Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

This is possible for an open economy.The

Question 3

Which of the following events would be consistent with purchasing-power parity?

Accepted Answer

A) The price level in the United States rises more rapidly than that in Ireland and the real exchange rate defined as Irish goods per unit of U.S.goods stays the same. 
B) The money supply in the United States rises more rapidly than in Egypt and the nominal exchange rate defined as Egyptian pounds per dollar falls. 
C) Earl, a worldwide traveler, looks at exchange rates and worldwide breakfast prices one morning and finds that whatever country he decides to go to he can convert $5 into enough local currency to buy the same breakfast. 
D) All of the above are correct. 
A) The price level in the United States rises more rapidly than that in Ireland and the real exchange rate defined as Irish goods per unit of U.S.goods stays the same. 
B) The money supply in the United States rises more rapidly than in Egypt and the nominal exchange rate defined as Egyptian pounds per dollar falls. 
C) Earl, a worldwide traveler, looks at exchange rates and worldwide breakfast prices one morning and finds that whatever country he decides to go to he can convert $5 into enough local currency to buy the same breakfast. 
D) All of the above are correct.

Question 4

According to purchasing-power parity,if prices in the United States increase by a larger percentage than prices in Poland,then

Accepted Answer

A) the real exchange defined as Polish goods per unit of U.S.goods rises. 
B) the real exchange defined as Polish goods per unit of U.S.goods falls. 
C) the nominal exchange rate defined as Polish currency per dollar rises. 
D) the nominal exchange rate defined as Polish currency per dollar falls. 
A) the real exchange defined as Polish goods per unit of U.S.goods rises. 
B) the real exchange defined as Polish goods per unit of U.S.goods falls. 
C) the nominal exchange rate defined as Polish currency per dollar rises. 
D) the nominal exchange rate defined as Polish currency per dollar falls.

Question 5

In the United States,a cup of hot chocolate costs $5.In Australia,the same hot chocolate costs $6.5 Australian dollars.If the exchange rate is $1.3 Australian dollars per U.S.dollar,what is the real exchange rate?

Accepted Answer

A) 1/2 cup of Australian hot chocolate per cup of U.S.hot chocolate 
B) 1 cup of Australian hot chocolate per cup of U.S.hot chocolate 
C) 2 cups of Australian hot chocolate per cup of U.S.hot chocolate 
D) None of the above is correct. 
A) 1/2 cup of Australian hot chocolate per cup of U.S.hot chocolate 
B) 1 cup of Australian hot chocolate per cup of U.S.hot chocolate 
C) 2 cups of Australian hot chocolate per cup of U.S.hot chocolate 
D) None of the above is correct.

Question 6

A U.S.firm opens a factory that produces camping equipment in Estonia

Accepted Answer

A) This increases U.S.net capital outflow and decreases Estonian net capital outflow. 
B) This decreases U.S.net capital outflow and increases Estonian net capital outflow. 
C) This increases only U.S.net capital outflow. 
D) This increases only Estonian net capital outflow. 
A) This increases U.S.net capital outflow and decreases Estonian net capital outflow. 
B) This decreases U.S.net capital outflow and increases Estonian net capital outflow. 
C) This increases only U.S.net capital outflow. 
D) This increases only Estonian net capital outflow.

Question 7

When a country's central bank increases the money supply,its

Accepted Answer

A) price level rises and its currency appreciates relative to other currencies in the world. 
B) price level rises and its currency depreciates relative to other currencies in the world. 
C) price level falls and its currency appreciates relative to other currencies in the world. 
D) price level falls and its currency depreciates relative to other currencies in the world. 
A) price level rises and its currency appreciates relative to other currencies in the world. 
B) price level rises and its currency depreciates relative to other currencies in the world. 
C) price level falls and its currency appreciates relative to other currencies in the world. 
D) price level falls and its currency depreciates relative to other currencies in the world.

Question 8

Suppose that a lobster in Maine costs $10 and that the same type of lobster in Massachusetts costs $30.People could make a profit by

Accepted Answer

A) buying lobsters in Maine and selling them in Massachusetts.This action would increase the price of lobster in Massachusetts. 
B) buying lobsters in Maine and selling them in Massachusetts.This action would decrease the price of lobster in Massachusetts. 
C) buying lobsters in Massachusetts and selling them in Maine.This action would increase the price of lobster in Massachusetts. 
D) buying lobsters in Massachusetts and selling them in Maine.This action would decrease the price of lobster in Massachusetts. 
A) buying lobsters in Maine and selling them in Massachusetts.This action would increase the price of lobster in Massachusetts. 
B) buying lobsters in Maine and selling them in Massachusetts.This action would decrease the price of lobster in Massachusetts. 
C) buying lobsters in Massachusetts and selling them in Maine.This action would increase the price of lobster in Massachusetts. 
D) buying lobsters in Massachusetts and selling them in Maine.This action would decrease the price of lobster in Massachusetts.

Question 9

Over the last 50 years or so,U.S.exports as a percentage of GDP have approximately

Accepted Answer

A) stayed constant. 
B) doubled. 
C) tripled. 
D) quadrupled. 
A) stayed constant. 
B) doubled. 
C) tripled. 
D) quadrupled.

Question 10

Net capital outflow equals the difference between a country's

Accepted Answer

A) income and expenditure. 
B) investment and saving. 
C) buying of foreign goods and services and sales of goods and services abroad. 
D) purchases of foreign assets and sales of domestic assets abroad. 
A) income and expenditure. 
B) investment and saving. 
C) buying of foreign goods and services and sales of goods and services abroad. 
D) purchases of foreign assets and sales of domestic assets abroad.

Question 11

Which of the following equations is correct?

Accepted Answer

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

Question 12

A U.S.based company sells semiconductors to an Italian firm.The U.S.company uses all of the revenues from this sale to purchase automobiles from Italian firms.These transactions

Accepted Answer

A) increase both U.S.net exports and U.S.net capital outflow. 
B) decrease both U.S.net exports and U.S.net capital outflow. 
C) increase U.S.net exports and do not affect U.S.net capital outflow. 
D) None of the above is correct. 
A) increase both U.S.net exports and U.S.net capital outflow. 
B) decrease both U.S.net exports and U.S.net capital outflow. 
C) increase U.S.net exports and do not affect U.S.net capital outflow. 
D) None of the above is correct.

Question 13

Suppose the Canadian nominal exchange rate does not change,but prices rise faster in Canada than in all other countries.Based on this information,the Canadian real exchange rate

Accepted Answer

A) does not change. 
B) rises. 
C) declines. 
D) There is not enough information to answer the question 
A) does not change. 
B) rises. 
C) declines. 
D) There is not enough information to answer the question

Question 14

Net capital outflow

Accepted Answer

A) is always greater than net exports. 
B) is always less than net exports. 
C) is always equal to net exports. 
D) could be any of the above. 
A) is always greater than net exports. 
B) is always less than net exports. 
C) is always equal to net exports. 
D) could be any of the above.

Question 15

Most of the change from 2000 to 2004 in U.S.net capital outflow as a percent of GDP was due to a(n)

Accepted Answer

A) decrease in U.S.investment. 
B) decrease in U.S.national saving. 
C) increase in U.S.investment. 
D) increase in U.S.national saving. 
A) decrease in U.S.investment. 
B) decrease in U.S.national saving. 
C) increase in U.S.investment. 
D) increase in U.S.national saving.

Question 16

From 1980 to 1987

Accepted Answer

A) foreigners were buying more capital assets from the United States than Americans were buying abroad.The United States was going into debt. 
B) Americans were buying more capital assets abroad than foreigners were buying from the United States.The United States was going into debt. 
C) foreigners were buying more capital assets from the United States than Americans were buying abroad.The United States was moving into surplus. 
D) Americans were buying more capital assets abroad than foreigners were buying from the United States.The United States was moving into surplus. 
A) foreigners were buying more capital assets from the United States than Americans were buying abroad.The United States was going into debt. 
B) Americans were buying more capital assets abroad than foreigners were buying from the United States.The United States was going into debt. 
C) foreigners were buying more capital assets from the United States than Americans were buying abroad.The United States was moving into surplus. 
D) Americans were buying more capital assets abroad than foreigners were buying from the United States.The United States was moving into surplus.

Question 17

For an economy as a whole,net exports must equal minus one times net capital outflow.

Accepted Answer

A) True 
 B)False

Question 18

In an open economy,U.S.national savings can be less than U.S.investment.

Accepted Answer

A) True 
 B)False

Question 19

Oceania buys $40 of wine from Escudia and Escudia buys $100 of wool from Oceania.Supposing this is the only trade that these countries do.What are the net exports of Oceania and Escudia in that order?

Accepted Answer

A) $140 and $140 
B) $100 and $40 
C) $60 and -$60 
D) None of the above is correct. 
A) $140 and $140 
B) $100 and $40 
C) $60 and -$60 
D) None of the above is correct.

Question 20

Imagine that a bushel of wheat costs $3.20 in the United States and costs 20 pesos in Mexico.If the nominal exchange rate is 10 pesos per dollar,the real exchange rate is

Accepted Answer

A) 1.60 
B) 1.25 
C) .625 
D) None of the above is correct. 
A) 1.60 
B) 1.25 
C) .625 
D) None of the above is correct.

Exam 31: Open-Economy Macroeconomics: Basic Concepts

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

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

Which of the following events would be consistent with purchasing-power parity?

According to purchasing-power parity,if prices in the United States increase by a larger percentage than prices in Poland,then

In the United States,a cup of hot chocolate costs $5.In Australia,the same hot chocolate costs $6.5 Australian dollars.If the exchange rate is $1.3 Australian dollars per U.S.dollar,what is the real exchange rate?

A U.S.firm opens a factory that produces camping equipment in Estonia

When a country's central bank increases the money supply,its

Suppose that a lobster in Maine costs $10 and that the same type of lobster in Massachusetts costs $30.People could make a profit by

Over the last 50 years or so,U.S.exports as a percentage of GDP have approximately

Net capital outflow equals the difference between a country's

Which of the following equations is correct?

A U.S.based company sells semiconductors to an Italian firm.The U.S.company uses all of the revenues from this sale to purchase automobiles from Italian firms.These transactions

Suppose the Canadian nominal exchange rate does not change,but prices rise faster in Canada than in all other countries.Based on this information,the Canadian real exchange rate

Net capital outflow

Most of the change from 2000 to 2004 in U.S.net capital outflow as a percent of GDP was due to a(n)

From 1980 to 1987

For an economy as a whole,net exports must equal minus one times net capital outflow.

In an open economy,U.S.national savings can be less than U.S.investment.

Oceania buys $40 of wine from Escudia and Escudia buys $100 of wool from Oceania.Supposing this is the only trade that these countries do.What are the net exports of Oceania and Escudia in that order?

Imagine that a bushel of wheat costs $3.20 in the United States and costs 20 pesos in Mexico.If the nominal exchange rate is 10 pesos per dollar,the real exchange rate is

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

Supply, demand, and Government Policies

Consumers, producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short Run Trade Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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