Exam 18: Open Economy Macroeconomics Basic Concepts: Part A

A country recently had GDP of $1,200 billion.Its consumption expenditures were $700 billion,its government spent $200 billion,and it had domestic investment of $175 billion.What was the value of this country's net capital outflow? Show your work.

A U.S.mutual fund uses $1 million to buy yen from a Japanese bank.It then uses these yen to buy stocks in a Japanese electronics firm.The Japanese electronic firm then exchanges the $1 million dollars of yen for dollars from a U.S.bank.It uses these dollars to buy equipment manufactured by a company located in the U.S. As a result of these exchanges,by how much,if at all,and in which direction does: A.U.S.net exports change? B.U.S.net capital outflow change?

A country recently had a trade deficit of 350 billion euros.Its residents also purchased 400 billion euros of foreign assets.What was the value of this country's assets purchased by foreigners?

A pound of steak costs $10 in the U.S.and 56.25 riyals (the currency of Saudi Arabia)in Saudi Arabia.If the real exchange rate is 2/3,what is the nominal exchange rate? Show your work.

A country recently had saving of 300 billion euros and domestic investment of 200 billion euros.What was the value of this country's net exports? Explain how you found your answer.

A U.S.bank loaned a Canadian oil company 1 million U.S.dollars.The Canadian company then used the entire loan to buy mining equipment from a U.S.company. As a result of these transactions,by how much and in which direction did: A.U.S.net exports change? B.U.S.net capital outflow change?

The price level in Country A is 250.The price level in Country B is 300.If purchasing-power parity holds,what is the nominal value of Country A's currency in the market for foreign exchange with Country B? Show your work.

A country recently had a trade deficit of $2.5 trillion and purchased $3 trillion of foreign assets.How many of its assets did foreigners purchase?

While vacationing in Italy,you see an interesting meal on a menu.The price is 24 euros. A.If the exchange rate is .80 euros per dollar,how many dollars would you have to give up to buy the meal? B.If the dollar appreciated against the euro,but the price of the meal remained 24 euro,would the meal cost more or fewer dollars? Explain.

A bushel of apples costs $15.00 in the U.S.The same apples cost 1,600 yen in Japan.If the exchange rate is 80 yen per dollar,is there a possibility for arbitrage? Explain and defend your answer.As part of your defense,find the real exchange rate.

While on vacation in Europe you notice that a tablet computer is selling for 600 euros in France and for 533 pounds in Britain.You also know that the exchange rates are .75 euros per dollar and .65 British pounds per dollar.Where is the number of dollars you would pay for the tablet lower? How many dollars would you have to pay to buy it there?

How do the nominal exchange rate and the real exchange rate differ?

A certain cell phone sells for 2400 yuan in China and for $300 in the U.S.The nominal exchange rate is 6.5 yuan per dollar. A.Find the real exchange rate.Show your work. B.In terms of dollars where is the cell phone cheaper?

A U.S.mutual fund buys stock issued by a corporation in Colombia.A U.S.grocery store chain builds and manages a new warehouse in Honduras.Which one(s)of these is foreign direct investment? Which one(s)would be taken into account when computing U.S.net capital outflows?

Last year country A's residents purchased $700 billion of goods and services from and sold $500 billion of goods and services to residents of foreign countries.Its domestic investment was $1,100.What was country A's saving? Show your work.

Suppose a bottle of wine costs 20 euros in France and 25 dollars in the United States.If the exchange rate is .80 euros per dollar,what is the real exchange rate?

Suppose that a U.S.dollar buys more gold in Australia than it buys in Russia.What does purchasing-power parity imply should happen?

Why are net exports and net capital outflow always equal?

A pair of hiking boots costs $120 in the U.S. ,if the real exchange rate is 6/5 and the nominal exchange rate is 2 Brazilian reais per dollar,what is the price of the same hiking boots in Brazil? Show your work.

A quality men's suit in the U.S.costs $400.The same suit costs 300 British pounds in the U.K.The nominal exchange rate is .60 pounds per dollar. A.Find the real exchange rate.Show your work. B.In terms of dollars where is the suit cheaper?