Question 1

Current trade between China and Egypt is such that

Accepted Answer

A)  China has placed high tariffs on the imports of Egyptian products. 
B)  China can easily purchase domestic Egyptian firms. 
C)  China has a low level of net foreign investment. 
D)  Egyptian imports from China greatly exceed exports to China. 
A)  China has placed high tariffs on the imports of Egyptian products. 
B)  China can easily purchase domestic Egyptian firms. 
C)  China has a low level of net foreign investment. 
D)  Egyptian imports from China greatly exceed exports to China. D

Question 2

Which of the following transactions would be included in Japan's current account?

Accepted Answer

A)  an American citizen purchases a new Toyota made in Japan 
B)  a Japanese citizen purchases 50 shares of Google stock 
C)  an American citizen purchases 50 shares of Toshiba stock 
D)  a Japanese citizen purchases a new Toyota made in Japan 
A)  an American citizen purchases a new Toyota made in Japan 
B)  a Japanese citizen purchases 50 shares of Google stock 
C)  an American citizen purchases 50 shares of Toshiba stock 
D)  a Japanese citizen purchases a new Toyota made in Japan A

Question 3

In theory, what should the rising U.S. current account deficit do the value of the dollar?

Accepted Answer

A)  It should decrease the supply of dollars and increase the foreign exchange rate of the dollar. 
B)  It should increase the supply of dollars, and decrease the foreign exchange rate of dollars. 
C)  It should decrease the supply of dollars and decrease the foreign exchange rate of the dollar. 
D)  If should increase the supply of dollars and increase the foreign exchange rate of dollars. 
A)  It should decrease the supply of dollars and increase the foreign exchange rate of the dollar. 
B)  It should increase the supply of dollars, and decrease the foreign exchange rate of dollars. 
C)  It should decrease the supply of dollars and decrease the foreign exchange rate of the dollar. 
D)  If should increase the supply of dollars and increase the foreign exchange rate of dollars. B

Question 4

Which of the following is not included in the financial account balance of Saudi Arabia?

Accepted Answer

A)  a purchase of General Electric stock by a Saudi firm in China 
B)  a purchase of German financial services by Riyadh bank 
C)  a purchase of a German car by a Saudi company. 
D)  a purchase of Toyota stock by Saudi Aramco 
E)  a purchase of a Saudi petrochemical plant by Japanese investors. 
A)  a purchase of General Electric stock by a Saudi firm in China 
B)  a purchase of German financial services by Riyadh bank 
C)  a purchase of a German car by a Saudi company. 
D)  a purchase of Toyota stock by Saudi Aramco 
E)  a purchase of a Saudi petrochemical plant by Japanese investors.

Question 5

Why has the large U.S. current account persisted?

Accepted Answer

A)  The supply of dollars on the foreign exchange market has fallen. 
B)  The foreign exchange value of the dollar has not decreased. 
C)  Foreign investors are reluctant to invest in U.S. real and financial assets. 
D)  Foreign investors have refused to hold large quantities of dollars. 
A)  The supply of dollars on the foreign exchange market has fallen. 
B)  The foreign exchange value of the dollar has not decreased. 
C)  Foreign investors are reluctant to invest in U.S. real and financial assets. 
D)  Foreign investors have refused to hold large quantities of dollars.

Question 6

Why is the multiplier for contractionary fiscal policy smaller in an open economy?

Accepted Answer

A)  Contractionary fiscal policy reduces the deficit, which reduces the interest rate, which reduces the foreign exchange value of the dollar, which decreases net exports. 
B)  Contractionary fiscal policy reduces the deficit, which raises the interest rate, which raises the foreign exchange value of the dollar, which increases net exports. 
C)  Contractionary fiscal policy increases the deficit, which raises the interest rate, which reduces the foreign exchange value of the dollar, which increases net exports. 
D)  Contractionary fiscal policy reduces the deficit, which reduces the interest rate, which reduces the foreign exchange value of the dollar, which increases net exports. 
A)  Contractionary fiscal policy reduces the deficit, which reduces the interest rate, which reduces the foreign exchange value of the dollar, which decreases net exports. 
B)  Contractionary fiscal policy reduces the deficit, which raises the interest rate, which raises the foreign exchange value of the dollar, which increases net exports. 
C)  Contractionary fiscal policy increases the deficit, which raises the interest rate, which reduces the foreign exchange value of the dollar, which increases net exports. 
D)  Contractionary fiscal policy reduces the deficit, which reduces the interest rate, which reduces the foreign exchange value of the dollar, which increases net exports.

Question 7

If the Oman is a "net borrower" from abroad,

Accepted Answer

A)  net capital flows must be negative. 
B)  net foreign investment must be positive. 
C)  the Oman must be exporting more than it is importing. 
D)  domestic saving is less than domestic investment. 
A)  net capital flows must be negative. 
B)  net foreign investment must be positive. 
C)  the Oman must be exporting more than it is importing. 
D)  domestic saving is less than domestic investment.

Question 8

If there is currently a surplus of dollars, which of the following would you expect to see in the foreign exchange market?

Accepted Answer

A)  There will be a decrease in the demand for dollars. 
B)  The dollar will depreciate. 
C)  The dollar will appreciate. 
D)  There will be a decrease in the supply of dollars. 
A)  There will be a decrease in the demand for dollars. 
B)  The dollar will depreciate. 
C)  The dollar will appreciate. 
D)  There will be a decrease in the supply of dollars.

Question 9

If the U.S. Federal reserve bank is using policy to combat inflation, what is likely to happen in the foreign exchange market and to the foreign exchange value of the dollar?

Accepted Answer

A)  The demand for the dollar will increase and the foreign exchange value of the dollar will rise. 
B)  The demand for the dollar will decrease and the foreign exchange value of the dollar will rise. 
C)  The demand for the dollar will decrease and the foreign exchange value of the dollar will fall. 
D)  The demand for the dollar will increase and the foreign exchange value of the dollar will fall. 
A)  The demand for the dollar will increase and the foreign exchange value of the dollar will rise. 
B)  The demand for the dollar will decrease and the foreign exchange value of the dollar will rise. 
C)  The demand for the dollar will decrease and the foreign exchange value of the dollar will fall. 
D)  The demand for the dollar will increase and the foreign exchange value of the dollar will fall.

Question 10

China has large holdings of U.S. Treasury bonds. Suppose China decide to sell the majority of these bonds. If an American was thinking of refinancing their house, how would China's action affect their decision to refinance?

Accepted Answer

A)  The person would want to wait to refinance as interest rates should fall. 
B)  The person would want to wait to refinance as interest rates should rise. 
C)  China's actions should not affect the decision to refinance in any way. 
D)  The person would want to refinance as soon as possible as interest rates should fall. 
A)  The person would want to wait to refinance as interest rates should fall. 
B)  The person would want to wait to refinance as interest rates should rise. 
C)  China's actions should not affect the decision to refinance in any way. 
D)  The person would want to refinance as soon as possible as interest rates should fall.

Question 11

Hugo Chavez, Venezuela's president, proposed that the independence of the Venezuelan central bank be eliminated. Given the research on the relationship between central bank independence and inflation, we should expect this event to cause inflation to ________ and the real exchange rate to ________ between the two counties. (Assume the nominal exchange does not change, and that the United States is the domestic country).

Accepted Answer

A)  rise in Venezuela relative to the U.S.; fall 
B)  rise in Venezuela relative to the U.S.; rise 
C)  fall in Venezuela relative to the U.S.; rise 
D)  fall in Venezuela relative to the U.S.; fall 
A)  rise in Venezuela relative to the U.S.; fall 
B)  rise in Venezuela relative to the U.S.; rise 
C)  fall in Venezuela relative to the U.S.; rise 
D)  fall in Venezuela relative to the U.S.; fall

Question 12

Between early 2002 and summer 2008 the value of the dollar

Accepted Answer

A)  lost about 45 percent of its value against the euro. 
B)  increased about 50 percent against an average of other major currencies. 
C)  declined against other major currencies because of strong demand by foreign investors for U.S. stocks and bonds. 
D)  declined against some foreign currencies, rose against others and overall had about the same value against an average of other major currencies. 
A)  lost about 45 percent of its value against the euro. 
B)  increased about 50 percent against an average of other major currencies. 
C)  declined against other major currencies because of strong demand by foreign investors for U.S. stocks and bonds. 
D)  declined against some foreign currencies, rose against others and overall had about the same value against an average of other major currencies.

Question 13

Suppose the majority of the shares of the U.S. General Motors stock were sold to a Japanese firm. Assuming all else remains constant, this will

Accepted Answer

A)  decrease net portfolio investment in the U.S. 
B)  create a capital outflow. 
C)  increase the balance on the U.S. current account. 
D)  increase foreign direct investment in the U.S. 
E)  increase the balance of the financial account. 
A)  decrease net portfolio investment in the U.S. 
B)  create a capital outflow. 
C)  increase the balance on the U.S. current account. 
D)  increase foreign direct investment in the U.S. 
E)  increase the balance of the financial account.

Question 14

Which of the following would result in a trade surplus for Qatar?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 15

Why has the dollar remained strong and its value not decreased as much as economists expected given the current account deficit?

Accepted Answer

A)  Foreign investors continue to invest in U.S. financial assets, and this raises the demand for dollars. 
B)  Foreign investors have reduced the level of investment in U.S. financial assets, increasing the supply of dollars. 
C)  Foreign investors no longer want to hold dollars and this raises the demand for dollars. 
D)  The negative trade balance due to the current account deficit reduces the supply of dollars. 
A)  Foreign investors continue to invest in U.S. financial assets, and this raises the demand for dollars. 
B)  Foreign investors have reduced the level of investment in U.S. financial assets, increasing the supply of dollars. 
C)  Foreign investors no longer want to hold dollars and this raises the demand for dollars. 
D)  The negative trade balance due to the current account deficit reduces the supply of dollars.

Current trade between China and Egypt is such that

Which of the following transactions would be included in Japan's current account?

In theory, what should the rising U.S. current account deficit do the value of the dollar?

Which of the following is not included in the financial account balance of Saudi Arabia?

Why has the large U.S. current account persisted?

Why is the multiplier for contractionary fiscal policy smaller in an open economy?

If the Oman is a "net borrower" from abroad,

If there is currently a surplus of dollars, which of the following would you expect to see in the foreign exchange market?

If the U.S. Federal reserve bank is using policy to combat inflation, what is likely to happen in the foreign exchange market and to the foreign exchange value of the dollar?

China has large holdings of U.S. Treasury bonds. Suppose China decide to sell the majority of these bonds. If an American was thinking of refinancing their house, how would China's action affect their decision to refinance?

Between early 2002 and summer 2008 the value of the dollar

Suppose the majority of the shares of the U.S. General Motors stock were sold to a Japanese firm. Assuming all else remains constant, this will

Which of the following would result in a trade surplus for Qatar?

Why has the dollar remained strong and its value not decreased as much as economists expected given the current account deficit?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Elasticity: The Responsiveness of Demand and Supply

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: The Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

Externalities, Environmental Policy, and Public Goods

Comparative Advantage and the Gains From International Trade Macro

GDP: Measuring Total Production and Income

Economic Growth, the Financial System, and Business Cycles

Unemployment and Inflation

The Markets for Labor and Other Factors of Production

Output and Expenditure in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Central Bank

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Central Bank Policy

Filters

Exam 25: Macroeconomics in an Open Economy

Current trade between China and Egypt is such that

Which of the following transactions would be included in Japan's current account?

In theory, what should the rising U.S. current account deficit do the value of the dollar?

Which of the following is not included in the financial account balance of Saudi Arabia?

Why has the large U.S. current account persisted?

Why is the multiplier for contractionary fiscal policy smaller in an open economy?

If the Oman is a "net borrower" from abroad,

If there is currently a surplus of dollars, which of the following would you expect to see in the foreign exchange market?

If the U.S. Federal reserve bank is using policy to combat inflation, what is likely to happen in the foreign exchange market and to the foreign exchange value of the dollar?

China has large holdings of U.S. Treasury bonds. Suppose China decide to sell the majority of these bonds. If an American was thinking of refinancing their house, how would China's action affect their decision to refinance?

Between early 2002 and summer 2008 the value of the dollar

Suppose the majority of the shares of the U.S. General Motors stock were sold to a Japanese firm. Assuming all else remains constant, this will

Which of the following would result in a trade surplus for Qatar?

Why has the dollar remained strong and its value not decreased as much as economists expected given the current account deficit?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Elasticity: The Responsiveness of Demand and Supply

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: The Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

Externalities, Environmental Policy, and Public Goods

Comparative Advantage and the Gains From International Trade Macro

GDP: Measuring Total Production and Income

Economic Growth, the Financial System, and Business Cycles

Unemployment and Inflation

The Markets for Labor and Other Factors of Production

Output and Expenditure in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Central Bank

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Central Bank Policy

Filters