Question 1

What does purchasing-power parity imply?

Accepted Answer

A)  that real incomes should be the same in all countries 
B)  that the nominal exchange rates should be equal to 1 for all currencies 
C)  that the price of a standard hamburger should be the same everywhere 
D)  that the rent for an apartment should be the same everywhere 
A)  that real incomes should be the same in all countries 
B)  that the nominal exchange rates should be equal to 1 for all currencies 
C)  that the price of a standard hamburger should be the same everywhere 
D)  that the rent for an apartment should be the same everywhere

Question 2

What would a depreciation 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 3

How did the real interest rates paid on long-term government debt in Canada and the United States compare with each other over the period from 1984 to 2015?

Accepted Answer

A)  The average real interest rate was 3.4 percent in Canada and 4.4 percent in the United States. 
B)  The average real interest rate was 3.7 percent in Canada and 3.0 percent in the United States. 
C)  The average real interest rate was 5.7 percent in Canada and 6.7 percent in the United States. 
D)  The average real interest rate was 6.7 percent in Canada and 5.7 percent in the United States. 
A)  The average real interest rate was 3.4 percent in Canada and 4.4 percent in the United States. 
B)  The average real interest rate was 3.7 percent in Canada and 3.0 percent in the United States. 
C)  The average real interest rate was 5.7 percent in Canada and 6.7 percent in the United States. 
D)  The average real interest rate was 6.7 percent in Canada and 5.7 percent in the United States.

Question 4

Over the past 50 years, what 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 a country has $120 billion of national saving and $80 billion of domestic investment. Is this possible? Where did the other $40 billion of national saving go?

Accepted Answer

This is possible for an open economy. Th

Question 6

-Refer to the Table 12-1. What currency(ies) is(are) more valuable than predicted by the doctrine of purchasing-power parity?

Accepted Answer

A)  the boliviano and dinar 
B)  the yen, kroner, and baht 
C)  the yen and dinar 
D)  the baht 
A)  the boliviano and dinar 
B)  the yen, kroner, and baht 
C)  the yen and dinar 
D)  the baht

Question 7

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

Question 8

Which of the following shows that any trade transaction must have a financial counterpart?

Accepted Answer

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

Question 9

Martin, a Canadian citizen, uses some previously obtained ? HYPERLINK "http://en.wikipedia.org/wiki/Lithuanian_litas" ?Lithuanian? currency (litas) to purchase a bond issued by a ? HYPERLINK "http://en.wikipedia.org/wiki/Lithuanian_litas" ?Lithuanian? company. How does this transaction affect Canadian net capital outflow?

Accepted Answer

A)  It increases Canadian net capital outflow by more than the value of the bond. 
B)  It increases Canadian net capital outflow by the value of the bond. 
C)  It does not change Canadian net capital outflow. 
D)  It decreases Canadian net capital outflow. 
A)  It increases Canadian net capital outflow by more than the value of the bond. 
B)  It increases Canadian net capital outflow by the value of the bond. 
C)  It does not change Canadian net capital outflow. 
D)  It decreases Canadian net capital outflow.

Question 10

Assume the exchange rate is about 153 Kazakhstan tenge per dollar. According to purchasing-power parity, when would this exchange rate rise?

Accepted Answer

A)  if the price level in either Canada or Kazakhstan rose 
B)  if the price level in either Canada or Kazakhstan fell 
C)  if the price level in Canada rose or the price level in Kazakhstan fell 
D)  if the price level in Canada fell or the price level in Kazakhstan rose 
A)  if the price level in either Canada or Kazakhstan rose 
B)  if the price level in either Canada or Kazakhstan fell 
C)  if the price level in Canada rose or the price level in Kazakhstan fell 
D)  if the price level in Canada fell or the price level in Kazakhstan rose

Question 11

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

Accepted Answer

Purchasing-power parity works well in he

Question 12

Which statement 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 13

Jill, a Canadian citizen, uses some previously obtained euros to purchase a bond issued by a French vineyard. How does this transaction affect Canadian net capital outflow?

Accepted Answer

A)  It increases Canadian net capital outflow by more than the value of the bond. 
B)  It increases Canadian net capital outflow by the value of the bond. 
C)  It does not change Canadian net capital outflow. 
D)  It decreases Canadian net capital outflow. 
A)  It increases Canadian net capital outflow by more than the value of the bond. 
B)  It increases Canadian net capital outflow by the value of the bond. 
C)  It does not change Canadian net capital outflow. 
D)  It decreases Canadian net capital outflow.

Question 14

What was an important change in the Canadian economy after 1999?

Accepted Answer

A)  National saving fell below investment, and net capital outflow was a large positive number. 
B)  Net capital outflow turned positive. 
C)  Investment equalled saving every year. 
D)  Investment fell below saving, so net capital outflow was a large negative number. 
A)  National saving fell below investment, and net capital outflow was a large positive number. 
B)  Net capital outflow turned positive. 
C)  Investment equalled saving every year. 
D)  Investment fell below saving, so net capital outflow was a large negative number.

Question 15

What is the formula for a closed economy's GDP?

Accepted Answer

A)  Y = C + I + G 
B)  Y = (C - T) + I + G 
C)  Y = C + I + G + S 
D)  Y = C + I + G + NX 
A)  Y = C + I + G 
B)  Y = (C - T) + I + G 
C)  Y = C + I + G + S 
D)  Y = C + I + G + NX

Question 16

As an open economy, Canadian national saving can be less than Canadian investment.

Accepted Answer

A) True 
 B)False

Question 17

Starting from a trade surplus, what 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 18

A Canadian firm buys couscous from Morocco and pays for it with Canadian dollars. What are the effects of this transaction?

Accepted Answer

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

Question 19

Exchange rates are 0.75 U.S. dollars per Canadian dollar, 170 yen per Canadian dollar, 0.8 euro per Canadian dollar, and 20 pesos per Canadian dollar. A bottle of beer in New York costs 6 U.S. dollars, 1200 yen in Tokyo, 7 euros in Munich, and 100 pesos in Cancun. Where is the most expensive beer?

Accepted Answer

A)  Cancun 
B)  New York 
C)  Tokyo 
D)  Munich 
A)  Cancun 
B)  New York 
C)  Tokyo 
D)  Munich

Question 20

What equation is the GDP identity in an open economy?

Accepted Answer

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

What does purchasing-power parity imply?

What would a depreciation of the Canadian real exchange rate induce Canadian consumers to buy?

How did the real interest rates paid on long-term government debt in Canada and the United States compare with each other over the period from 1984 to 2015?

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

Suppose that a country has $120 billion of national saving and $80 billion of domestic investment. Is this possible? Where did the other $40 billion of national saving go?

-Refer to the Table 12-1. What currency(ies) is(are) more valuable than predicted by the doctrine of purchasing-power parity?

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

Which of the following shows that any trade transaction must have a financial counterpart?

Assume the exchange rate is about 153 Kazakhstan tenge per dollar. According to purchasing-power parity, when would this exchange rate rise?

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

Which statement best defines the nominal exchange rate?

Jill, a Canadian citizen, uses some previously obtained euros to purchase a bond issued by a French vineyard. How does this transaction affect Canadian net capital outflow?

What was an important change in the Canadian economy after 1999?

What is the formula for a closed economy's GDP?

As an open economy, Canadian national saving can be less than Canadian investment.

Starting from a trade surplus, what would create a trade deficit?

A Canadian firm buys couscous from Morocco and pays for it with Canadian dollars. What are the effects of this transaction?

Exchange rates are 0.75 U.S. dollars per Canadian dollar, 170 yen per Canadian dollar, 0.8 euro per Canadian dollar, and 20 pesos per Canadian dollar. A bottle of beer in New York costs 6 U.S. dollars, 1200 yen in Tokyo, 7 euros in Munich, and 100 pesos in Cancun. Where is the most expensive beer?

What equation is the GDP identity in an open economy?

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 does purchasing-power parity imply?

What would a depreciation of the Canadian real exchange rate induce Canadian consumers to buy?

How did the real interest rates paid on long-term government debt in Canada and the United States compare with each other over the period from 1984 to 2015?

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

Suppose that a country has $120 billion of national saving and $80 billion of domestic investment. Is this possible? Where did the other $40 billion of national saving go?

-Refer to the Table 12-1. What currency(ies) is(are) more valuable than predicted by the doctrine of purchasing-power parity?

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

Which of the following shows that any trade transaction must have a financial counterpart?

Assume the exchange rate is about 153 Kazakhstan tenge per dollar. According to purchasing-power parity, when would this exchange rate rise?

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

Which statement best defines the nominal exchange rate?

Jill, a Canadian citizen, uses some previously obtained euros to purchase a bond issued by a French vineyard. How does this transaction affect Canadian net capital outflow?

What was an important change in the Canadian economy after 1999?

What is the formula for a closed economy's GDP?

As an open economy, Canadian national saving can be less than Canadian investment.

Starting from a trade surplus, what would create a trade deficit?

A Canadian firm buys couscous from Morocco and pays for it with Canadian dollars. What are the effects of this transaction?

Exchange rates are 0.75 U.S. dollars per Canadian dollar, 170 yen per Canadian dollar, 0.8 euro per Canadian dollar, and 20 pesos per Canadian dollar. A bottle of beer in New York costs 6 U.S. dollars, 1200 yen in Tokyo, 7 euros in Munich, and 100 pesos in Cancun. Where is the most expensive beer?

What equation is the GDP identity in an open economy?

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