Question 1

Which of the following equations is correct?

Accepted Answer

A) Y = C + I + G + NCO 
B) NX = NCO 
C) NCO = S - I 
D) All of the above are correct. 
A) Y = C + I + G + NCO 
B) NX = NCO 
C) NCO = S - I 
D) All of the above are correct.

Question 2

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 3

If you go to the bank and notice that a dollar buys more Mexican pesos than it used to,then the dollar has

Accepted Answer

A) appreciated.Other things the same, the appreciation would make you less likely to travel to Mexico. 
B) appreciated.Other things the same, the appreciation would make you more likely to travel to Mexico. 
C) depreciated.Other things the same, the depreciation would make you less likely to travel to Mexico. 
D) depreciated.Other things the same, the depreciation would make you more likely to travel to Mexico. 
A) appreciated.Other things the same, the appreciation would make you less likely to travel to Mexico. 
B) appreciated.Other things the same, the appreciation would make you more likely to travel to Mexico. 
C) depreciated.Other things the same, the depreciation would make you less likely to travel to Mexico. 
D) depreciated.Other things the same, the depreciation would make you more likely to travel to Mexico.

Question 4

Catherine,a citizen of Spain,decides to purchase bonds issued by Chile instead of ones issued by the United States even though the Chilean bonds have a higher risk of default.An economic reason for her decision might be that

Accepted Answer

A) she dislikes U.S.foreign policy. 
B) the Chilean bonds pay a higher rate of interest. 
C) the U.S.government is more stable than the Chilean government. 
D) None of the above provide an economic reason for buying the riskier bond. 
A) she dislikes U.S.foreign policy. 
B) the Chilean bonds pay a higher rate of interest. 
C) the U.S.government is more stable than the Chilean government. 
D) None of the above provide an economic reason for buying the riskier bond.

Question 5

What is the logic behind the theory of purchasing-power parity?

Accepted Answer

The logic behind purchasing-power parity

Question 6

A country has a trade deficit.Its

Accepted Answer

A) net capital outflow must be positive, and saving is larger than investment. 
B) net capital outflow must be positive and saving is smaller than investment. 
C) net capital outflow must be negative and saving is larger than investment. 
D) net capital outflow must be negative and saving is smaller than investment. 
A) net capital outflow must be positive, and saving is larger than investment. 
B) net capital outflow must be positive and saving is smaller than investment. 
C) net capital outflow must be negative and saving is larger than investment. 
D) net capital outflow must be negative and saving is smaller than investment.

Question 7

Which of the following could be a consequence of a depreciation of the U.S.real exchange rate?

Accepted Answer

A) John, a French citizen, decides that Iowa pork has become too expensive and cancels his order. 
B) Nick, a U.S.citizen, decides that the trip to Nepal he's been thinking about is now made affordable by the depreciation. 
C) Roberta, a U.S.citizen, decides to import fewer windshield wipers for her auto parts company. 
D) All of the above are correct. 
A) John, a French citizen, decides that Iowa pork has become too expensive and cancels his order. 
B) Nick, a U.S.citizen, decides that the trip to Nepal he's been thinking about is now made affordable by the depreciation. 
C) Roberta, a U.S.citizen, decides to import fewer windshield wipers for her auto parts company. 
D) All of the above are correct.

Question 8

Suppose a Starbucks tall-latte cost $4.00 in the United States and 3.20 euros in the Euro area.Suppose a McDonald's Big Mac costs $3.50 in the United States and 2.45 euros in Euro area.If the nominal exchange rate is .80 euros per dollar,which goods have prices that are consistent with purchasing power parity?

Accepted Answer

A) Both the tall-latte and the Big Mac. 
B) Neither the tall-latte nor the Big Mac. 
C) The tall-latte but not the Big Mac. 
D) The Big Mac but not the tall-latte. 
A) Both the tall-latte and the Big Mac. 
B) Neither the tall-latte nor the Big Mac. 
C) The tall-latte but not the Big Mac. 
D) The Big Mac but not the tall-latte.

Question 9

Which of the following is an example of U.S.foreign portfolio investment?

Accepted Answer

A) Albert, a German citizen, buys stock in a U.S.computer company. 
B) Larry, a citizen of Ireland, opens a fish and chips restaurant in the United States. 
C) Ruth, a U.S.citizen, buys bonds issued by a German corporation. 
D) Dustin, a U.S.citizen, opens a country-western tavern in New Zealand. 
A) Albert, a German citizen, buys stock in a U.S.computer company. 
B) Larry, a citizen of Ireland, opens a fish and chips restaurant in the United States. 
C) Ruth, a U.S.citizen, buys bonds issued by a German corporation. 
D) Dustin, a U.S.citizen, opens a country-western tavern in New Zealand.

Question 10

After 1980 in the United States,

Accepted Answer

A) national saving fell below investment and net capital outflow was a large positive number. 
B) national saving fell below investment and net capital outflow was a large negative number. 
C) investment fell below saving and net capital outflow was a large positive number. 
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) national saving fell below investment and net capital outflow was a large negative number. 
C) investment fell below saving and net capital outflow was a large positive number. 
D) investment fell below saving, so net capital outflow was a large negative number.

Question 11

A country's trade balance

Accepted Answer

A) must be zero. 
B) must be greater than zero. 
C) is greater than zero only if exports are greater than imports. 
D) is greater than zero only if imports are greater than exports. 
A) must be zero. 
B) must be greater than zero. 
C) is greater than zero only if exports are greater than imports. 
D) is greater than zero only if imports are greater than exports.

Question 12

An open economy's GDP is always given by

Accepted Answer

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

Question 13

Suppose a bottle of wine costs 25 euros in France and 20 dollars in the United States.If the exchange rate is 1.25 euros per dollar,what is the real exchange rate?

Accepted Answer

The real exchange rate = nomin

Question 14

Net capital outflow refers to the purchase of

Accepted Answer

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

Question 15

If purchasing-power parity holds,a dollar will buy

Accepted Answer

A) more goods in foreign countries than in the United States. 
B) as many goods in foreign countries as it does in the United States. 
C) fewer goods in foreign countries than it does in the United States. 
D) None of the above is implied by purchasing-power parity. 
A) more goods in foreign countries than in the United States. 
B) as many goods in foreign countries as it does in the United States. 
C) fewer goods in foreign countries than it does in the United States. 
D) None of the above is implied by purchasing-power parity.

Question 16

International trade

Accepted Answer

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

Question 17

The country of Freedonia has a GDP of $2,100,consumption of $1,200,and government purchases of $400.This implies that it has

Accepted Answer

A) domestic investment of $500. 
B) domestic investment plus net capital outflow of $500. 
C) domestic investment - net capital outflow of $500. 
D) None of the above is correct. 
A) domestic investment of $500. 
B) domestic investment plus net capital outflow of $500. 
C) domestic investment - net capital outflow of $500. 
D) None of the above is correct.

Question 18

Which of the following statements is incorrect for an open economy?

Accepted Answer

A) A country can have a trade deficit, trade surplus, or balanced trade. 
B) A country that has a trade deficit has positive net capital outflow. 
C) Net exports must equal net capital outflow. 
D) National saving must equal domestic investment plus net capital outflow. 
A) A country can have a trade deficit, trade surplus, or balanced trade. 
B) A country that has a trade deficit has positive net capital outflow. 
C) Net exports must equal net capital outflow. 
D) National saving must equal domestic investment plus net capital outflow.

Question 19

If U.S.imports total $100 billion and U.S.exports total $150 billion,which of the following is correct?

Accepted Answer

A) The U.S.has a trade surplus of $100 billion. 
B) The U.S.has a trade surplus of $50 billion. 
C) The U.S.has a trade deficit of $100 billion. 
D) The U.S.has a trade deficit of $50 billion. 
A) The U.S.has a trade surplus of $100 billion. 
B) The U.S.has a trade surplus of $50 billion. 
C) The U.S.has a trade deficit of $100 billion. 
D) The U.S.has a trade deficit of $50 billion.

Question 20

Which of the following is correct?

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

Exam 31: Open-Economy Macroeconomics: Basic Concepts

Which of the following equations is correct?

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

If you go to the bank and notice that a dollar buys more Mexican pesos than it used to,then the dollar has

Catherine,a citizen of Spain,decides to purchase bonds issued by Chile instead of ones issued by the United States even though the Chilean bonds have a higher risk of default.An economic reason for her decision might be that

What is the logic behind the theory of purchasing-power parity?

A country has a trade deficit.Its

Which of the following could be a consequence of a depreciation of the U.S.real exchange rate?

Which of the following is an example of U.S.foreign portfolio investment?

After 1980 in the United States,

A country's trade balance

An open economy's GDP is always given by

Suppose a bottle of wine costs 25 euros in France and 20 dollars in the United States.If the exchange rate is 1.25 euros per dollar,what is the real exchange rate?

Net capital outflow refers to the purchase of

If purchasing-power parity holds,a dollar will buy

International trade

The country of Freedonia has a GDP of $2,100,consumption of $1,200,and government purchases of $400.This implies that it has

Which of the following statements is incorrect for an open economy?

If U.S.imports total $100 billion and U.S.exports total $150 billion,which of the following is correct?

Which of the following is correct?

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

Filters