Question 1

If the exchange rate is 175 yen = $1, what is the cost of a bottle of rice wine that costs 5250 yen?

Accepted Answer

A) $28 
B) $30 
C) $32 
D) $34 
A) $28 
B) $30 
C) $32 
D) $34 B

Question 2

Catherine, a citizen of Spain, decides to purchase bonds issued by Chile instead of Canadian bonds, even though the Chilean bonds have a higher risk of default. Which of the following might be an economic reason for her decision?

Accepted Answer

A) Chile has a lower inflation rate. 
B) The Chilean bonds pay a higher rate of interest. 
C) The Canadian government is more stable than the Chilean government. 
D) Chilean bonds have shorter maturity periods than Canadian bonds. 
A) Chile has a lower inflation rate. 
B) The Chilean bonds pay a higher rate of interest. 
C) The Canadian government is more stable than the Chilean government. 
D) Chilean bonds have shorter maturity periods than Canadian bonds. B

Question 3

Which of the following would an appreciation of the Canadian real exchange rate induce Canadian consumers to buy?

Accepted Answer

A) fewer domestic goods and fewer foreign goods 
B) more domestic goods and fewer foreign goods 
C) fewer domestic goods and more foreign goods 
D) more domestic goods and more foreign goods 
A) fewer domestic goods and fewer foreign goods 
B) more domestic goods and fewer foreign goods 
C) fewer domestic goods and more foreign goods 
D) more domestic goods and more foreign goods C

Question 4

Which of the following best defines the current account balance?

Accepted Answer

A) net exports 
B) net exports - net inflow of dividends and interest payments 
C) net exports + net inflow of dividends and interest payments 
D) net inflow of dividends and interest payments - net exports 
A) net exports 
B) net exports - net inflow of dividends and interest payments 
C) net exports + net inflow of dividends and interest payments 
D) net inflow of dividends and interest payments - net exports

Question 5

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

Accepted Answer

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

Question 6

Which of the following best describes the net flow of dividends and interest payments?

Accepted Answer

A) part of the current account balance 
B) part of net capital outflow 
C) part of net exports 
D) part of foreign direct investment 
A) part of the current account balance 
B) part of net capital outflow 
C) part of net exports 
D) part of foreign direct investment

Question 7

The country of Sylvania has a GDP of $4000, investment of $500, government purchases of $400, and net capital outflow of negative $300. What is consumption?

Accepted Answer

A) $600 
B) $700 
C) $3400 
D) $3700 
A) $600 
B) $700 
C) $3400 
D) $3700

Question 8

Suppose that the exchange rate is 50 Bangladesh taka per dollar, and that a bushel of rice costs 200 taka in Bangladesh and $3 in Canada. Which of the following is consistent with these facts?

Accepted Answer

A) The real exchange rate is greater than one, and arbitrageurs could profit by buying rice in Canada and selling it in Bangladesh. 
B) The real exchange rate is greater than one, and arbitrageurs could profit by buying rice in Bangladesh and selling it in Canada. 
C) The real exchange rate is less than one, and arbitrageurs could profit by buying rice in Canada and selling it in Bangladesh. 
D) The real exchange rate is less than one, and arbitrageurs could profit by buying rice in Bangladesh and selling it in Canada. 
A) The real exchange rate is greater than one, and arbitrageurs could profit by buying rice in Canada and selling it in Bangladesh. 
B) The real exchange rate is greater than one, and arbitrageurs could profit by buying rice in Bangladesh and selling it in Canada. 
C) The real exchange rate is less than one, and arbitrageurs could profit by buying rice in Canada and selling it in Bangladesh. 
D) The real exchange rate is less than one, and arbitrageurs could profit by buying rice in Bangladesh and selling it in Canada.

Question 9

Mike, a Canadian citizen living in Canada, buys $30 of cheese from France. Which of the following correctly identifies the effects of this transaction?

Accepted Answer

A) It increases Canadian imports by $30 and increases Canadian net exports by $30. 
B) It increases Canadian imports by $30 and decreases Canadian net exports by $30. 
C) It increases Canadian exports by $30 and increases Canadian net exports by $30. 
D) It increases Canadian exports by $30 and decreases Canadian net exports by $30. 
A) It increases Canadian imports by $30 and increases Canadian net exports by $30. 
B) It increases Canadian imports by $30 and decreases Canadian net exports by $30. 
C) It increases Canadian exports by $30 and increases Canadian net exports by $30. 
D) It increases Canadian exports by $30 and decreases Canadian net exports by $30.

Question 10

If the Canadian real exchange rate appreciates relative to the euro, which of the following best describes the consequences?

Accepted Answer

A) Canadian exports to Europe and European exports to Canada both rise. 
B) Canadian exports to Europe and European exports to Canada both fall. 
C) Canadian exports to Europe rise, and European exports to Canada fall. 
D) Canadian exports to Europe fall, and European exports to Canada rise. 
A) Canadian exports to Europe and European exports to Canada both rise. 
B) Canadian exports to Europe and European exports to Canada both fall. 
C) Canadian exports to Europe rise, and European exports to Canada fall. 
D) Canadian exports to Europe fall, and European exports to Canada rise.

Question 11

The country of Freedonia has a GDP of $4000, consumption of $1800, and government purchases of $500. Which of the following does this situation imply?

Accepted Answer

A) Investment is equal to -$1700. 
B) Investment plus net capital outflow is equal to $1700. 
C) Investment plus net exports is equal to $2300. 
D) Saving is equal to $2200. 
A) Investment is equal to -$1700. 
B) Investment plus net capital outflow is equal to $1700. 
C) Investment plus net exports is equal to $2300. 
D) Saving is equal to $2200.

Question 12

A country has $60 million of domestic investment and net capital outflow of $20 million. What is saving?

Accepted Answer

A) -$60 million 
B) -$40 million 
C) $40 million 
D) $60 million 
A) -$60 million 
B) -$40 million 
C) $40 million 
D) $60 million

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Which of the following refers to the theory that the real interest rate in Canada should equal that in the rest of the world?

Accepted Answer

A) the Fisher effect 
B) the theory of Ricardian equivalence 
C) the theory of purchasing power parity 
D) interest rate parity 
A) the Fisher effect 
B) the theory of Ricardian equivalence 
C) the theory of purchasing power parity 
D) interest rate parity

Question 15

Suppose that the real return from operating factories in Ghana rises relative to the real rate of return in Canada. Which of the following best describes the effects of this transaction?

Accepted Answer

A) This will increase Canadian net capital outflow and decrease Ghanian net capital outflow. 
B) This will decrease Canadian net capital outflow and increase Ghanian net capital outflow. 
C) This will only increase Canadian net capital outflow. 
D) This will only increase Ghanian net capital outflow. 
A) This will increase Canadian net capital outflow and decrease Ghanian net capital outflow. 
B) This will decrease Canadian net capital outflow and increase Ghanian net capital outflow. 
C) This will only increase Canadian net capital outflow. 
D) This will only increase Ghanian net capital outflow.

Question 16

Which of the following do net exports measure?

Accepted Answer

A) an imbalance between a country's income and expenditures 
B) an imbalance between a country's sale of goods and services abroad and purchase of foreign goods and services 
C) an imbalance between a country's sale of domestic assets abroad and purchase of foreign assets 
D) imports minus exports 
A) an imbalance between a country's income and expenditures 
B) an imbalance between a country's sale of goods and services abroad and purchase of foreign goods and services 
C) an imbalance between a country's sale of domestic assets abroad and purchase of foreign assets 
D) imports minus exports

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Over the past 50 years, which of the following 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 19

If a country sells more goods and services abroad than it purchases abroad, it has positive net exports and a trade surplus.

Accepted Answer

A) True 
 B)False

Question 20

When Canada imports more than it exports, it must also buy domestic assets from foreigners.

Accepted Answer

A) True 
 B)False

If the exchange rate is 175 yen = $1, what is the cost of a bottle of rice wine that costs 5250 yen?

Catherine, a citizen of Spain, decides to purchase bonds issued by Chile instead of Canadian bonds, even though the Chilean bonds have a higher risk of default. Which of the following might be an economic reason for her decision?

Which of the following would an appreciation of the Canadian real exchange rate induce Canadian consumers to buy?

Which of the following best defines the current account balance?

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

Which of the following best describes the net flow of dividends and interest payments?

The country of Sylvania has a GDP of $4000, investment of $500, government purchases of $400, and net capital outflow of negative $300. What is consumption?

Suppose that the exchange rate is 50 Bangladesh taka per dollar, and that a bushel of rice costs 200 taka in Bangladesh and $3 in Canada. Which of the following is consistent with these facts?

Mike, a Canadian citizen living in Canada, buys $30 of cheese from France. Which of the following correctly identifies the effects of this transaction?

If the Canadian real exchange rate appreciates relative to the euro, which of the following best describes the consequences?

The country of Freedonia has a GDP of $4000, consumption of $1800, and government purchases of $500. Which of the following does this situation imply?

A country has $60 million of domestic investment and net capital outflow of $20 million. What is saving?

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

Which of the following refers to the theory that the real interest rate in Canada should equal that in the rest of the world?

Suppose that the real return from operating factories in Ghana rises relative to the real rate of return in Canada. Which of the following best describes the effects of this transaction?

Which of the following do net exports measure?

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

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

If a country sells more goods and services abroad than it purchases abroad, it has positive net exports and a trade surplus.

When Canada imports more than it exports, it must also buy domestic assets from foreigners.

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 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

If the exchange rate is 175 yen = $1, what is the cost of a bottle of rice wine that costs 5250 yen?

Catherine, a citizen of Spain, decides to purchase bonds issued by Chile instead of Canadian bonds, even though the Chilean bonds have a higher risk of default. Which of the following might be an economic reason for her decision?

Which of the following would an appreciation of the Canadian real exchange rate induce Canadian consumers to buy?

Which of the following best defines the current account balance?

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

Which of the following best describes the net flow of dividends and interest payments?

The country of Sylvania has a GDP of $4000, investment of $500, government purchases of $400, and net capital outflow of negative $300. What is consumption?

Suppose that the exchange rate is 50 Bangladesh taka per dollar, and that a bushel of rice costs 200 taka in Bangladesh and $3 in Canada. Which of the following is consistent with these facts?

Mike, a Canadian citizen living in Canada, buys $30 of cheese from France. Which of the following correctly identifies the effects of this transaction?

If the Canadian real exchange rate appreciates relative to the euro, which of the following best describes the consequences?

The country of Freedonia has a GDP of $4000, consumption of $1800, and government purchases of $500. Which of the following does this situation imply?

A country has $60 million of domestic investment and net capital outflow of $20 million. What is saving?

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

Which of the following refers to the theory that the real interest rate in Canada should equal that in the rest of the world?

Suppose that the real return from operating factories in Ghana rises relative to the real rate of return in Canada. Which of the following best describes the effects of this transaction?

Which of the following do net exports measure?

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

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

If a country sells more goods and services abroad than it purchases abroad, it has positive net exports and a trade surplus.

When Canada imports more than it exports, it must also buy domestic assets from foreigners.

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 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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