

-Refer to the Table 12-1. What country's good are less expensive than Canadian goods?

Accepted Answer

A)  Bolivia 
B)  Japan 
C)  Norway 
D)  Thailand 
A)  Bolivia 
B)  Japan 
C)  Norway 
D)  Thailand

Question 10

Which statement best defines net capital outflow?

Accepted Answer

A)  It is the purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreign residents. 
B)  It is the purchase of foreign assets by domestic residents minus the purchase of foreign goods and services by domestic residents. 
C)  It is the purchase of domestic assets by foreign residents minus the purchase of domestic goods and services by foreign residents. 
D)  It is the purchase of domestic assets by foreign residents minus the purchase of foreign assets by domestic residents. 
A)  It is the purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreign residents. 
B)  It is the purchase of foreign assets by domestic residents minus the purchase of foreign goods and services by domestic residents. 
C)  It is the purchase of domestic assets by foreign residents minus the purchase of domestic goods and services by foreign residents. 
D)  It is the purchase of domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.

Question 11

In which situation must domestic saving equal investment?

Accepted Answer

A)  when NX is negative 
B)  when NX is zero 
C)  when NCO is negative 
D)  when imports are zero 
A)  when NX is negative 
B)  when NX is zero 
C)  when NCO is negative 
D)  when imports are zero

Question 12

In 2006, Canada had positive net exports. What does this fact imply?

Accepted Answer

A)  Canada sold more abroad than it purchased abroad and had a trade surplus. 
B)  Canada sold more abroad than it purchased abroad and had a trade deficit. 
C)  Canada bought more abroad than it sold abroad and had a trade surplus. 
D)  Canada bought more abroad than it sold abroad and had a trade deficit. 
A)  Canada sold more abroad than it purchased abroad and had a trade surplus. 
B)  Canada sold more abroad than it purchased abroad and had a trade deficit. 
C)  Canada bought more abroad than it sold abroad and had a trade surplus. 
D)  Canada bought more abroad than it sold abroad and had a trade deficit.

Question 13

How does international trade affect the standard of living?

Accepted Answer

A)  It raises the standard of living in all trading countries. 
B)  It lowers the standard of living in all trading countries. 
C)  It raises the standard of living in the exporting country and lowers it in the importing country. 
D)  It raises the standard of living in the importing country and lowers it in the exporting country. 
A)  It raises the standard of living in all trading countries. 
B)  It lowers the standard of living in all trading countries. 
C)  It raises the standard of living in the exporting country and lowers it in the importing country. 
D)  It raises the standard of living in the importing country and lowers it in the exporting country.

Question 14

List the factors that might influence a country's exports, imports, and trade balance.

Accepted Answer

a. the tastes of consumers for domestic

Question 15

If a country sells more goods and services abroad than it purchases abroad, it has positive net exports and a trade surplus.

Accepted Answer

A) True 
 B)False

Question 16

A country has $120 million of net exports and $150 million of saving. What is net capital outflow?

Accepted Answer

A)  -$30 million 
B)  $30 million 
C)  $120 million 
D)  $150 million 
A)  -$30 million 
B)  $30 million 
C)  $120 million 
D)  $150 million

Question 17

Canadian exports make up less than 20 percent of GDP.

Accepted Answer

A) True 
 B)False

Question 18

Suppose that the exchange rate is 50 Bangladesh taka per Canadian dollar, and that a bushel of rice costs 200 taka in Bangladesh and $3 in Canada. Which statement is consistent with these facts?

Accepted Answer

A)  The real exchange rate is greater than one, and arbitrageurs could profit by buying rice in Canada and selling it in Bangladesh. 
B)  The real exchange rate is greater than one, and arbitrageurs could profit by buying rice in Bangladesh and selling it in Canada. 
C)  The real exchange rate is less than one, and arbitrageurs could profit by buying rice in Canada and selling it in Bangladesh. 
D)  The real exchange rate is less than one, and arbitrageurs could profit by buying rice in Bangladesh and selling it in Canada. 
A)  The real exchange rate is greater than one, and arbitrageurs could profit by buying rice in Canada and selling it in Bangladesh. 
B)  The real exchange rate is greater than one, and arbitrageurs could profit by buying rice in Bangladesh and selling it in Canada. 
C)  The real exchange rate is less than one, and arbitrageurs could profit by buying rice in Canada and selling it in Bangladesh. 
D)  The real exchange rate is less than one, and arbitrageurs could profit by buying rice in Bangladesh and selling it in Canada.

Question 19

Suppose the price level in Canada was P = 124 last year; it is up by 3 points this year. In the U.S., the price level was 112 last year; it is up by 2 points this year. The exchange rate was US$0.96 per C$1 last year. (For part a, approximate all results to two decimals.)
a) Compare the rate of change in the exchange rate with the difference between the foreign and domestic inflation rates. Are they equal?
b) In theory, the rate of change in the nominal exchange rate should be about the same as the inflation difference. Redo the calculations from part a, retaining this time at least four decimals in your intermediate results. Does your answer to the question in part a change?
c) What have you learned from this exercise?

Accepted Answer

a)The inflation rate in Canada = (127 -

Question 20

A country's exports are $500 billion, and imports are $700 billion. What is the country's trade balance?

Accepted Answer

A)  $200 billion deficit 
B)  $200 billion surplus 
C)  $1200 billion deficit 
D)  $1200 billion surplus 
A)  $200 billion deficit 
B)  $200 billion surplus 
C)  $1200 billion deficit 
D)  $1200 billion surplus

What partly caused the increase in international trade in Canada since 1989?

If a country has business opportunities that become relatively attractive to other countries, what best predicts the effects of this change?

In Ireland, a pint of beer costs 4 Irish punts. In Australia, a pint of beer costs 6 Australian dollars. If the exchange rate is 0.8 punts per Australian dollar, what is the real exchange rate?

In 2009, approximately what was Canadian net capital outflow as a percent of GDP?

How do nominal exchange rates change over time?

If the exchange rate changes from 0.35 ? HYPERLINK "http://en.wikipedia.org/wiki/Saudi_riyal" ?Saudi riyal? per dollar to 0.30 ? HYPERLINK "http://en.wikipedia.org/wiki/Saudi_riyal" ?Saudi riyal? per dollar, what has happened to the dollar?

The country of Sylvania has a GDP of $4000, investment of $1500, government purchases of $400, and net capital outflow of negative $300. What is consumption?

Suppose a lobster supper in Nova Scotia costs fewer dollars than a lobster supper in Moscow. Explain why this is inconsistent with purchasing-power parity and explain why the inconsistency may exist.

-Refer to the Table 12-1. What country's good are less expensive than Canadian goods?

Which statement best defines net capital outflow?

In which situation must domestic saving equal investment?

In 2006, Canada had positive net exports. What does this fact imply?

How does international trade affect the standard of living?

List the factors that might influence a country's exports, imports, and trade balance.

If a country sells more goods and services abroad than it purchases abroad, it has positive net exports and a trade surplus.

A country has $120 million of net exports and $150 million of saving. What is net capital outflow?

Canadian exports make up less than 20 percent of GDP.

Suppose that the exchange rate is 50 Bangladesh taka per Canadian dollar, and that a bushel of rice costs 200 taka in Bangladesh and $3 in Canada. Which statement is consistent with these facts?

A country's exports are $500 billion, and imports are $700 billion. What is the country's trade balance?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations 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

What partly caused the increase in international trade in Canada since 1989?

If a country has business opportunities that become relatively attractive to other countries, what best predicts the effects of this change?

In Ireland, a pint of beer costs 4 Irish punts. In Australia, a pint of beer costs 6 Australian dollars. If the exchange rate is 0.8 punts per Australian dollar, what is the real exchange rate?

In 2009, approximately what was Canadian net capital outflow as a percent of GDP?

How do nominal exchange rates change over time?

If the exchange rate changes from 0.35 ? HYPERLINK "http://en.wikipedia.org/wiki/Saudi_riyal" ?Saudi riyal? per dollar to 0.30 ? HYPERLINK "http://en.wikipedia.org/wiki/Saudi_riyal" ?Saudi riyal? per dollar, what has happened to the dollar?

The country of Sylvania has a GDP of $4000, investment of $1500, government purchases of $400, and net capital outflow of negative $300. What is consumption?

Suppose a lobster supper in Nova Scotia costs fewer dollars than a lobster supper in Moscow. Explain why this is inconsistent with purchasing-power parity and explain why the inconsistency may exist.

-Refer to the Table 12-1. What country's good are less expensive than Canadian goods?

Which statement best defines net capital outflow?

In which situation must domestic saving equal investment?

In 2006, Canada had positive net exports. What does this fact imply?

How does international trade affect the standard of living?

List the factors that might influence a country's exports, imports, and trade balance.

If a country sells more goods and services abroad than it purchases abroad, it has positive net exports and a trade surplus.

A country has $120 million of net exports and $150 million of saving. What is net capital outflow?

Canadian exports make up less than 20 percent of GDP.

Suppose that the exchange rate is 50 Bangladesh taka per Canadian dollar, and that a bushel of rice costs 200 taka in Bangladesh and $3 in Canada. Which statement is consistent with these facts?

A country's exports are $500 billion, and imports are $700 billion. What is the country's trade balance?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations 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