Question 1

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 shares of 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 shares of stock in Research In Motion,a Canadian company.

Question 2

Exchange rates are 0.75 U.S.dollars per Canadian dollar,170 yen per Canadian dollar,0.8 euro per Canadian dollar,and 20 pesos per Canadian dollar.A bottle of beer in New York costs 6 U.S.dollars,1200 yen in Tokyo,7 euros in Munich,and 100 pesos in Cancun.Where is the most expensive beer?

Accepted Answer

A)  Cancun 
B)  New York 
C)  Tokyo 
D)  Munich 
A)  Cancun 
B)  New York 
C)  Tokyo 
D)  Munich

Question 3

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 4

What happened after the introduction of the euro as the common currency of many European countries?

Accepted Answer

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

Question 5

Which statement best describes how the Canadian economy has evolved over the past five decades?

Accepted Answer

A)  It has become more closed. 
B)  It has become more open. 
C)  It has become less trade-oriented. 
D)  It has become more self-sufficient. 
A)  It has become more closed. 
B)  It has become more open. 
C)  It has become less trade-oriented. 
D)  It has become more self-sufficient.

Question 6

When the central bank prints large quantities of money,that money loses value both in terms of the goods and services it buys and in terms of the amount of foreign currencies it can buy.

Accepted Answer

A) True 
 B)False

Question 7

Larry,a Canadian citizen,opens and operates a bookstore in England.What is this an example of?

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 8

If Canada buys cameras from Japan,both Canadian net exports and Canadian net capital outflow decrease.

Accepted Answer

A) True 
 B)False

Question 9

Over the past 50 years,what has happened to Canadian imports as a percentage of GDP?

Accepted Answer

A)  They have approximately stayed constant. 
B)  They have approximately doubled. 
C)  They have approximately tripled. 
D)  They have approximately quadrupled. 
A)  They have approximately stayed constant. 
B)  They have approximately doubled. 
C)  They have approximately tripled. 
D)  They have approximately quadrupled.

Question 10

Which statement best defines the nominal exchange rate?

Accepted Answer

A)  It is the nominal interest rate in one country divided by the nominal interest rate in the other country. 
B)  It is the rate at which a person can trade the currency of one country for the currency of another. 
C)  It is the price of a good in one country divided by the price of the same good in another. 
D)  It is the number of goods a person can trade for a similar good in another country. 
A)  It is the nominal interest rate in one country divided by the nominal interest rate in the other country. 
B)  It is the rate at which a person can trade the currency of one country for the currency of another. 
C)  It is the price of a good in one country divided by the price of the same good in another. 
D)  It is the number of goods a person can trade for a similar good in another country.

Question 11

What was an important change in the Canadian economy after 1999?

Accepted Answer

A)  National saving fell below investment,and net capital outflow was a large positive number. 
B)  Net capital outflow turned positive. 
C)  Investment equalled saving every year. 
D)  Investment fell below saving,so net capital outflow was a large negative number. 
A)  National saving fell below investment,and net capital outflow was a large positive number. 
B)  Net capital outflow turned positive. 
C)  Investment equalled saving every year. 
D)  Investment fell below saving,so net capital outflow was a large negative number.

Question 12

Between 1981 and 1988,what 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 13

Why does purchasing-power parity theory NOT hold at all times?

Accepted Answer

A)  because countries use different currencies 
B)  because wages are higher in some countries and lower in others 
C)  because some goods and services cannot be traded 
D)  because prices are different across countries 
A)  because countries use different currencies 
B)  because wages are higher in some countries and lower in others 
C)  because some goods and services cannot be traded 
D)  because prices are different across countries

Question 14

In Ireland,a pint of beer costs 4 Irish punts.In Australia,a pint of beer costs 6 Australian dollars.If the exchange rate is 0.8 punts per Australian dollar,what is the real exchange rate?

Accepted Answer

A)  0.53 pints of Irish beer per pint of Australian beer 
B)  0.8 pints of Irish beer per pint of Australian beer 
C)  1.11 pints of Irish beer per pint of Australian beer 
D)  1.25 pints of Irish beer per pint of Australian beer 
A)  0.53 pints of Irish beer per pint of Australian beer 
B)  0.8 pints of Irish beer per pint of Australian beer 
C)  1.11 pints of Irish beer per pint of Australian beer 
D)  1.25 pints of Irish beer per pint of Australian beer

Question 15

Which statement best describes the consequences that could occur if the Canadian real exchange rate appreciates relative to the euro?

Accepted Answer

A)  Canadian exports to Europe and European exports to Canada both rise. 
B)  Canadian exports to Europe and European exports to Canada both fall. 
C)  Canadian exports to Europe rise,and European exports to Canada fall. 
D)  Canadian exports to Europe fall,and European exports to Canada rise. 
A)  Canadian exports to Europe and European exports to Canada both rise. 
B)  Canadian exports to Europe and European exports to Canada both fall. 
C)  Canadian exports to Europe rise,and European exports to Canada fall. 
D)  Canadian exports to Europe fall,and European exports to Canada rise.

Question 16

John,a Canadian citizen,opens up a 70s-style dance club in Tokyo.What is this an example of?

Accepted Answer

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

Question 17

How do nominal exchange rates change over time?

Accepted Answer

A)  They vary little over time. 
B)  They vary substantially over time. 
C)  They appreciate over time for most countries. 
D)  They depreciate over time for most countries. 
A)  They vary little over time. 
B)  They vary substantially over time. 
C)  They appreciate over time for most countries. 
D)  They depreciate over time for most countries.

Question 18

Many economists believe that the theory of purchasing-power parity describes the forces that determine exchange rates in the long run.

Accepted Answer

A) True 
 B)False

Question 19

What does net capital outflow measure?

Accepted Answer

A)  foreign assets held by domestic residents minus domestic assets held by foreign residents 
B)  the imbalance between the amount of domestic assets bought by domestic residents and the amount of foreign assets bought by foreigners 
C)  the imbalance between the amount of foreign assets bought by domestic residents and the amount of domestic goods and services sold to foreigners 
D)  domestic assets held by foreigners minus foreign assets held by domestic residents 
A)  foreign assets held by domestic residents minus domestic assets held by foreign residents 
B)  the imbalance between the amount of domestic assets bought by domestic residents and the amount of foreign assets bought by foreigners 
C)  the imbalance between the amount of foreign assets bought by domestic residents and the amount of domestic goods and services sold to foreigners 
D)  domestic assets held by foreigners minus foreign assets held by domestic residents

Question 20

From 1970 to 1998,the Canadian dollar depreciated against the German mark and appreciated against the Italian lira because Canada experienced more inflation than Germany but less inflation than Italy.

Accepted Answer

A) True 
 B)False

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

Exchange rates are 0.75 U.S.dollars per Canadian dollar,170 yen per Canadian dollar,0.8 euro per Canadian dollar,and 20 pesos per Canadian dollar.A bottle of beer in New York costs 6 U.S.dollars,1200 yen in Tokyo,7 euros in Munich,and 100 pesos in Cancun.Where is the most expensive beer?

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

What happened after the introduction of the euro as the common currency of many European countries?

Which statement best describes how the Canadian economy has evolved over the past five decades?

When the central bank prints large quantities of money,that money loses value both in terms of the goods and services it buys and in terms of the amount of foreign currencies it can buy.

Larry,a Canadian citizen,opens and operates a bookstore in England.What is this an example of?

If Canada buys cameras from Japan,both Canadian net exports and Canadian net capital outflow decrease.

Over the past 50 years,what has happened to Canadian imports as a percentage of GDP?

Which statement best defines the nominal exchange rate?

What was an important change in the Canadian economy after 1999?

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

Why does purchasing-power parity theory NOT hold at all times?

In Ireland,a pint of beer costs 4 Irish punts.In Australia,a pint of beer costs 6 Australian dollars.If the exchange rate is 0.8 punts per Australian dollar,what is the real exchange rate?

Which statement best describes the consequences that could occur if the Canadian real exchange rate appreciates relative to the euro?

John,a Canadian citizen,opens up a 70s-style dance club in Tokyo.What is this an example of?

How do nominal exchange rates change over time?

Many economists believe that the theory of purchasing-power parity describes the forces that determine exchange rates in the long run.

What does net capital outflow measure?

From 1970 to 1998,the Canadian dollar depreciated against the German mark and appreciated against the Italian lira because Canada experienced more inflation than Germany but less inflation than Italy.

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 Small 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

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

Exchange rates are 0.75 U.S.dollars per Canadian dollar,170 yen per Canadian dollar,0.8 euro per Canadian dollar,and 20 pesos per Canadian dollar.A bottle of beer in New York costs 6 U.S.dollars,1200 yen in Tokyo,7 euros in Munich,and 100 pesos in Cancun.Where is the most expensive beer?

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

What happened after the introduction of the euro as the common currency of many European countries?

Which statement best describes how the Canadian economy has evolved over the past five decades?

When the central bank prints large quantities of money,that money loses value both in terms of the goods and services it buys and in terms of the amount of foreign currencies it can buy.

Larry,a Canadian citizen,opens and operates a bookstore in England.What is this an example of?

If Canada buys cameras from Japan,both Canadian net exports and Canadian net capital outflow decrease.

Over the past 50 years,what has happened to Canadian imports as a percentage of GDP?

Which statement best defines the nominal exchange rate?

What was an important change in the Canadian economy after 1999?

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

Why does purchasing-power parity theory NOT hold at all times?

In Ireland,a pint of beer costs 4 Irish punts.In Australia,a pint of beer costs 6 Australian dollars.If the exchange rate is 0.8 punts per Australian dollar,what is the real exchange rate?

Which statement best describes the consequences that could occur if the Canadian real exchange rate appreciates relative to the euro?

John,a Canadian citizen,opens up a 70s-style dance club in Tokyo.What is this an example of?

How do nominal exchange rates change over time?

Many economists believe that the theory of purchasing-power parity describes the forces that determine exchange rates in the long run.

What does net capital outflow measure?

From 1970 to 1998,the Canadian dollar depreciated against the German mark and appreciated against the Italian lira because Canada experienced more inflation than Germany but less inflation than Italy.

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 Small 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