Exam 12: Open-Economy Macroeconomics: Basic Concepts

The nominal exchange rate is about 3 Aruban florins per dollar. If a basket of goods in Canada costs $40, how many florins must a basket of goods in Aruba cost for purchasing-power parity to hold?

Suppose that a kilogram can of coffee costs about $16 in Canada. Suppose the exchange rate is 0.7 euro per dollar and that a kilogram can of coffee in Belgium costs about 5.6 euros. What is the real exchange rate?

Suppose that the exchange rate is 10 Moroccan dirhams per Canadian dollar. Also suppose that you can buy a crate of oranges for 300 dirhams in the Moroccan capital of Rabat and can buy a similar crate of oranges in Ottawa for $35. Which statement is consistent with these facts?

Roger lives in Iceland and purchases a snowmobile manufactured in Canada. What is this purchase?

Net capital outflow is the purchase of domestic assets purchased by foreign residents minus the purchase of foreign assets by domestic residents.

Suppose the price level in Canada was P = 124 last year and it is up by 3 points this year. In the U.S., the price level was 112 last year and it is up by 2 points this year. The exchange rate was US$0.96 per C$1 last year. (For the following calculations, approximate all results to two decimals.) a. Calculate the inflation rates in Canada and the U.S.? b. Calculate the real exchange rate at the beginning of the period.? c. Calculate the nominal exchange rate at the end of the period, assuming that the real exchange rate has not changed.? d. Compare the rate of change in the exchange rate with the difference between the foreign and domestic inflation rates. Are they equal?

A country has $100 million of saving and domestic investment of $30 million. What are net exports?

A Japanese firm buys lumber from Canada and pays for it with yen. What are the effects of this transaction?

What kind of country would most likely have a "small open economy"?

What happened after the introduction of the euro as the common currency of many European countries?

Which of the following might part of Canadian savings be counted as?

Can purchasing-power parity be used to explain the fact that the Canadian dollar depreciated by more than 50 percent against the German mark from 1970 to 2001, but appreciated by more than 100 percent against the Italian lira during the same period? Defend your answer.

Hungary buys railroad engines from a Canadian firm and pays for them with forints (Hungarian currency). What happens to Canadian net exports and net foreign investment due to this transaction?

A Russian flour mill buys barley from Canada and pays for it with rubles. What are the effects of this transaction?

In every economy, national saving equals domestic investment plus net capital outflow.

Suppose the real exchange rate is 3/5 kilograms of Chilean beef per kilogram of Canadian beef, a kilogram of Canadian beef costs $3, and the nominal exchange rate is 500 Chilean pesos per dollar. What does Chilean beef cost?

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.

Between 1981 and 1988, what caused most of the change in Canadian net capital outflow as a percent of GDP?

Michel, a Canadian citizen living in Canada, buys $300 of cheese from France. Which statement best identifies the effects of this transaction?

Country A buys $250 of wine from country B, and B buys $130 of wool from A. Which of the following correctly indicates the two countries' net exports (in the order A, B)?