Question 1

How does international trade affect the standard of living?

Accepted Answer

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

Question 2

In 2005, Canada had positive net exports. Which of the following does this fact imply?

Accepted Answer

A) Canada sold more abroad than it purchased abroad and had a trade surplus. 
B) Canada sold more abroad than it purchased abroad and had a trade deficit. 
C) Canada bought more abroad than it sold abroad and had a trade surplus. 
D) Canada bought more abroad than it sold abroad and had a trade deficit. 
A) Canada sold more abroad than it purchased abroad and had a trade surplus. 
B) Canada sold more abroad than it purchased abroad and had a trade deficit. 
C) Canada bought more abroad than it sold abroad and had a trade surplus. 
D) Canada bought more abroad than it sold abroad and had a trade deficit.

Question 3

Suppose Connie, a Canadian citizen, buys bonds issued by an automobile manufacturer in Sweden. Which of the following would her expenditure be?

Accepted Answer

A) Canadian foreign direct investment that would increase Canadian net capital outflow 
B) Canadian foreign direct investment that would decrease Canadian net capital outflow 
C) Canadian foreign portfolio investment that would increase Canadian net capital outflow 
D) Canadian foreign portfolio investment that would decrease Canadian net capital outflow 
A) Canadian foreign direct investment that would increase Canadian net capital outflow 
B) Canadian foreign direct investment that would decrease Canadian net capital outflow 
C) Canadian foreign portfolio investment that would increase Canadian net capital outflow 
D) Canadian foreign portfolio investment that would decrease Canadian net capital outflow

Question 4

Which of the following was of much concern about Canadian economy in the 1960s and 1970s?

Accepted Answer

A) increasing budget deficits 
B) the extent of foreign investment in Canada 
C) the fact that net exports were positive 
D) Canadians purchasing too many foreign assets 
A) increasing budget deficits 
B) the extent of foreign investment in Canada 
C) the fact that net exports were positive 
D) Canadians purchasing too many foreign assets

Question 5

Tony, an Italian citizen, opens and operates a spaghetti factory in Canada. This counts as which of the following?

Accepted Answer

A) Italian foreign direct investment that increases Italian net capital outflow 
B) Italian foreign direct investment that decreases Italian net capital outflow 
C) Italian foreign portfolio investment that increases Italian net capital outflow 
D) Italian foreign portfolio investment that decreases Italian net capital outflow 
A) Italian foreign direct investment that increases Italian net capital outflow 
B) Italian foreign direct investment that decreases Italian net capital outflow 
C) Italian foreign portfolio investment that increases Italian net capital outflow 
D) Italian foreign portfolio investment that decreases Italian net capital outflow

Question 6

Table 31-1
  
-Refer to Table 31-1. Assume that there are no transportation costs or trade restrictions. With which of the following countries can arbitrageurs make a profit?

Accepted Answer

A) Bolivia and Morocco 
B) Japan, Norway, and Thailand 
C) Japan and Norway 
D) Thailand 
A) Bolivia and Morocco 
B) Japan, Norway, and Thailand 
C) Japan and Norway 
D) Thailand

Question 7

About what percentage of GDP are Canadian imports?

Accepted Answer

A) less than 13 percent 
B) about 14 percent 
C) about 37 percent 
D) about 67 percent 
A) less than 13 percent 
B) about 14 percent 
C) about 37 percent 
D) about 67 percent

Question 8

Which of the following shows that any trade transaction must have a financial counterpart?

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

Question 9

A Venezuelan firm purchases earth-moving equipment from a Canadian company and pays for it with domestic currency. Which of the following correctly identifies the effects of this transaction?

Accepted Answer

A) It increases Canadian net exports and increases Venezuelan net capital outflow. 
B) It increases Canadian net exports and decreases Venezuelan net capital outflow. 
C) It decreases Canadian net exports and increases Venezuelan net capital outflow. 
D) It decreases Canadian net exports and decreases Venezuelan net capital outflow. 
A) It increases Canadian net exports and increases Venezuelan net capital outflow. 
B) It increases Canadian net exports and decreases Venezuelan net capital outflow. 
C) It decreases Canadian net exports and increases Venezuelan net capital outflow. 
D) It decreases Canadian net exports and decreases Venezuelan net capital outflow.

Question 10

Which of the following is an example of Canadian foreign portfolio investment?

Accepted Answer

A) Crystal, a Canadian citizen, buys bonds issued by a corporation in Turkey. 
B) Randall, a Canadian citizen, opens a cheesecake factory in Italy. 
C) Abigail, a Canadian citizen, buys software produced by Microsoft Corporation, a U.S. company. 
D) Fernando, a Spanish citizen, buys stock in Research In Motion, a Canadian company. 
A) Crystal, a Canadian citizen, buys bonds issued by a corporation in Turkey. 
B) Randall, a Canadian citizen, opens a cheesecake factory in Italy. 
C) Abigail, a Canadian citizen, buys software produced by Microsoft Corporation, a U.S. company. 
D) Fernando, a Spanish citizen, buys stock in Research In Motion, a Canadian company.

Question 11

Which of the following would be Canadian foreign direct investment?

Accepted Answer

A) A Swedish car manufacturer opens a plant in Sherbrooke, Quebec. 
B) A Dutch citizen buys shares of stock in a Canadian company. 
C) Tim Hortons, a Canadian company, opens a restaurant in Jamaica. 
D) A Canadian citizen buys stock in companies located in Japan. 
A) A Swedish car manufacturer opens a plant in Sherbrooke, Quebec. 
B) A Dutch citizen buys shares of stock in a Canadian company. 
C) Tim Hortons, a Canadian company, opens a restaurant in Jamaica. 
D) A Canadian citizen buys stock in companies located in Japan.

Question 12

How did the real interest rates paid on long-term government debt in Canada and the United States compare with each other over the period from 1984 to 2009?

Accepted Answer

A) The average real interest rate was 3.4 percent in Canada and 4.4 percent in the United States. 
B) The average real interest rate was 4.4 percent in Canada and 3.4 percent in the United States. 
C) The average real interest rate was 5.7 percent in Canada and 6.7 percent in the United States. 
D) The real interest rates paid on long-term government debt in Canada and the United States have tended to move in opposite directions. 
A) The average real interest rate was 3.4 percent in Canada and 4.4 percent in the United States. 
B) The average real interest rate was 4.4 percent in Canada and 3.4 percent in the United States. 
C) The average real interest rate was 5.7 percent in Canada and 6.7 percent in the United States. 
D) The real interest rates paid on long-term government debt in Canada and the United States have tended to move in opposite directions.

Question 13

Suppose the exchange rate is 5 units of Peruvian currency per dollar, and a hotel room in Lima, Peru, costs 350 units of Peruvian currency. How many dollars do you need to get a room in Lima?

Accepted Answer

A) $1750 
B) $355 
C) $70 
D) $35 
A) $1750 
B) $355 
C) $70 
D) $35

Question 14

Suppose Judy, a Canadian citizen, opens an ice cream store in Bermuda. Which of the following would her expenditures be?

Accepted Answer

A) Canadian foreign portfolio investment that would increase Canadian net capital outflow 
B) Canadian foreign portfolio investment that would decrease Canadian net capital outflow 
C) Canadian foreign direct investment that would increase Canadian net capital outflow 
D) Canadian foreign direct investment that would decrease Canadian net capital outflow 
A) Canadian foreign portfolio investment that would increase Canadian net capital outflow 
B) Canadian foreign portfolio investment that would decrease Canadian net capital outflow 
C) Canadian foreign direct investment that would increase Canadian net capital outflow 
D) Canadian foreign direct investment that would decrease Canadian net capital outflow

Question 15

When a country's central bank decreases the money supply, which of the following best predicts the consequences?

Accepted Answer

A) Its price level rises, and its currency appreciates relative to other currencies in the world. 
B) Its price level falls, and its currency appreciates relative to other currencies in the world. 
C) Its price level rises, and its currency depreciates relative to other currencies in the world. 
D) Its price level falls, and its currency depreciates relative to other currencies in the world. 
A) Its price level rises, and its currency appreciates relative to other currencies in the world. 
B) Its price level falls, and its currency appreciates relative to other currencies in the world. 
C) Its price level rises, and its currency depreciates relative to other currencies in the world. 
D) Its price level falls, and its currency depreciates relative to other currencies in the world.

Question 16

Roger lives in Iceland and purchases a snowmobile manufactured in Canada. Which of the following is this purchase?

Accepted Answer

A) both a Canadian and an Icelandic export 
B) both a Canadian and an Icelandic import 
C) a Canadian import and an Icelandic export 
D) a Canadian export and an Icelandic import 
A) both a Canadian and an Icelandic export 
B) both a Canadian and an Icelandic import 
C) a Canadian import and an Icelandic export 
D) a Canadian export and an Icelandic import

Question 17

In 2009, approximately what was Canadian net capital outflow as a percent of GDP?

Accepted Answer

A) 4.5 percent 
B) 2.5 percent 
C) -2.5 percent 
D) -4.5 percent 
A) 4.5 percent 
B) 2.5 percent 
C) -2.5 percent 
D) -4.5 percent

Question 18

Suppose the real exchange rate is 1/2 gallon of Canadian gasoline per gallon of U.S. gasoline, a gallon of U.S. gasoline costs $1.50 U.S., and a gallon of Canadian gas costs $3.90 Canadian. What is the nominal exchange rate?

Accepted Answer

A) 0.385 Canadian dollars per U.S. dollar 
B) 0.65 Canadian dollars per U.S. dollar 
C) 1.10 Canadian dollars per U.S. dollar 
D) 1.30 Canadian dollars per U.S. dollar 
A) 0.385 Canadian dollars per U.S. dollar 
B) 0.65 Canadian dollars per U.S. dollar 
C) 1.10 Canadian dollars per U.S. dollar 
D) 1.30 Canadian dollars per U.S. dollar

Question 19

Which of the following best explains the relationship among price levels, nominal and real exchange rates, and money supply in Canada and Ireland when purchasing power parity holds?

Accepted Answer

A) When the price level in Canada falls more rapidly than that in Ireland, the real exchange rate, defined as Irish goods per unit of Canadian goods, stays the same. 
B) When the money supply in Canada rises more rapidly than in Ireland, the nominal exchange rate, defined as euros (the currency used in Ireland) per dollar, increases. 
C) When prices for the same goods are the same in Canadian dollars in Canada and Ireland, the nominal exchange rate does not change. 
D) When prices in both countries stay the same and the nominal exchange rate increases, the real exchange rate decreases. 
A) When the price level in Canada falls more rapidly than that in Ireland, the real exchange rate, defined as Irish goods per unit of Canadian goods, stays the same. 
B) When the money supply in Canada rises more rapidly than in Ireland, the nominal exchange rate, defined as euros (the currency used in Ireland) per dollar, increases. 
C) When prices for the same goods are the same in Canadian dollars in Canada and Ireland, the nominal exchange rate does not change. 
D) When prices in both countries stay the same and the nominal exchange rate increases, the real exchange rate decreases.

Question 20

Suppose that a bushel of wheat costs $5 in Canada and costs 50 pesos in Mexico. If the nominal exchange rate is 30 pesos per dollar, what is the real exchange rate?

Accepted Answer

A) 1/3 
B) 1 
C) 3 
D) 10 
A) 1/3 
B) 1 
C) 3 
D) 10

How does international trade affect the standard of living?

In 2005, Canada had positive net exports. Which of the following does this fact imply?

Suppose Connie, a Canadian citizen, buys bonds issued by an automobile manufacturer in Sweden. Which of the following would her expenditure be?

Which of the following was of much concern about Canadian economy in the 1960s and 1970s?

Tony, an Italian citizen, opens and operates a spaghetti factory in Canada. This counts as which of the following?

Table 31-1 -Refer to Table 31-1. Assume that there are no transportation costs or trade restrictions. With which of the following countries can arbitrageurs make a profit?

About what percentage of GDP are Canadian imports?

Which of the following shows that any trade transaction must have a financial counterpart?

A Venezuelan firm purchases earth-moving equipment from a Canadian company and pays for it with domestic currency. Which of the following correctly identifies the effects of this transaction?

Which of the following is an example of Canadian foreign portfolio investment?

Which of the following would be Canadian foreign direct investment?

How did the real interest rates paid on long-term government debt in Canada and the United States compare with each other over the period from 1984 to 2009?

Suppose the exchange rate is 5 units of Peruvian currency per dollar, and a hotel room in Lima, Peru, costs 350 units of Peruvian currency. How many dollars do you need to get a room in Lima?

Suppose Judy, a Canadian citizen, opens an ice cream store in Bermuda. Which of the following would her expenditures be?

When a country's central bank decreases the money supply, which of the following best predicts the consequences?

Roger lives in Iceland and purchases a snowmobile manufactured in Canada. Which of the following is this purchase?

In 2009, approximately what was Canadian net capital outflow as a percent of GDP?

Suppose the real exchange rate is 1/2 gallon of Canadian gasoline per gallon of U.S. gasoline, a gallon of U.S. gasoline costs $1.50 U.S., and a gallon of Canadian gas costs $3.90 Canadian. What is the nominal exchange rate?

Which of the following best explains the relationship among price levels, nominal and real exchange rates, and money supply in Canada and Ireland when purchasing power parity holds?

Suppose that a bushel of wheat costs $5 in Canada and costs 50 pesos in Mexico. If the nominal exchange rate is 30 pesos per dollar, what is the real exchange rate?

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

How does international trade affect the standard of living?

In 2005, Canada had positive net exports. Which of the following does this fact imply?

Suppose Connie, a Canadian citizen, buys bonds issued by an automobile manufacturer in Sweden. Which of the following would her expenditure be?

Which of the following was of much concern about Canadian economy in the 1960s and 1970s?

Tony, an Italian citizen, opens and operates a spaghetti factory in Canada. This counts as which of the following?

Table 31-1 -Refer to Table 31-1. Assume that there are no transportation costs or trade restrictions. With which of the following countries can arbitrageurs make a profit?

About what percentage of GDP are Canadian imports?

Which of the following shows that any trade transaction must have a financial counterpart?

A Venezuelan firm purchases earth-moving equipment from a Canadian company and pays for it with domestic currency. Which of the following correctly identifies the effects of this transaction?

Which of the following is an example of Canadian foreign portfolio investment?

Which of the following would be Canadian foreign direct investment?

How did the real interest rates paid on long-term government debt in Canada and the United States compare with each other over the period from 1984 to 2009?

Suppose the exchange rate is 5 units of Peruvian currency per dollar, and a hotel room in Lima, Peru, costs 350 units of Peruvian currency. How many dollars do you need to get a room in Lima?

Suppose Judy, a Canadian citizen, opens an ice cream store in Bermuda. Which of the following would her expenditures be?

When a country's central bank decreases the money supply, which of the following best predicts the consequences?

Roger lives in Iceland and purchases a snowmobile manufactured in Canada. Which of the following is this purchase?

In 2009, approximately what was Canadian net capital outflow as a percent of GDP?

Suppose the real exchange rate is 1/2 gallon of Canadian gasoline per gallon of U.S. gasoline, a gallon of U.S. gasoline costs $1.50 U.S., and a gallon of Canadian gas costs $3.90 Canadian. What is the nominal exchange rate?

Which of the following best explains the relationship among price levels, nominal and real exchange rates, and money supply in Canada and Ireland when purchasing power parity holds?

Suppose that a bushel of wheat costs $5 in Canada and costs 50 pesos in Mexico. If the nominal exchange rate is 30 pesos per dollar, what is the real exchange rate?

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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