Question 1

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 2

Assuming all other things equal,what would happen to the Canadian dollar real exchange rate under each of the following circumstances?
a.The Canadian nominal exchange rate depreciates.
b.Canadian domestic prices increase.
c.Prices in the rest of the world rise.

Accepted Answer

a.The Canadian real exchange r

Question 3

What type of economy does Canada have?

Accepted Answer

A)  a large closed economy 
B)  a small closed economy 
C)  a large open economy 
D)  a small open economy 
A)  a large closed economy 
B)  a small closed economy 
C)  a large open economy 
D)  a small open economy

Question 4

Suppose that the dollar buys less cotton in Canada than in Egypt.How could traders make a profit?

Accepted Answer

A)  by buying cotton in Canada and selling it in Egypt,which would tend to raise the price of cotton in Canada 
B)  by buying cotton in Canada and selling it in Egypt,which would tend to raise the price of cotton in Egypt 
C)  by buying cotton in Egypt and selling it in Canada,which would tend to raise the price of cotton in Egypt 
D)  by buying cotton in Egypt and selling it in Canada,which would tend to raise the price of cotton in Canada 
A)  by buying cotton in Canada and selling it in Egypt,which would tend to raise the price of cotton in Canada 
B)  by buying cotton in Canada and selling it in Egypt,which would tend to raise the price of cotton in Egypt 
C)  by buying cotton in Egypt and selling it in Canada,which would tend to raise the price of cotton in Egypt 
D)  by buying cotton in Egypt and selling it in Canada,which would tend to raise the price of cotton in Canada

Question 5

Suppose that a country exports $300 million of goods and services and imports $180 million of goods and services.What is the value of that country's net exports?

Accepted Answer

A)  $-120 million 
B)  $120 million 
C)  $300 million 
D)  $380 million 
A)  $-120 million 
B)  $120 million 
C)  $300 million 
D)  $380 million

Question 6

Suppose Canadian wheat sells for $100 per bushel and Russian wheat sells for 1600 rubles per bushel.
a.If you believe that the purchasing-power parity theory holds,and if the current exchange rate is 12 rubles per dollar,would you expect the exchange rate to change? In what direction would it change?
b.If the current exchange rate is 12 rubles per dollar,how much is the real exchange rate,based on the prices of wheat?
c.If the exchange rate is 12,how could you make profit in this situation? How much profit per bushel could you make?

Accepted Answer

a.The PPP exchange rate is 1600 / 100 =

Question 7

Healthy Grain Farms,a Canadian manufacturer of dried peas and lentils,sells cases of its product to stores overseas.Which statement best identifies the effects of these transactions?

Accepted Answer

A)  They decrease Canadian exports but increase Canadian net exports. 
B)  They decrease both Canadian exports and Canadian net exports. 
C)  They increase both Canadian exports and Canadian net exports. 
D)  They increase Canadian exports but decrease Canadian net exports. 
A)  They decrease Canadian exports but increase Canadian net exports. 
B)  They decrease both Canadian exports and Canadian net exports. 
C)  They increase both Canadian exports and Canadian net exports. 
D)  They increase Canadian exports but decrease Canadian net exports.

Question 8

What does a trade deficit 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 9

Suppose that the exchange rate is 50 Bangladesh taka per Canadian dollar,and that a bushel of rice costs 200 taka in Bangladesh and $3 in Canada.Which statement is consistent with these facts?

Accepted Answer

A)  The real exchange rate is greater than one,and arbitrageurs could profit by buying rice in Canada and selling it in Bangladesh. 
B)  The real exchange rate is greater than one,and arbitrageurs could profit by buying rice in Bangladesh and selling it in Canada. 
C)  The real exchange rate is less than one,and arbitrageurs could profit by buying rice in Canada and selling it in Bangladesh. 
D)  The real exchange rate is less than one,and arbitrageurs could profit by buying rice in Bangladesh and selling it in Canada. 
A)  The real exchange rate is greater than one,and arbitrageurs could profit by buying rice in Canada and selling it in Bangladesh. 
B)  The real exchange rate is greater than one,and arbitrageurs could profit by buying rice in Bangladesh and selling it in Canada. 
C)  The real exchange rate is less than one,and arbitrageurs could profit by buying rice in Canada and selling it in Bangladesh. 
D)  The real exchange rate is less than one,and arbitrageurs could profit by buying rice in Bangladesh and selling it in Canada.

Question 10

A country has $50 million of domestic investment and net capital outflow of -$80 million.What is saving?

Accepted Answer

A)  -$80 million 
B)  -$30 million 
C)  $50 million 
D)  $130 million 
A)  -$80 million 
B)  -$30 million 
C)  $50 million 
D)  $130 million

Question 11

In 2015,Denmark had net exports of $100 billion and sold $600 billion of goods and services abroad.What were Denmark's components of net exports?

Accepted Answer

A)  $500 billion of exports and $600 billion of imports 
B)  $500 billion of exports and $700 billion of imports 
C)  $600 billion of exports and $500 billion of imports 
D)  $700 billion of exports and $500 billion of imports 
A)  $500 billion of exports and $600 billion of imports 
B)  $500 billion of exports and $700 billion of imports 
C)  $600 billion of exports and $500 billion of imports 
D)  $700 billion of exports and $500 billion of imports

Question 12

A Canadian computer maker sells computers to a Czech Republic firm.This company uses all of the revenues from this sale to purchase stock in a Czech Republic company.What happens to Canadian net exports and net foreign investment due to these transactions?

Accepted Answer

A)  They will increase both Canadian net exports and Canadian net foreign investment. 
B)  They will decrease both Canadian net exports and Canadian net foreign investment. 
C)  They will increase Canadian net exports and will decrease Canadian net foreign investment. 
D)  They will decrease Canadian net exports and will increase Canadian net foreign investment. 
A)  They will increase both Canadian net exports and Canadian net foreign investment. 
B)  They will decrease both Canadian net exports and Canadian net foreign investment. 
C)  They will increase Canadian net exports and will decrease Canadian net foreign investment. 
D)  They will decrease Canadian net exports and will increase Canadian net foreign investment.

Question 13

Suppose the real exchange rate is 3 / 5 kilograms of Chilean beef per kilogram of Canadian beef,a kilogram of Canadian beef costs $3,and the nominal exchange rate is 500 Chilean pesos per dollar.What does Chilean beef cost?

Accepted Answer

A)  960 pesos per kilogram 
B)  1200 pesos per kilogram 
C)  1500 pesos per kilogram 
D)  2500 pesos per kilogram 
A)  960 pesos per kilogram 
B)  1200 pesos per kilogram 
C)  1500 pesos per kilogram 
D)  2500 pesos per kilogram

Question 14

Country A buys $250 of wine from country B,and B buys $130 of wool from A.Which of the following correctly indicates the two countries' net exports (in the order A,B)?

Accepted Answer

A)  -$120,$120 
B)  $120,-$120 
C)  $250,$130 
D)  $330,$0 
A)  -$120,$120 
B)  $120,-$120 
C)  $250,$130 
D)  $330,$0

Question 15

Suppose Bob,a Greek citizen,opens a restaurant in Vancouver.What are the effects of this action?

Accepted Answer

A)  It increases Canadian net capital outflow and has no effect on Greek net capital outflow. 
B)  It increases both Canadian and Greek net capital outflows. 
C)  It increases Canadian net capital outflow,but decreases Greek net capital outflow. 
D)  It decreases Canadian net capital outflow,but increases Greek net capital outflow. 
A)  It increases Canadian net capital outflow and has no effect on Greek net capital outflow. 
B)  It increases both Canadian and Greek net capital outflows. 
C)  It increases Canadian net capital outflow,but decreases Greek net capital outflow. 
D)  It decreases Canadian net capital outflow,but increases Greek net capital outflow.

Question 16

If the exchange rate changes from 130 yen per dollar to 150 yen per dollar,what has happened to the dollar?

Accepted Answer

A)  It has appreciated and so buys more Japanese goods. 
B)  It has appreciated and so buys fewer Japanese goods. 
C)  It has depreciated and so buys more Japanese goods. 
D)  It has depreciated and so buys fewer Japanese goods. 
A)  It has appreciated and so buys more Japanese goods. 
B)  It has appreciated and so buys fewer Japanese goods. 
C)  It has depreciated and so buys more Japanese goods. 
D)  It has depreciated and so buys fewer Japanese goods.

Question 17

A country has $80 million of domestic investment and net capital outflow of -$20 million.What is saving?

Accepted Answer

A)  -$80 million 
B)  -$60 million 
C)  $60 million 
D)  $80 million 
A)  -$80 million 
B)  -$60 million 
C)  $60 million 
D)  $80 million

Question 18

When a company from Germany builds an automobile factory in Canada,the German firm has engaged in foreign direct investment.

Accepted Answer

A) True 
 B)False

Question 19

If the real exchange rate of the Canadian dollar falls,Canadian net exports will fall.

Accepted Answer

A) True 
 B)False

Question 20

Consider this statement: "Canada is characterized by perfect capital mobility." What does this mean in the language of economics?

Accepted Answer

A)  that capital is free to move across provinces in Canada 
B)  that capital is free to move from one sector to another 
C)  that Canadians can invest abroad but foreigners cannot invest in Canada 
D)  that Canadians can invest abroad and foreigners can invest in Canada 
A)  that capital is free to move across provinces in Canada 
B)  that capital is free to move from one sector to another 
C)  that Canadians can invest abroad but foreigners cannot invest in Canada 
D)  that Canadians can invest abroad and foreigners can invest in Canada

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

Assuming all other things equal,what would happen to the Canadian dollar real exchange rate under each of the following circumstances? a.The Canadian nominal exchange rate depreciates. b.Canadian domestic prices increase. c.Prices in the rest of the world rise.

What type of economy does Canada have?

Suppose that the dollar buys less cotton in Canada than in Egypt.How could traders make a profit?

Suppose that a country exports $300 million of goods and services and imports $180 million of goods and services.What is the value of that country's net exports?

Healthy Grain Farms,a Canadian manufacturer of dried peas and lentils,sells cases of its product to stores overseas.Which statement best identifies the effects of these transactions?

What does a trade deficit imply?

Suppose that the exchange rate is 50 Bangladesh taka per Canadian dollar,and that a bushel of rice costs 200 taka in Bangladesh and $3 in Canada.Which statement is consistent with these facts?

A country has $50 million of domestic investment and net capital outflow of -$80 million.What is saving?

In 2015,Denmark had net exports of $100 billion and sold $600 billion of goods and services abroad.What were Denmark's components of net exports?

A Canadian computer maker sells computers to a Czech Republic firm.This company uses all of the revenues from this sale to purchase stock in a Czech Republic company.What happens to Canadian net exports and net foreign investment due to these transactions?

Suppose the real exchange rate is 3 / 5 kilograms of Chilean beef per kilogram of Canadian beef,a kilogram of Canadian beef costs $3,and the nominal exchange rate is 500 Chilean pesos per dollar.What does Chilean beef cost?

Country A buys $250 of wine from country B,and B buys $130 of wool from A.Which of the following correctly indicates the two countries' net exports (in the order A,B)?

Suppose Bob,a Greek citizen,opens a restaurant in Vancouver.What are the effects of this action?

If the exchange rate changes from 130 yen per dollar to 150 yen per dollar,what has happened to the dollar?

A country has $80 million of domestic investment and net capital outflow of -$20 million.What is saving?

When a company from Germany builds an automobile factory in Canada,the German firm has engaged in foreign direct investment.

If the real exchange rate of the Canadian dollar falls,Canadian net exports will fall.

Consider this statement: "Canada is characterized by perfect capital mobility." What does this mean in the language of economics?

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

Exam 12: Open-Economy Macroeconomics: Basic Concepts

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

Assuming all other things equal,what would happen to the Canadian dollar real exchange rate under each of the following circumstances? a.The Canadian nominal exchange rate depreciates. b.Canadian domestic prices increase. c.Prices in the rest of the world rise.

What type of economy does Canada have?

Suppose that the dollar buys less cotton in Canada than in Egypt.How could traders make a profit?

Suppose that a country exports $300 million of goods and services and imports $180 million of goods and services.What is the value of that country's net exports?

Healthy Grain Farms,a Canadian manufacturer of dried peas and lentils,sells cases of its product to stores overseas.Which statement best identifies the effects of these transactions?

What does a trade deficit imply?

Suppose that the exchange rate is 50 Bangladesh taka per Canadian dollar,and that a bushel of rice costs 200 taka in Bangladesh and $3 in Canada.Which statement is consistent with these facts?

A country has $50 million of domestic investment and net capital outflow of -$80 million.What is saving?

In 2015,Denmark had net exports of $100 billion and sold $600 billion of goods and services abroad.What were Denmark's components of net exports?

A Canadian computer maker sells computers to a Czech Republic firm.This company uses all of the revenues from this sale to purchase stock in a Czech Republic company.What happens to Canadian net exports and net foreign investment due to these transactions?

Suppose the real exchange rate is 3 / 5 kilograms of Chilean beef per kilogram of Canadian beef,a kilogram of Canadian beef costs $3,and the nominal exchange rate is 500 Chilean pesos per dollar.What does Chilean beef cost?

Country A buys $250 of wine from country B,and B buys $130 of wool from A.Which of the following correctly indicates the two countries' net exports (in the order A,B)?

Suppose Bob,a Greek citizen,opens a restaurant in Vancouver.What are the effects of this action?

If the exchange rate changes from 130 yen per dollar to 150 yen per dollar,what has happened to the dollar?

A country has $80 million of domestic investment and net capital outflow of -$20 million.What is saving?

When a company from Germany builds an automobile factory in Canada,the German firm has engaged in foreign direct investment.

If the real exchange rate of the Canadian dollar falls,Canadian net exports will fall.

Consider this statement: "Canada is characterized by perfect capital mobility." What does this mean in the language of economics?

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