Exam 18: Open Economy Macroeconomics Basic Concepts: Part A

According to purchasing-power parity,what is the relationship between changes in price levels between two countries and changes in nominal exchange rates?

As measured by the amount of trade it does,has the U.S.economy become more internationalized? Provide two reasons for this change.

Last month a country sold more goods and services to residents of foreign countries than it purchased from them.What does this imply about this country's trade balance?

Suppose that money supply growth continues to be higher in Turkey than it is in the United States.What does purchasing-power parity imply will happen to the real and to the nominal exchange rate?

A country had a net capital outflow of 300 billion euros and exports of 400 billion euros.What was the value of its imports?

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

A country recently had a GDP of $1000 billion.Its consumption expenditures were $650 billion,its government spent $250 billion,and it had domestic investment of $150 billion.What was the value of this country's net capital outflow? Explain how you found your answer.

The nominal exchange rate is 32 Russian rubles per dollar.The price of a bushel of wheat is 260 rubles in Russia and $7 in the U.S. A.What is the real exchange rate? Show your work. B.Can arbitragers make a profit? C.If your answer to B is yes,where would arbitragers buy and where would they sell.

What is the logic behind the theory of purchasing-power parity?

Last year residents of country A purchased $400 billion of foreign assets and $200 of foreign goods.Foreigners purchased $300 billion dollars of country A's assets.What was the value of country A's exports?

While vacationing in Turkey you see a rug you consider purchasing.The seller tells you the rug costs 1,200 Turkish lire. A.If the exchange rate is .60 lira per dollar,how many dollars does the rug cost? B.If the dollar depreciates against the lira,will it take more or fewer dollars to buy the rug? Explain.

While vacationing in Agra,India,the price of one night's stay at your hotel room rises from 6600 rupees to 7200 rupees.If the exchange rate was previously 55 rupees per dollar,what would the exchange rate need to be now in order for the number of dollars you pay for your room to remain the same? Does this imply the rupee depreciated or appreciated against the dollar?

If a country's exports were 500 billion pesos and its imports were 300 billion pesos,what would its trade balance be?

In the U.S.a television costs $400.In South Africa the same television costs 3000 rand (the currency of South Africa).The nominal exchange rate is 8 rand per dollar. A.Find the real exchange rate.Show your work. B.In terms of dollars where is the television cheapest?

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

Last year a country had $700 billion of saving and $900 of investment.This year it had $1000 billion of saving and $800 billion of investment.By how much did net capital outflow change? By how much did net exports change? How is it possible for a country to have saving that is greater than investment?

While on a study abroad program you see a McDonald's in Paris.A combo meal costs 8 euros.The same meal costs $6 in the U.S.and the exchange rate is .75 euros per dollar. A.Find the real exchange rate.Show your work. B.In terms of dollars where is the combo meal cheaper?

If a nation produces more 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?

The Norwegian government uses $500,000 of previously obtained U.S.dollars to buy $500,000 of police cars from a U.S.company. 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?

During 2011 the inflation rate in Brazil was about 6.6% while in the U.S.it was about 3.3%.At the start of 2011 the nominal exchange rate was about 1.7 Brazilian real per U.S.dollar. If purchasing-power parity holds,about what should the nominal exchange rate have been at the end of 2011? Show your work.