Question 1

A country has $50 million of domestic investment and net capital outflow of $15 million. What is saving?

Accepted Answer

A)  $65 million. 
B)  -$65 million. 
C)  $35 million. 
D)  -$35 million. 
A)  $65 million. 
B)  -$65 million. 
C)  $35 million. 
D)  -$35 million. A

Question 2

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?

Accepted Answer

The real exchange rate = nominal exchange rate $\times$ Domestic Price/Foreign price =X .80 euros per dollar 25 dollars/20 euros = 1.

Question 3

According to purchasing power parity, if two countries have the same price level because they have the same prices for all goods and services, then which of the following would equal 1?

Accepted Answer

A)  the real exchange rate, but not the nominal exchange rate 
B)  the nominal exchange rate, but not the real exchange rate 
C)  the real exchange rate and the nominal exchange rate 
D)  neither the real exchange rate nor the nominal exchange rate 
A)  the real exchange rate, but not the nominal exchange rate 
B)  the nominal exchange rate, but not the real exchange rate 
C)  the real exchange rate and the nominal exchange rate 
D)  neither the real exchange rate nor the nominal exchange rate C

Question 4

A Mexican firm exchanges Pesos for U.S. dollars and then uses these dollars to purchase corn from the U.S. This transaction

Accepted Answer

A)  increases Mexican net capital outflow, and increases U.S. net exports. 
B)  increases Mexican net capital outflow, and decreases U.S. net exports. 
C)  decreases Mexican net capital outflow, and increases U.S. net exports. 
D)  decreases Mexican net capital outflow, and decreases U.S. net exports. 
A)  increases Mexican net capital outflow, and increases U.S. net exports. 
B)  increases Mexican net capital outflow, and decreases U.S. net exports. 
C)  decreases Mexican net capital outflow, and increases U.S. net exports. 
D)  decreases Mexican net capital outflow, and decreases U.S. net exports.

Question 5

If the purchasing power of the dollar is always the same at home and abroad, then the nominal exchange rate defined as units of foreign currency per dollar decreases if the U.S. price level rises more than the price level in foreign countries.

Accepted Answer

A) True 
 B)False

Question 6

In an open economy national saving equals domestic investment plus net capital outflow.

Accepted Answer

A) True 
 B)False

Question 7

According to purchasing-power parity theory, the nominal exchange rate between the U.S. and another country should equal the U.S. price level divided by the price level in the foreign country.

Accepted Answer

A) True 
 B)False

Question 8

If Norway sold more goods and services abroad than it purchased from abroad, then it had

Accepted Answer

A)  positive net exports which is a trade surplus. 
B)  positive net exports which is a trade deficit. 
C)  negative net exports which is a trade surplus. 
D)  negative net exports which is a trade deficit. 
A)  positive net exports which is a trade surplus. 
B)  positive net exports which is a trade deficit. 
C)  negative net exports which is a trade surplus. 
D)  negative net exports which is a trade deficit.

Question 9

A Peruvian firm purchases construction equipment made in the U.S. and pays for it with Peruvian currency. This transaction

Accepted Answer

A)  increases U.S. net exports, and increases Peruvian net capital outflow. 
B)  increases U.S. net exports, and decreases Peruvian net capital outflow. 
C)  decreases U.S. net exports, and increases Peruvian net capital outflow. 
D)  decreases U.S. net exports, and decreases Peruvian net capital outflow. 
A)  increases U.S. net exports, and increases Peruvian net capital outflow. 
B)  increases U.S. net exports, and decreases Peruvian net capital outflow. 
C)  decreases U.S. net exports, and increases Peruvian net capital outflow. 
D)  decreases U.S. net exports, and decreases Peruvian net capital outflow.

Question 10

From 2000-2006 net capital outflow as a percent of GDP became a

Accepted Answer

A)  larger positive number. 
B)  smaller positive number. 
C)  larger negative number. 
D)  smaller negative number 
A)  larger positive number. 
B)  smaller positive number. 
C)  larger negative number. 
D)  smaller negative number

Question 11

According to purchasing-power parity, which of the following necessarily equals the ratio of the foreign price level divided by the domestic price level?

Accepted Answer

A)  the real exchange rate, but not the nominal exchange rate 
B)  the nominal exchange rate, but not the real exchange rate 
C)  the real exchange rate and the nominal exchange rate 
D)  neither the real exchange rate nor the nominal exchange rate 
A)  the real exchange rate, but not the nominal exchange rate 
B)  the nominal exchange rate, but not the real exchange rate 
C)  the real exchange rate and the nominal exchange rate 
D)  neither the real exchange rate nor the nominal exchange rate

Question 12

When a French vineyard establishes a distribution center in the U.S., U.S. net capital outflow

Accepted Answer

A)  increases because the foreign company makes a portfolio investment in the U.S. 
B)  declines because the foreign company makes a portfolio investment in the U.S. 
C)  increases because the foreign company makes a direct investment in capital in the U.S. 
D)  declines because the foreign company makes a direct investment in capital in the U.S. 
A)  increases because the foreign company makes a portfolio investment in the U.S. 
B)  declines because the foreign company makes a portfolio investment in the U.S. 
C)  increases because the foreign company makes a direct investment in capital in the U.S. 
D)  declines because the foreign company makes a direct investment in capital in the U.S.

Question 13

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.

Accepted Answer

The purchase of a foreign good by a U.S.

Question 14

Suppose that the inflation rate is higher in Turkey than in the U.S. for the next six months. Then according to purchasing power parity, if exchange rates are given in terms of how many Turkish lira or how many Turkish goods a U.S. dollar buys,

Accepted Answer

A)  the nominal exchange rate rises but the real exchange rate does not. 
B)  the nominal exchange rate does not rise, but the real exchange rate does. 
C)  both the nominal and real exchange rates rise. 
D)  neither the nominal nor the real exchange rate rises. 
A)  the nominal exchange rate rises but the real exchange rate does not. 
B)  the nominal exchange rate does not rise, but the real exchange rate does. 
C)  both the nominal and real exchange rates rise. 
D)  neither the nominal nor the real exchange rate rises.

Question 15

From 1980-1987, U.S. net capital outflow as a percent of GDP became a

Accepted Answer

A)  larger positive number. 
B)  smaller positive number. 
C)  larger negative number. 
D)  smaller negative number. 
A)  larger positive number. 
B)  smaller positive number. 
C)  larger negative number. 
D)  smaller negative number.

Question 16

A country has $20 billion of domestic investment and net capital outflow of $10 billion. What is saving?

Accepted Answer

A)  $10 billion 
B)  $30 billion 
C)  -$20 billion 
D)  -$30 billion 
A)  $10 billion 
B)  $30 billion 
C)  -$20 billion 
D)  -$30 billion

Question 17

From 1960 to about 1975 in the United States, net capital outflow was

Accepted Answer

A)  small but always positive. 
B)  small and sometimes negative and sometimes positive. 
C)  large and positive. 
D)  large but sometimes negative and sometimes positive. 
A)  small but always positive. 
B)  small and sometimes negative and sometimes positive. 
C)  large and positive. 
D)  large but sometimes negative and sometimes positive.

Question 18

If a country has a trade surplus then

Accepted Answer

A) S > I and Y > C + I + G. B) S > I and Y C + I + G. D) S < I and Y < C + I + G. A) S > I and Y > C + I + G. B) S > I and Y C + I + G. D) S < I and Y < C + I + G.

Question 19

Suppose that more British decide to vacation in the U.S. and that the British purchase more U.S. Treasury bonds. Ignoring how payments are made for these purchases,

Accepted Answer

A)  the first action by itself raises U.S. net exports, the second action by itself raises U.S. net capital outflow. 
B)  the first action by itself raises U.S. net exports, the second action by itself lowers U.S. net capital outflow. 
C)  the first action by itself lowers U.S. net exports, the second action by itself raises U.S. net capital outflow. 
D)  the first action by itself lowers U.S. net exports, the second action by itself lowers U.S. net capital outflow. 
A)  the first action by itself raises U.S. net exports, the second action by itself raises U.S. net capital outflow. 
B)  the first action by itself raises U.S. net exports, the second action by itself lowers U.S. net capital outflow. 
C)  the first action by itself lowers U.S. net exports, the second action by itself raises U.S. net capital outflow. 
D)  the first action by itself lowers U.S. net exports, the second action by itself lowers U.S. net capital outflow.

Question 20

A firm in the United Kingdom hires a firm in the U.S. to train its managers. By itself this transaction

Accepted Answer

A)  increases U.S. imports and decreases U.S. net exports. 
B)  increases U.S. imports and increases U.S. net exports. 
C)  increases U.S. exports and decreases U.S. net exports. 
D)  increases U.S. exports and increases U.S. net exports. 
A)  increases U.S. imports and decreases U.S. net exports. 
B)  increases U.S. imports and increases U.S. net exports. 
C)  increases U.S. exports and decreases U.S. net exports. 
D)  increases U.S. exports and increases U.S. net exports.

A country has $50 million of domestic investment and net capital outflow of $15 million. What is saving?

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?

According to purchasing power parity, if two countries have the same price level because they have the same prices for all goods and services, then which of the following would equal 1?

A Mexican firm exchanges Pesos for U.S. dollars and then uses these dollars to purchase corn from the U.S. This transaction

If the purchasing power of the dollar is always the same at home and abroad, then the nominal exchange rate defined as units of foreign currency per dollar decreases if the U.S. price level rises more than the price level in foreign countries.

In an open economy national saving equals domestic investment plus net capital outflow.

According to purchasing-power parity theory, the nominal exchange rate between the U.S. and another country should equal the U.S. price level divided by the price level in the foreign country.

If Norway sold more goods and services abroad than it purchased from abroad, then it had

A Peruvian firm purchases construction equipment made in the U.S. and pays for it with Peruvian currency. This transaction

From 2000-2006 net capital outflow as a percent of GDP became a

According to purchasing-power parity, which of the following necessarily equals the ratio of the foreign price level divided by the domestic price level?

When a French vineyard establishes a distribution center in the U.S., U.S. net capital outflow

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.

Suppose that the inflation rate is higher in Turkey than in the U.S. for the next six months. Then according to purchasing power parity, if exchange rates are given in terms of how many Turkish lira or how many Turkish goods a U.S. dollar buys,

From 1980-1987, U.S. net capital outflow as a percent of GDP became a

A country has $20 billion of domestic investment and net capital outflow of $10 billion. What is saving?

From 1960 to about 1975 in the United States, net capital outflow was

If a country has a trade surplus then

Suppose that more British decide to vacation in the U.S. and that the British purchase more U.S. Treasury bonds. Ignoring how payments are made for these purchases,

A firm in the United Kingdom hires a firm in the U.S. to train its managers. By itself this transaction

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

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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Exam 13: Open-Economy Macroeconomic Models

A country has $50 million of domestic investment and net capital outflow of $15 million. What is saving?

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?

According to purchasing power parity, if two countries have the same price level because they have the same prices for all goods and services, then which of the following would equal 1?

A Mexican firm exchanges Pesos for U.S. dollars and then uses these dollars to purchase corn from the U.S. This transaction

If the purchasing power of the dollar is always the same at home and abroad, then the nominal exchange rate defined as units of foreign currency per dollar decreases if the U.S. price level rises more than the price level in foreign countries.

In an open economy national saving equals domestic investment plus net capital outflow.

According to purchasing-power parity theory, the nominal exchange rate between the U.S. and another country should equal the U.S. price level divided by the price level in the foreign country.

If Norway sold more goods and services abroad than it purchased from abroad, then it had

A Peruvian firm purchases construction equipment made in the U.S. and pays for it with Peruvian currency. This transaction

From 2000-2006 net capital outflow as a percent of GDP became a

According to purchasing-power parity, which of the following necessarily equals the ratio of the foreign price level divided by the domestic price level?

When a French vineyard establishes a distribution center in the U.S., U.S. net capital outflow

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.

Suppose that the inflation rate is higher in Turkey than in the U.S. for the next six months. Then according to purchasing power parity, if exchange rates are given in terms of how many Turkish lira or how many Turkish goods a U.S. dollar buys,

From 1980-1987, U.S. net capital outflow as a percent of GDP became a

A country has $20 billion of domestic investment and net capital outflow of $10 billion. What is saving?

From 1960 to about 1975 in the United States, net capital outflow was

If a country has a trade surplus then

Suppose that more British decide to vacation in the U.S. and that the British purchase more U.S. Treasury bonds. Ignoring how payments are made for these purchases,

A firm in the United Kingdom hires a firm in the U.S. to train its managers. By itself this transaction

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

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters