Exam 12: Open-Economy Macroeconomics: Basic Concepts

According to the theory of purchasing-power parity, the real exchange rate defined as foreign goods per unit of Canadian goods will equal the domestic price level divided by the foreign price level.

Suppose the nominal exchange rate between the yen and the U.S. dollar is 220 yen per U.S. dollar, and that the nominal exchange rate between the Canadian dollar and the U.S. dollar is 1.10 Canadian dollars per U.S. dollar. How many yen would it take to buy a Canadian dollar?

List the factors that might influence a country's exports, imports, and trade balance.

Which of the following terms refers to the process of taking advantage of different prices for a good in different markets?

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

What does purchasing-power parity imply about the real exchange rate?

A Canadian firm opens a factory that produces camping equipment in Albania. Which of the following correctly identifies the effects of this transaction?

According to purchasing-power parity theory, if a McDonald's Big Mac cost U.S. $2.50 in the United States and 10 Tunisian dinars, what should the exchange rate be?

Suppose that the real exchange rate between Canada and Kenya is defined in terms of baskets of goods. Which of the following will increase the real exchange rate (that is, increase the number of baskets of Kenyan goods a basket of Canadian goods buys)?

Which of the following does net capital outflow measure?

Suppose that the exchange rate is 10 Moroccan dirhams per Canadian dollar. Also suppose that you can buy a crate of oranges for 300 dirhams in the Moroccan capital of Rabat and can buy a similar crate of oranges in Ottawa for $35. Which of the following is consistent with these facts?

Suppose Bob, a Greek citizen, opens a restaurant in Vancouver. Which of the following correctly identifies the effects of this action?

A rational investor will always purchase the bond that pays the highest real interest rate.

Part of Canadian savings may be counted as which of the following?

In Canada, a cup of hot chocolate costs $6. In Australia, the same hot chocolate costs $6 Australian dollars. If the exchange rate is $3 Australian dollars per Canadian dollar, what is the real exchange rate?

Suppose that a Canadian dollar buys more gold in Australia than it buys in Burkina Faso. What does purchasing-power parity imply should happen?

If it took as many dollars to buy goods in Canada as it did to buy enough currency to buy the same goods in India, the real exchange rate would be computed as how many Indian goods per Canadian goods?

If a U.S. textbook publishing company sells texts to Canadian students, which of the following correctly identifies the effects of these sales?

If goods in Canada cost the same number of dollars as German goods cost in euros, the real exchange rate would be computed as how many German goods per Canadian goods?

Jill, a Canadian citizen, uses some previously obtained euros to purchase a bond issued by a French vineyard. How does this transaction affect Canadian net capital outflow?