Exam 12: Open-Economy Macroeconomics: Basic Concepts

According to purchasing-power parity theory,if the same fast-food hamburger costs $2.50 in Canada and 5 euros in France,what should the nominal exchange rate be?

When a country's central bank increases the money supply,what happens to a unit of that country's money?

What equation is the GDP identity in an open economy?

How are net exports of a country determined?

How does international trade affect the standard of living?

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

Suppose the exchange rate is 5 units of Peruvian currency per dollar,and a hotel room in Lima,Peru,costs 450 units of Peruvian currency.How many dollars do you need to get a room in Lima?

If the Canadian dollar gets weaker relative to the Japanese yen,what might happen?

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

The large,positive net capital outflow in Canada after 1999 is primarily the result of government budget surpluses.

Refer to the Table 12-1.What country's good are less expensive than Canadian goods?

Which of the following might part of Canadian savings be counted as?

Suppose the price level in Canada was P = 124 last year; it is up by 3 points this year.In the U.S.,the price level was 112 last year; it is up by 2 points this year.The exchange rate was US$0.96 per C$1 last year.(For part a,approximate all results to two decimals.) a)Compare the rate of change in the exchange rate with the difference between the foreign and domestic inflation rates.Are they equal? b)In theory,the rate of change in the nominal exchange rate should be about the same as the inflation difference.Redo the calculations from part a,retaining this time at least four decimals in your intermediate results.Does your answer to the question in part a change? c)What have you learned from this exercise?

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?

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 statement is consistent with these facts?

Refer to Table 12-1.What currency(ies)is(are)less valuable than predicted by the purchasing-power parity theory?

Paula,a citizen of Spain,decides to purchase bonds issued by Columbia instead of Canadian bonds,even though the Columbian bonds have a higher risk of default.What might be an economic reason for her decision?

A German company sells vehicles to a dealership in Canada.Which statement best identifies the effects of these transactions?

What does purchasing-power parity explain?

A Japanese firm buys lumber from Canada and pays for it with yen.What are the effects of this transaction?