Question 1

Guido,an Italian citizen,opens and operates a pasta factory in Canada.What is this an example of?

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 2

The nominal exchange rate is about 3 Aruban florins 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)  120 florins 
A)  20 florins 
B)  40 florins 
C)  80 florins 
D)  120 florins

Question 3

Suppose the nominal exchange rate between the yen and the U.S.dollar is 260 yen per U.S.dollar,and that the nominal exchange rate between the Canadian dollar and the U.S.dollar is 1.30 Canadian dollars per U.S.dollar.How many yen would it take to buy a Canadian dollar?

Accepted Answer

A)  0.005 
B)  0.5 
C)  200 
A)  0.005 
B)  0.5 
C)  200

Question 4

How do we find the real exchange rate from the nominal exchange rate?

Accepted Answer

Real exchange rate =

Question 5

Ivan,a Russian citizen,sells several hundred cases of Russian caviar to a Canadian hotel chain.Which statement best identifies the effects of this transaction?

Accepted Answer

A)  It increases Canadian net exports and has no effect on Russian net exports. 
B)  It increases Canadian net exports and decreases Russian net exports. 
C)  It decreases Canadian net exports and has no effect on Russian net exports. 
D)  It decreases Canadian net exports and increases Russian net exports. 
A)  It increases Canadian net exports and has no effect on Russian net exports. 
B)  It increases Canadian net exports and decreases Russian net exports. 
C)  It decreases Canadian net exports and has no effect on Russian net exports. 
D)  It decreases Canadian net exports and increases Russian net exports.

Question 6

According to purchasing-power parity,if prices in Canada increase by a larger percentage than prices in Algeria,how does the exchange rate change?

Accepted Answer

A)  The real exchange rate,defined as Algerian goods per unit of Canadian goods,rises. 
B)  The real exchange rate,defined as Algerian goods per unit of Canadian goods,falls. 
C)  The nominal exchange rate,defined as Algerian currency per dollar,rises. 
D)  The nominal exchange rate,defined as Algerian currency per dollar,falls. 
A)  The real exchange rate,defined as Algerian goods per unit of Canadian goods,rises. 
B)  The real exchange rate,defined as Algerian goods per unit of Canadian goods,falls. 
C)  The nominal exchange rate,defined as Algerian currency per dollar,rises. 
D)  The nominal exchange rate,defined as Algerian currency per dollar,falls.

Question 7

If the nominal exchange rate e is foreign currency per dollar,the domestic price is P,and the foreign price is P*,what is the definition of the real exchange rate?

Accepted Answer

A)  e(P* / P) 
B)  e(P / P*) 
C)  e + P / P 
D)  e - P / P* 
A)  e(P* / P) 
B)  e(P / P*) 
C)  e + P / P 
D)  e - P / P*

Question 8

What do net exports measure?

Accepted Answer

A)  income minus expenditure 
B)  exports minus imports 
C)  expenditure minus income 
D)  imports minus exports 
A)  income minus expenditure 
B)  exports minus imports 
C)  expenditure minus income 
D)  imports minus exports

Question 9

Suppose the price of a standard pair of sport shoes is €60 in Spain and $85 in Canada,and the current exchange rate is 0.75 euro for one dollar.What is the purchasing-power parity exchange rate of the dollar?

Accepted Answer

A)  0.40 euro / dollar 
B)  0.53 euro / dollar 
C)  0.71 euro / dollar 
D)  1.53 euro / dollar 
A)  0.40 euro / dollar 
B)  0.53 euro / dollar 
C)  0.71 euro / dollar 
D)  1.53 euro / dollar

Question 10

Martin,a Canadian citizen,uses some previously obtained HYPERLINK "http: / / en.wikipedia.org / wiki / Lithuanian_litas" Lithuanian currency (litas)to purchase a bond issued by a HYPERLINK "http: / / en.wikipedia.org / wiki / Lithuanian_litas" Lithuanian company.How does this transaction affect Canadian net capital outflow?

Accepted Answer

A)  It increases Canadian net capital outflow by more than the value of the bond. 
B)  It increases Canadian net capital outflow by the value of the bond. 
C)  It does not change Canadian net capital outflow. 
D)  It decreases Canadian net capital outflow. 
A)  It increases Canadian net capital outflow by more than the value of the bond. 
B)  It increases Canadian net capital outflow by the value of the bond. 
C)  It does not change Canadian net capital outflow. 
D)  It decreases Canadian net capital outflow.

Question 11

If the Canadian real exchange rate appreciates,what will most likely happen?

Accepted Answer

A)  Exports increase and imports decrease. 
B)  Exports decrease and imports increase. 
C)  Exports and imports both increase. 
D)  Exports and imports both decrease. 
A)  Exports increase and imports decrease. 
B)  Exports decrease and imports increase. 
C)  Exports and imports both increase. 
D)  Exports and imports both decrease.

Question 12

What is the formula for investment in an open economy?

Accepted Answer

A)  I = Y - C 
B)  I = Y - C - NX 
C)  I = S - NCO 
D)  I = S + NX 
A)  I = Y - C 
B)  I = Y - C - NX 
C)  I = S - NCO 
D)  I = S + NX

Question 13

What was of much concern about the 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 14

On behalf of your firm,you make frequent trips to Hong Kong.You notice that you always have to pay more dollars to get enough local currency to get your suits dry-cleaned than you have to pay to get your suits dry-cleaned in Canada.Is this consistent with purchasing-power parity?

Accepted Answer

A)  No,but it might be explained by limited opportunities for arbitrage across international borders. 
B)  Yes,if prices in Hong Kong are rising more rapidly than prices in Canada. 
C)  Yes,if prices in Hong Kong are rising less rapidly than prices in Canada. 
D)  No,but it can be explained by arbitrage across international borders. 
A)  No,but it might be explained by limited opportunities for arbitrage across international borders. 
B)  Yes,if prices in Hong Kong are rising more rapidly than prices in Canada. 
C)  Yes,if prices in Hong Kong are rising less rapidly than prices in Canada. 
D)  No,but it can be explained by arbitrage across international borders.

Question 15

What would a depreciation of the Canadian real exchange rate induce Canadian consumers to buy?

Accepted Answer

A)  fewer domestic goods and foreign goods 
B)  more domestic goods,but fewer foreign goods 
C)  fewer domestic goods,but more foreign goods 
D)  more domestic goods and foreign goods 
A)  fewer domestic goods and foreign goods 
B)  more domestic goods,but fewer foreign goods 
C)  fewer domestic goods,but more foreign goods 
D)  more domestic goods and foreign goods

Question 16

Which of the following would be a Canadian foreign portfolio investment?

Accepted Answer

A)  CAE,a Canadian company,builds a new factory near Rome,Italy. 
B)  A Canadian citizen buys shares of stock in companies located in Latvia. 
C)  A Dutch hotel chain opens a new hotel in Canada. 
D)  A citizen of Singapore buys a bond issued by a Canadian corporation. 
A)  CAE,a Canadian company,builds a new factory near Rome,Italy. 
B)  A Canadian citizen buys shares of stock in companies located in Latvia. 
C)  A Dutch hotel chain opens a new hotel in Canada. 
D)  A citizen of Singapore buys a bond issued by a Canadian corporation.

Question 17

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 18

Between 1981 and 1988,what 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 19

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)  Lululemon,a Canadian company,opens an athleticwear store in Jamaica. 
D)  A Canadian citizen buys shares of 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)  Lululemon,a Canadian company,opens an athleticwear store in Jamaica. 
D)  A Canadian citizen buys shares of stock in companies located in Japan.

Question 20

Which statement best describes Canadian net capital outflow and net exports since 1999?

Accepted Answer

A)  Net capital outflow has been positive,and net exports have been negative. 
B)  Net capital outflow and net exports have been positive. 
C)  Net capital outflow and net exports have been negative. 
D)  Net capital outflow has been negative,and net exports have been positive. 
A)  Net capital outflow has been positive,and net exports have been negative. 
B)  Net capital outflow and net exports have been positive. 
C)  Net capital outflow and net exports have been negative. 
D)  Net capital outflow has been negative,and net exports have been positive.

Guido,an Italian citizen,opens and operates a pasta factory in Canada.What is this an example of?

The nominal exchange rate is about 3 Aruban florins 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 nominal exchange rate between the yen and the U.S.dollar is 260 yen per U.S.dollar,and that the nominal exchange rate between the Canadian dollar and the U.S.dollar is 1.30 Canadian dollars per U.S.dollar.How many yen would it take to buy a Canadian dollar?

How do we find the real exchange rate from the nominal exchange rate?

Ivan,a Russian citizen,sells several hundred cases of Russian caviar to a Canadian hotel chain.Which statement best identifies the effects of this transaction?

According to purchasing-power parity,if prices in Canada increase by a larger percentage than prices in Algeria,how does the exchange rate change?

If the nominal exchange rate e is foreign currency per dollar,the domestic price is P,and the foreign price is P*,what is the definition of the real exchange rate?

What do net exports measure?

Suppose the price of a standard pair of sport shoes is €60 in Spain and $85 in Canada,and the current exchange rate is 0.75 euro for one dollar.What is the purchasing-power parity exchange rate of the dollar?

If the Canadian real exchange rate appreciates,what will most likely happen?

What is the formula for investment in an open economy?

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

On behalf of your firm,you make frequent trips to Hong Kong.You notice that you always have to pay more dollars to get enough local currency to get your suits dry-cleaned than you have to pay to get your suits dry-cleaned in Canada.Is this consistent with purchasing-power parity?

What would a depreciation of the Canadian real exchange rate induce Canadian consumers to buy?

Which of the following would be a Canadian foreign portfolio investment?

About what percentage of GDP are Canadian imports?

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

Which of the following would be Canadian foreign direct investment?

Which statement best describes Canadian net capital outflow and net exports since 1999?

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

Guido,an Italian citizen,opens and operates a pasta factory in Canada.What is this an example of?

The nominal exchange rate is about 3 Aruban florins 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 nominal exchange rate between the yen and the U.S.dollar is 260 yen per U.S.dollar,and that the nominal exchange rate between the Canadian dollar and the U.S.dollar is 1.30 Canadian dollars per U.S.dollar.How many yen would it take to buy a Canadian dollar?

How do we find the real exchange rate from the nominal exchange rate?

Ivan,a Russian citizen,sells several hundred cases of Russian caviar to a Canadian hotel chain.Which statement best identifies the effects of this transaction?

According to purchasing-power parity,if prices in Canada increase by a larger percentage than prices in Algeria,how does the exchange rate change?

If the nominal exchange rate e is foreign currency per dollar,the domestic price is P,and the foreign price is P*,what is the definition of the real exchange rate?

What do net exports measure?

Suppose the price of a standard pair of sport shoes is €60 in Spain and $85 in Canada,and the current exchange rate is 0.75 euro for one dollar.What is the purchasing-power parity exchange rate of the dollar?

If the Canadian real exchange rate appreciates,what will most likely happen?

What is the formula for investment in an open economy?

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

On behalf of your firm,you make frequent trips to Hong Kong.You notice that you always have to pay more dollars to get enough local currency to get your suits dry-cleaned than you have to pay to get your suits dry-cleaned in Canada.Is this consistent with purchasing-power parity?

What would a depreciation of the Canadian real exchange rate induce Canadian consumers to buy?

Which of the following would be a Canadian foreign portfolio investment?

About what percentage of GDP are Canadian imports?

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

Which of the following would be Canadian foreign direct investment?

Which statement best describes Canadian net capital outflow and net exports since 1999?

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