Exam 18: Open Economy Macroeconomics Basic Concepts: Part A

What does purchasing-power parity imply about the real exchange rate? Explain what this means.

Last year a country sold $500 billion euros worth of goods to foreigners and had a trade deficit of $100 billion euros.What was the value of its imports?

If a nation produces less than it spends what do we know about: A.its net exports? B.its net capital outflow? C.its saving in relation to its domestic investment?

In the first quarter of 2015 the U.S.had a trade deficit.In the first quarter of 2016 exports fell and imports rose.According to these numbers what happened to net exports?

Colonial America had little industry and so had mostly raw materials to export.At the same time,there were many opportunities to purchase capital goods and earn a high rate of return because there was little existing capital so that the marginal product of capital was relatively high.What does this suggest about net exports and net capital outflow in colonial America?

A U.S.grocery store chain bought $800,000 worth of Kenyan currency from a bank in Kenya.It then used these funds to buy $800,000 worth of coffee from Kenyan coffee growers. As a result of this exchange,by how much and in which direction did: A.U.S.net exports change? B.U.S.net capital outflow change?

Assuming purchasing-power parity holds and that over a period of five years the dollar had appreciated relative to the currency of Country X,what would explain the appreciation of the dollar?

A farm equipment retailer in Azerbaijan exchanges Azerbaijan manats (the currency of Azerbaijan)for $300,000 a bank in Azerbaijan was holding.It uses the $300,000 to buy farm equipment from a U.S.company.The U.S.company deposits half of these funds in a U.S.bank and exchanges the other half for euros from a bank in London. As a result of these transactions,by how much,if at all,and in which direction did: A.U.S.net exports change? B.U.S.net capital outflow change?

A country recently had $800 billion worth of domestic investment and its residents purchased $400 billion worth of foreign assets.If foreigners purchased $100 billion of this country's assets,what was this country's saving? Explain how your found your answer.

Suppose that Bill,a resident of the U.S. ,buys software from a company in Japan.Explain why and in what directions this changes U.S.net exports and U.S.net capital outflow.

Last year residents of Country A purchased $600 billion of foreign assets.Foreigners purchased $425 billion dollars of assets and $375 billion of goods and services from country A.What was the value of Country A's imports?

List the factors that might influence a country's exports,imports,and trade balance.

Last year a country had $700 billion of saving and $900 of investment.What was its net capital outflow? How is it possible for a country to have investment that exceeds saving?

Can purchasing-power parity be used to explain the fact that the U.S.dollar depreciated by more than 50 percent against the German mark between 1970 and 1998,but appreciated by more than 100 percent against the Italian lira during the same period? Defend your answer.

A U.S.firm called EcoWind produces windmills for households to generate electricity.It uses 25,000 recently obtained pesos to buy copper from a mining company in Argentina.As a result of this exchange,by how much,if at all,and in which direction did: A.U.S.net exports change? B.U.S.net capital outflow change?

A country recently had saving of 250 billion euro and domestic investment of 400 billion euro.What was the value of this country's net exports? Show your work.

A department store chain in Japan uses yen to purchase 500,000 U.S.dollars from a U.S.bank.It then uses these dollars to buy DVDs from a U.S.filmmaker.As a result of these transactions: A.By how much and in what direction did U.S.net exports change? B.By how much and in which direction did U.S.net capital outflow change?

Suppose that a country has $120 billion of national saving,and $80 billion of domestic investment.Is this possible? Where did the other $40 billion of national savings go?

The nominal exchange rate is 3 Malaysian ringgits per dollar.The real exchange rate is 8/5.If a Big Mac costs 7.5 ringgits in Malaysia,how much does a Big Mac cost in the U.S.? Show your work.

A dozen eggs cost $2 in the U.S.and 12 pesos in Argentina.If the real exchange rate is 5/6,what is the nominal exchange rate? Show your work.