Question 1

What is the value of Peru's exports minus the value of Peru's imports called?

Accepted Answer

A) Peru's net capital inflow 
B) Peru's foreign direct investment 
C) Peru's net exports 
D) Peru's net imports 
A) Peru's net capital inflow 
B) Peru's foreign direct investment 
C) Peru's net exports 
D) Peru's net imports

Question 2

How are net exports of a country determined?

Accepted Answer

A) the value of goods and services imported minus the value of goods and services exported 
B) the value of goods and services exported minus the value of goods and services imported 
C) the value of goods exported minus the value of goods imported 
D) the value of goods imported minus the value of goods exported 
A) the value of goods and services imported minus the value of goods and services exported 
B) the value of goods and services exported minus the value of goods and services imported 
C) the value of goods exported minus the value of goods imported 
D) the value of goods imported minus the value of goods exported

Question 3

Which of the following does a trade surplus imply?

Accepted Answer

A) saving is greater than domestic investment and Y > C + I + G B) saving is greater than domestic investment and Y C + I + G D) saving is less than domestic investment and Y < C + I + G A) saving is greater than domestic investment and Y > C + I + G B) saving is greater than domestic investment and Y C + I + G D) saving is less than domestic investment and Y < C + I + G

Question 4

Suppose that a lobster in Nova Scotia costs $10 and the same type of lobster in New Brunswick costs $30. How could people make a profit in the situation?

Accepted Answer

A) by buying lobsters in Nova Scotia and selling them in New Brunswick, which would increase the price of lobster in New Brunswick 
B) by buying lobsters in Nova Scotia and selling them in New Brunswick, which would decrease the price of lobster in New Brunswick 
C) by buying lobsters in New Brunswick and selling them in Nova Scotia, which would increase the price of lobster in New Brunswick 
D) by buying lobsters in New Brunswick and selling them in Nova Scotia, which would decrease the price of lobster in New Brunswick 
A) by buying lobsters in Nova Scotia and selling them in New Brunswick, which would increase the price of lobster in New Brunswick 
B) by buying lobsters in Nova Scotia and selling them in New Brunswick, which would decrease the price of lobster in New Brunswick 
C) by buying lobsters in New Brunswick and selling them in Nova Scotia, which would increase the price of lobster in New Brunswick 
D) by buying lobsters in New Brunswick and selling them in Nova Scotia, which would decrease the price of lobster in New Brunswick

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) decline in public saving 
B) decline in private saving 
C) increase in public saving 
D) increase in private saving 
A) decline in public saving 
B) decline in private saving 
C) increase in public saving 
D) increase in private saving

Question 6

When making investment decisions, which of the following are investors most likely to do?

Accepted Answer

A) They compare the real interest rates offered on different bonds. 
B) They compare the nominal, but not the real, interest rates offered on different bonds. 
C) They purchase the highest-priced bond available. 
D) They purchase the highest-interest bonds available. 
A) They compare the real interest rates offered on different bonds. 
B) They compare the nominal, but not the real, interest rates offered on different bonds. 
C) They purchase the highest-priced bond available. 
D) They purchase the highest-interest bonds available.

Question 7

Suppose that the dollar buys more bananas in Honduras than in Guatemala. How could traders make a profit?

Accepted Answer

A) by buying bananas in Honduras and selling them in Guatemala, which would tend to raise the price of bananas in Honduras 
B) by buying bananas in Honduras and selling them in Guatemala, which would tend to raise the price of bananas in Guatemala 
C) by buying bananas in Guatemala and selling them in Honduras, which would tend to raise the price of bananas in Guatemala 
D) by buying bananas in Guatemala and selling them in Honduras, which would tend to raise the price of bananas in Honduras 
A) by buying bananas in Honduras and selling them in Guatemala, which would tend to raise the price of bananas in Honduras 
B) by buying bananas in Honduras and selling them in Guatemala, which would tend to raise the price of bananas in Guatemala 
C) by buying bananas in Guatemala and selling them in Honduras, which would tend to raise the price of bananas in Guatemala 
D) by buying bananas in Guatemala and selling them in Honduras, which would tend to raise the price of bananas in Honduras

Question 8

Suppose a bottle of wine costs 25 euros in France and $20 in Canada. If the exchange rate is 1.25 euros per dollar, what is the real exchange rate?

Accepted Answer

The real exchange rate = Nomin

Question 9

A country with no imports necessarily has zero net exports.

Accepted Answer

A) True 
 B)False

Question 10

If citizens of a country are not saving much, which of the following is best for that country's government to do?

Accepted Answer

A) force citizens to save 
B) reduce investment 
C) have foreigners invest in the domestic economy 
D) prevent opportunities for citizens to buy capital assets abroad 
A) force citizens to save 
B) reduce investment 
C) have foreigners invest in the domestic economy 
D) prevent opportunities for citizens to buy capital assets abroad

Question 11

What is the implication of perfect capital mobility for a small open economy like Canada's?

Accepted Answer

A) The real interest rate in Canada should exceed the real interest rate prevailing in world financial markets. 
B) The real interest rate in Canada should equal the real interest rate prevailing in world financial markets. 
C) The real interest rate in Canada should be less than the real interest rate prevailing in world financial markets. 
D) The real interest rate is irrelevant for capital mobility. 
A) The real interest rate in Canada should exceed the real interest rate prevailing in world financial markets. 
B) The real interest rate in Canada should equal the real interest rate prevailing in world financial markets. 
C) The real interest rate in Canada should be less than the real interest rate prevailing in world financial markets. 
D) The real interest rate is irrelevant for capital mobility.

Question 12

Which of the following partly caused the increase in international trade in Canada since 1989?

Accepted Answer

A) an increase in Canadian GDP 
B) an appreciation of the dollar 
C) better quality of Canadian products 
D) the free trade agreement between Canada and the United States 
A) an increase in Canadian GDP 
B) an appreciation of the dollar 
C) better quality of Canadian products 
D) the free trade agreement between Canada and the United States

Question 13

According to the theory of purchasing-power parity, what must the nominal exchange rate between two countries reflect?

Accepted Answer

A) the different price levels in those countries 
B) the different resource endowments in those countries 
C) the different income levels in those countries 
D) the different standards of living between those countries 
A) the different price levels in those countries 
B) the different resource endowments in those countries 
C) the different income levels in those countries 
D) the different standards of living between those countries

Question 14

Which of the following is the most likely consequence of the introduction of the euro as the common currency of many European countries?

Accepted Answer

A) It will lead to less international trade. 
B) It will reduce the costs of trading within Europe. 
C) It will lead to greater differences in monetary policy amongst participating countries. 
D) It will reduce trade of some European countries with Canada. 
A) It will lead to less international trade. 
B) It will reduce the costs of trading within Europe. 
C) It will lead to greater differences in monetary policy amongst participating countries. 
D) It will reduce trade of some European countries with Canada.

Question 15

The nominal exchange rate is about 2 Aruban florin per dollar. If a basket of goods in Canada costs $40, how many florins must a basket of goods in Aruba cost for purchasing-power parity to hold?

Accepted Answer

A) 20 florins 
B) 40 florins 
C) 80 florins 
D) 100 florins 
A) 20 florins 
B) 40 florins 
C) 80 florins 
D) 100 florins

Question 16

Suppose the real exchange rate is 3/5 pounds of Chilean beef per pound of Canadian beef, a pound of Canadian beef costs $3, and the nominal exchange rate is 400 Chilean pesos per dollar. What does Chilean beef cost?

Accepted Answer

A) 960 pesos per pound 
B) 1200 pesos per pound 
C) 1500 pesos per pound 
D) 2000 pesos per pound 
A) 960 pesos per pound 
B) 1200 pesos per pound 
C) 1500 pesos per pound 
D) 2000 pesos per pound

Question 17

A country sells more to people overseas than it buys from them. Which of the following correctly identifies the effects of these transactions?

Accepted Answer

A) The country will have a trade surplus and positive net exports. 
B) The country will have a trade surplus and negative net exports. 
C) The country will have a trade deficit and positive net exports. 
D) The country will have a trade deficit and negative net exports. 
A) The country will have a trade surplus and positive net exports. 
B) The country will have a trade surplus and negative net exports. 
C) The country will have a trade deficit and positive net exports. 
D) The country will have a trade deficit and negative net exports.

Question 18

Which of the following units of measurement would be appropriate for a real exchange rate?

Accepted Answer

A) 9 euros per dollar 
B) 15 euros per basket of Canadian goods 
C) 1/2 case of German beer per case of Canadian beer 
D) 1/2 case of German beer per dollar of Canadian beer 
A) 9 euros per dollar 
B) 15 euros per basket of Canadian goods 
C) 1/2 case of German beer per case of Canadian beer 
D) 1/2 case of German beer per dollar of Canadian beer

Question 19

If the Canadian real exchange rate appreciates, which of the following most likely happen?

Accepted Answer

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

Question 20

Negative net exports are the same as a trade surplus.

Accepted Answer

A) True 
 B)False

What is the value of Peru's exports minus the value of Peru's imports called?

How are net exports of a country determined?

Which of the following does a trade surplus imply?

Suppose that a lobster in Nova Scotia costs $10 and the same type of lobster in New Brunswick costs $30. How could people make a profit in the situation?

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

When making investment decisions, which of the following are investors most likely to do?

Suppose that the dollar buys more bananas in Honduras than in Guatemala. How could traders make a profit?

Suppose a bottle of wine costs 25 euros in France and $20 in Canada. If the exchange rate is 1.25 euros per dollar, what is the real exchange rate?

A country with no imports necessarily has zero net exports.

If citizens of a country are not saving much, which of the following is best for that country's government to do?

What is the implication of perfect capital mobility for a small open economy like Canada's?

Which of the following partly caused the increase in international trade in Canada since 1989?

According to the theory of purchasing-power parity, what must the nominal exchange rate between two countries reflect?

Which of the following is the most likely consequence of the introduction of the euro as the common currency of many European countries?

The nominal exchange rate is about 2 Aruban florin per dollar. If a basket of goods in Canada costs $40, how many florins must a basket of goods in Aruba cost for purchasing-power parity to hold?

Suppose the real exchange rate is 3/5 pounds of Chilean beef per pound of Canadian beef, a pound of Canadian beef costs $3, and the nominal exchange rate is 400 Chilean pesos per dollar. What does Chilean beef cost?

A country sells more to people overseas than it buys from them. Which of the following correctly identifies the effects of these transactions?

Which of the following units of measurement would be appropriate for a real exchange rate?

If the Canadian real exchange rate appreciates, which of the following most likely happen?

Negative net exports are the same as a trade surplus.

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

What is the value of Peru's exports minus the value of Peru's imports called?

How are net exports of a country determined?

Which of the following does a trade surplus imply?

Suppose that a lobster in Nova Scotia costs $10 and the same type of lobster in New Brunswick costs $30. How could people make a profit in the situation?

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

When making investment decisions, which of the following are investors most likely to do?

Suppose that the dollar buys more bananas in Honduras than in Guatemala. How could traders make a profit?

Suppose a bottle of wine costs 25 euros in France and $20 in Canada. If the exchange rate is 1.25 euros per dollar, what is the real exchange rate?

A country with no imports necessarily has zero net exports.

If citizens of a country are not saving much, which of the following is best for that country's government to do?

What is the implication of perfect capital mobility for a small open economy like Canada's?

Which of the following partly caused the increase in international trade in Canada since 1989?

According to the theory of purchasing-power parity, what must the nominal exchange rate between two countries reflect?

Which of the following is the most likely consequence of the introduction of the euro as the common currency of many European countries?

The nominal exchange rate is about 2 Aruban florin per dollar. If a basket of goods in Canada costs $40, how many florins must a basket of goods in Aruba cost for purchasing-power parity to hold?

Suppose the real exchange rate is 3/5 pounds of Chilean beef per pound of Canadian beef, a pound of Canadian beef costs $3, and the nominal exchange rate is 400 Chilean pesos per dollar. What does Chilean beef cost?

A country sells more to people overseas than it buys from them. Which of the following correctly identifies the effects of these transactions?

Which of the following units of measurement would be appropriate for a real exchange rate?

If the Canadian real exchange rate appreciates, which of the following most likely happen?

Negative net exports are the same as a trade surplus.

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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