Question 1

If the exchange rate changes from 100 yen per dollar to 150 yen per dollar, what has happened to the dollar?

Accepted Answer

A) It has appreciated and so buys more Japanese goods. 
B) It has appreciated and so buys fewer Japanese goods. 
C) It has depreciated and so buys more Japanese goods. 
D) It has depreciated and so buys fewer Japanese goods. 
A) It has appreciated and so buys more Japanese goods. 
B) It has appreciated and so buys fewer Japanese goods. 
C) It has depreciated and so buys more Japanese goods. 
D) It has depreciated and so buys fewer Japanese goods.

Question 2

Consider this statement: "Canada is characterized by perfect capital mobility." Which of the following best explains what this statement means?

Accepted Answer

A) that Canadians do not have access to world capital markets 
B) that foreigners do not have full access to Canadian capital markets 
C) that Canadians have full access to world financial markets and foreigners have access to Canadian financial markets 
D) that physical capital can easily be freely transported across borders 
A) that Canadians do not have access to world capital markets 
B) that foreigners do not have full access to Canadian capital markets 
C) that Canadians have full access to world financial markets and foreigners have access to Canadian financial markets 
D) that physical capital can easily be freely transported across borders

Question 3

Which of the following equations 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

Question 4

If the nominal exchange rate e is foreign currency per dollar, the domestic price is P, and the foreign price is P*, which of the following is the definition of the real exchange rate?

Accepted Answer

A) e(P*/P) 
B) e(P/P*) 
C) e + P/P 
D) e - P/P* 
A) e(P*/P) 
B) e(P/P*) 
C) e + P/P 
D) e - P/P*

Question 5

Larry, a Canadian citizen, opens and operates a bookstore in Spain. This counts as which of the following?

Accepted Answer

A) investment for Larry and Canadian foreign direct investment 
B) investment for Larry and Canadian foreign portfolio investment 
C) Canadian foreign direct investment and Canadian domestic investment 
D) Canadian foreign portfolio investment and Canadian domestic investment 
A) investment for Larry and Canadian foreign direct investment 
B) investment for Larry and Canadian foreign portfolio investment 
C) Canadian foreign direct investment and Canadian domestic investment 
D) Canadian foreign portfolio investment and Canadian domestic investment

Question 6

If a Swiss watchmaker opens a factory in Canada, this is an example of which of the following?

Accepted Answer

A) Swiss exports 
B) Swiss imports 
C) Swiss foreign portfolio investment 
D) Swiss foreign direct investment 
A) Swiss exports 
B) Swiss imports 
C) Swiss foreign portfolio investment 
D) Swiss foreign direct investment

Question 7

In 2001, Cote d'Ivore had $3 billion of net exports and bought $1 billion of goods from foreign countries. What were Cote d'Ivore's changes in the components of net exports?

Accepted Answer

A) an increase of $4 billion in exports and $1 billion in imports 
B) an increase of $3 billion in imports and $2 billion in exports 
C) an increase of $2 billion in exports and $3 billion in imports 
D) an increase of $1 billion in imports and $4 billion in exports 
A) an increase of $4 billion in exports and $1 billion in imports 
B) an increase of $3 billion in imports and $2 billion in exports 
C) an increase of $2 billion in exports and $3 billion in imports 
D) an increase of $1 billion in imports and $4 billion in exports

Question 8

If a country has business opportunities that become relatively attractive to other countries, which of the following best predicts the effects of this change?

Accepted Answer

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

Question 9

A country has $80 million of saving and domestic investment of $30 million. What are net exports?

Accepted Answer

A) -$50 million 
B) $50 million 
C) $80 million 
D) $110 million 
A) -$50 million 
B) $50 million 
C) $80 million 
D) $110 million

Question 10

Suppose that the dollar buys less cotton in Canada than in Egypt. How could traders make a profit?

Accepted Answer

A) by buying cotton in Canada and selling it in Egypt, which would tend to raise the price of cotton in Canada 
B) by buying cotton in Canada and selling it in Egypt, which would tend to raise the price of cotton in Egypt 
C) by buying cotton in Egypt and selling it in Canada, which would tend to raise the price of cotton in Egypt 
D) by buying cotton in Egypt and selling it in Canada, which would tend to raise the price of cotton in Canada 
A) by buying cotton in Canada and selling it in Egypt, which would tend to raise the price of cotton in Canada 
B) by buying cotton in Canada and selling it in Egypt, which would tend to raise the price of cotton in Egypt 
C) by buying cotton in Egypt and selling it in Canada, which would tend to raise the price of cotton in Egypt 
D) by buying cotton in Egypt and selling it in Canada, which would tend to raise the price of cotton in Canada

Question 11

When the yen gets "stronger" relative to the dollar, what happens to the Canadian trade deficit with Japan?

Accepted Answer

A) The Canadian trade deficit with Japan will rise. 
B) The Canadian trade deficit with Japan will fall. 
C) The Canadian trade deficit with Japan will be unchanged. 
D) There is insufficient information to answer this question. 
A) The Canadian trade deficit with Japan will rise. 
B) The Canadian trade deficit with Japan will fall. 
C) The Canadian trade deficit with Japan will be unchanged. 
D) There is insufficient information to answer this question.

Question 12

Consider the following excerpt from the Big Mac Index table computed by The Economist magazine. The table shows prices of a Big Mac in local currencies and the current nominal exchange rate between the local currency and the U.S. dollar.
   
a.Compute the Big Mac prices in US dollars for each country.
b.Compute the PPP exchange rate.
c.Compute the over- or undervaluation of each country's currency with respect to the U.S. dollar. (A currency is considered to be overvalued if the nominal exchange rate is less than the PPP exchange rate. Overvaluation is the percentage difference between the nominal and the PPP exchange rate, computed using the following formula: [(PPP exchange rate - nominal exchange rate) / nominal exchange rate]*100.)

Accepted Answer

The answer of Consider the following excerpt from the Big...

Question 13

Between 1981 and 1988, which of the following happened to Canadian net capital outflow as a percent of GDP?

Accepted Answer

A) It became a larger, positive number. 
B) It became a smaller, positive number. 
C) It became a larger, negative number. 
D) It became a smaller, negative number. 
A) It became a larger, positive number. 
B) It became a smaller, positive number. 
C) It became a larger, negative number. 
D) It became a smaller, negative number.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is the most likely effect of an appreciation of the Canadian real exchange rate on the quantity of Alberta beef demanded by French citizens?

Accepted Answer

A) French citizens will buy less of Alberta beef. 
B) French citizens will buy more of Alberta beef. 
C) The quantity of Alberta beef demanded by French citizens will not change because the nominal exchange rate has not changed. 
D) The quantity of Alberta beef demanded by French citizens will not change because it is the French real interest rate that matters for French citizens. 
A) French citizens will buy less of Alberta beef. 
B) French citizens will buy more of Alberta beef. 
C) The quantity of Alberta beef demanded by French citizens will not change because the nominal exchange rate has not changed. 
D) The quantity of Alberta beef demanded by French citizens will not change because it is the French real interest rate that matters for French citizens.

Question 16

If the exchange rate is 10 pesos per U.S. dollar, it is also 0.10 U.S. dollars per peso.

Accepted Answer

A) True 
 B)False

Question 17

Suppose that a kilogram can of coffee costs about $6 in Canada. Suppose the exchange rate is about 0.7 euro per dollar and that a kilogram can of coffee in Belgium costs about 2.1 euros. What is the real exchange rate?

Accepted Answer

A) 2.45 cans of Belgian coffee per can of Canadian coffee 
B) 3/4 cans of Belgian coffee per can of Canadian coffee 
C) 3/5 cans of Belgian coffee per can of Canadian coffee 
D) 2 cans of Belgian coffee per can of Canadian coffee 
A) 2.45 cans of Belgian coffee per can of Canadian coffee 
B) 3/4 cans of Belgian coffee per can of Canadian coffee 
C) 3/5 cans of Belgian coffee per can of Canadian coffee 
D) 2 cans of Belgian coffee per can of Canadian coffee

Question 18

Which of the following is the formula for saving in an open economy?

Accepted Answer

A) Saving = Foreign saving + Net capital outflow 
B) Saving = Domestic investment - Net capital outflow 
C) Saving = Domestic saving + Net capital outflow 
D) Saving = Domestic investment + Net capital outflow 
A) Saving = Foreign saving + Net capital outflow 
B) Saving = Domestic investment - Net capital outflow 
C) Saving = Domestic saving + Net capital outflow 
D) Saving = Domestic investment + Net capital outflow

Question 19

How can one derive the identity that saving equals the sum of domestic investment and net capital outflow from the national income accounting identity?

Accepted Answer

Start from the national income accountin

Question 20

Since 1999, which of the following caused most of the change of Canadian net capital outflow as a percent of GDP?

Accepted Answer

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

If the exchange rate changes from 100 yen per dollar to 150 yen per dollar, what has happened to the dollar?

Consider this statement: "Canada is characterized by perfect capital mobility." Which of the following best explains what this statement means?

Which of the following equations is the GDP identity in an open economy?

If the nominal exchange rate e is foreign currency per dollar, the domestic price is P, and the foreign price is P*, which of the following is the definition of the real exchange rate?

Larry, a Canadian citizen, opens and operates a bookstore in Spain. This counts as which of the following?

If a Swiss watchmaker opens a factory in Canada, this is an example of which of the following?

In 2001, Cote d'Ivore had $3 billion of net exports and bought $1 billion of goods from foreign countries. What were Cote d'Ivore's changes in the components of net exports?

If a country has business opportunities that become relatively attractive to other countries, which of the following best predicts the effects of this change?

A country has $80 million of saving and domestic investment of $30 million. What are net exports?

Suppose that the dollar buys less cotton in Canada than in Egypt. How could traders make a profit?

When the yen gets "stronger" relative to the dollar, what happens to the Canadian trade deficit with Japan?

Between 1981 and 1988, which of the following happened to Canadian net capital outflow as a percent of GDP?

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

Which of the following is the most likely effect of an appreciation of the Canadian real exchange rate on the quantity of Alberta beef demanded by French citizens?

If the exchange rate is 10 pesos per U.S. dollar, it is also 0.10 U.S. dollars per peso.

Suppose that a kilogram can of coffee costs about $6 in Canada. Suppose the exchange rate is about 0.7 euro per dollar and that a kilogram can of coffee in Belgium costs about 2.1 euros. What is the real exchange rate?

Which of the following is the formula for saving in an open economy?

How can one derive the identity that saving equals the sum of domestic investment and net capital outflow from the national income accounting identity?

Since 1999, which of the following caused most of the change of Canadian net capital outflow as a percent of GDP?

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 changes from 100 yen per dollar to 150 yen per dollar, what has happened to the dollar?

Consider this statement: "Canada is characterized by perfect capital mobility." Which of the following best explains what this statement means?

Which of the following equations is the GDP identity in an open economy?

If the nominal exchange rate e is foreign currency per dollar, the domestic price is P, and the foreign price is P*, which of the following is the definition of the real exchange rate?

Larry, a Canadian citizen, opens and operates a bookstore in Spain. This counts as which of the following?

If a Swiss watchmaker opens a factory in Canada, this is an example of which of the following?

In 2001, Cote d'Ivore had $3 billion of net exports and bought $1 billion of goods from foreign countries. What were Cote d'Ivore's changes in the components of net exports?

If a country has business opportunities that become relatively attractive to other countries, which of the following best predicts the effects of this change?

A country has $80 million of saving and domestic investment of $30 million. What are net exports?

Suppose that the dollar buys less cotton in Canada than in Egypt. How could traders make a profit?

When the yen gets "stronger" relative to the dollar, what happens to the Canadian trade deficit with Japan?

Between 1981 and 1988, which of the following happened to Canadian net capital outflow as a percent of GDP?

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

Which of the following is the most likely effect of an appreciation of the Canadian real exchange rate on the quantity of Alberta beef demanded by French citizens?

If the exchange rate is 10 pesos per U.S. dollar, it is also 0.10 U.S. dollars per peso.

Suppose that a kilogram can of coffee costs about $6 in Canada. Suppose the exchange rate is about 0.7 euro per dollar and that a kilogram can of coffee in Belgium costs about 2.1 euros. What is the real exchange rate?

Which of the following is the formula for saving in an open economy?

How can one derive the identity that saving equals the sum of domestic investment and net capital outflow from the national income accounting identity?

Since 1999, which of the following caused most of the change of Canadian net capital outflow as a percent of GDP?

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

Filters