Question 1

According to purchasing-power parity, if prices in the United States increase by a smaller percentage than prices in the United Kingdom, then the

Accepted Answer

A)  real exchange rate rises. 
B)  nominal exchange rate rises. 
C)  real exchange rate falls. 
D)  nominal exchange rate falls. 
A)  real exchange rate rises. 
B)  nominal exchange rate rises. 
C)  real exchange rate falls. 
D)  nominal exchange rate falls.

Question 2

A farmer in Mexico purchases a tractor made in the U.S. This purchase is an example of

Accepted Answer

A)  a U.S. import and a Mexican export 
B)  a U.S. export and a Mexican import 
C)  an export for both the U.S. and Mexico 
D)  an import for both Mexico and the U.S. 
A)  a U.S. import and a Mexican export 
B)  a U.S. export and a Mexican import 
C)  an export for both the U.S. and Mexico 
D)  an import for both Mexico and the U.S.

Question 3

If citizens of a country are not saving much, it is better to

Accepted Answer

A)  force citizens to save. 
B)  reduce investment. 
C)  have foreigners invest in the domestic economy than no one at all. 
D)  to prevent opportunities for citizens to buy capital assets abroad. 
A)  force citizens to save. 
B)  reduce investment. 
C)  have foreigners invest in the domestic economy than no one at all. 
D)  to prevent opportunities for citizens to buy capital assets abroad.

Question 4

A country has $100 million of net exports and $170 million of saving. Net capital outflow is

Accepted Answer

A)  $70 million and domestic investment is $170 million. 
B)  $70 million and domestic investment is $270 million. 
C)  $100 million and domestic investment is $70 million. 
D)  None of the above is correct. 
A)  $70 million and domestic investment is $170 million. 
B)  $70 million and domestic investment is $270 million. 
C)  $100 million and domestic investment is $70 million. 
D)  None of the above is correct.

Question 5

Other things the same, if the exchange rate changes from 6 Chinese yuan per dollar to 7 Chinese yuan per dollar, then the dollar

Accepted Answer

A)  appreciates and buys more Chinese goods. 
B)  appreciates and buys fewer Chinese goods. 
C)  depreciates and buys more Chinese goods. 
D)  depreciates and buys fewer Chinese goods. 
A)  appreciates and buys more Chinese goods. 
B)  appreciates and buys fewer Chinese goods. 
C)  depreciates and buys more Chinese goods. 
D)  depreciates and buys fewer Chinese goods.

Question 6

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

Accepted Answer

Yes.
reduced transportation co

Question 7

If a country were to save more, but its domestic investment remained the same, then which of the following would rise?

Accepted Answer

A)  both net capital outflow and net exports 
B)  net capital outflow but not net exports 
C)  net exports but not net exports 
D)  neither net exports nor net capital outflow 
A)  both net capital outflow and net exports 
B)  net capital outflow but not net exports 
C)  net exports but not net exports 
D)  neither net exports nor net capital outflow

Question 8

A U.S. citizen buys bonds issued by an automobile manufacturer in Japan. Her expenditures are U.S.

Accepted Answer

A)  foreign direct investment that increase U.S. net capital outflow. 
B)  foreign direct investment that decrease U.S. net capital outflow. 
C)  foreign portfolio investment that increase U.S. net capital outflow. 
D)  foreign portfolio investment that decrease U.S. net capital outflow. 
A)  foreign direct investment that increase U.S. net capital outflow. 
B)  foreign direct investment that decrease U.S. net capital outflow. 
C)  foreign portfolio investment that increase U.S. net capital outflow. 
D)  foreign portfolio investment that decrease U.S. net capital outflow.

Question 9

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.

Accepted Answer

This country had saving of $1,100 billio

Question 10

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.

Accepted Answer

A. 1200 lire = $x times .60 li

Question 11

Other things the same, if U.S. net capital outflow rises, so does U.S. saving.

Accepted Answer

A) True 
 B)False

Question 12

Suppose the real exchange rate is 3/4 gallon of country A's gasoline per gallon of U.S. gasoline, a gallon of U.S. gasoline costs $3.00 U.S., and a gallon of gas in country A costs 6 units of their currency. What is the nominal exchange rate?

Accepted Answer

A)  3/8 of a unit of country A's currency per dollar. 
B)  3/2 units of country A's currency per dollar. 
C)  8/3 units of country A's currency per dollar. 
D)  None of the above is correct. 
A)  3/8 of a unit of country A's currency per dollar. 
B)  3/2 units of country A's currency per dollar. 
C)  8/3 units of country A's currency per dollar. 
D)  None of the above is correct.

Question 13

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 14

International trade

Accepted Answer

A)  raises the standard of living in all trading countries. 
B)  lowers the standard of living in all trading countries. 
C)  leaves the standard of living unchanged. 
D)  raises the standard of living for importing countries and lowers it for exporting countries. 
A)  raises the standard of living in all trading countries. 
B)  lowers the standard of living in all trading countries. 
C)  leaves the standard of living unchanged. 
D)  raises the standard of living for importing countries and lowers it for exporting countries.

Question 15

A U.S. firm opens a factory that produces power tools in Korea.

Accepted Answer

A)  This increases U.S. net capital outflow and decreases Korean net capital outflow. 
B)  This decreases U.S. net capital outflow and increases Korean net capital outflow. 
C)  This increases only U.S. net capital outflow. 
D)  This increases only Korean net capital outflow. 
A)  This increases U.S. net capital outflow and decreases Korean net capital outflow. 
B)  This decreases U.S. net capital outflow and increases Korean net capital outflow. 
C)  This increases only U.S. net capital outflow. 
D)  This increases only Korean net capital outflow.

Question 16

If the exchange rate is .70 euro per dollar, the price of an MP3 player in Paris is 150 euros and the price of an MP3 player in the U.S. is $150, then what is the real exchange rate?

Accepted Answer

A)  1/.70 French MP3 players per U.S. MP3 player 
B)  1 French MP3 players per U.S. MP3 player 
C)  .70 French MP3 players per U.S. MP3 player. 
D)  None of the above are correct. 
A)  1/.70 French MP3 players per U.S. MP3 player 
B)  1 French MP3 players per U.S. MP3 player 
C)  .70 French MP3 players per U.S. MP3 player. 
D)  None of the above are correct.

Question 17

According to purchasing-power parity, if a basket of goods costs $100 in the U.S. and the same basket costs 800 pesos in Argentina, then what is the nominal exchange rate?

Accepted Answer

A)  8 pesos per dollar 
B)  1 peso per dollar 
C)  1/8 peso per dollar 
D)  none of the above is correct 
A)  8 pesos per dollar 
B)  1 peso per dollar 
C)  1/8 peso per dollar 
D)  none of the above is correct

Question 18

According to purchasing-power parity what should the nominal exchange rate between the U.S. and another country be equal to?

Accepted Answer

A)  1 
B)  the real exchange rate between the U.S. and that country 
C)  the price level in the U.S. divided by the price level in the other country 
D)  the price level in the other country divided by the price level in the U.S. 
A)  1 
B)  the real exchange rate between the U.S. and that country 
C)  the price level in the U.S. divided by the price level in the other country 
D)  the price level in the other country divided by the price level in the U.S.

Question 19

If the U.S. price level is increasing by 3 percent annually and the Japanese price level is increasing by 1 percent annually, then according to purchasing-power parity, by about what percent would the nominal exchange rate be changing?

Accepted Answer

A)  decreasing by 4 percent 
B)  decreasing by 2 percent 
C)  increasing by 4 percent 
D)  increasing by 2 percent 
A)  decreasing by 4 percent 
B)  decreasing by 2 percent 
C)  increasing by 4 percent 
D)  increasing by 2 percent

Question 20

In an open economy, national saving can be less than investment.

Accepted Answer

A) True 
 B)False

According to purchasing-power parity, if prices in the United States increase by a smaller percentage than prices in the United Kingdom, then the

A farmer in Mexico purchases a tractor made in the U.S. This purchase is an example of

If citizens of a country are not saving much, it is better to

A country has $100 million of net exports and $170 million of saving. Net capital outflow is

Other things the same, if the exchange rate changes from 6 Chinese yuan per dollar to 7 Chinese yuan per dollar, then the dollar

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

If a country were to save more, but its domestic investment remained the same, then which of the following would rise?

A U.S. citizen buys bonds issued by an automobile manufacturer in Japan. Her expenditures are U.S.

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.

Other things the same, if U.S. net capital outflow rises, so does U.S. saving.

Suppose the real exchange rate is 3/4 gallon of country A's gasoline per gallon of U.S. gasoline, a gallon of U.S. gasoline costs $3.00 U.S., and a gallon of gas in country A costs 6 units of their currency. What is the nominal exchange rate?

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,

International trade

A U.S. firm opens a factory that produces power tools in Korea.

If the exchange rate is .70 euro per dollar, the price of an MP3 player in Paris is 150 euros and the price of an MP3 player in the U.S. is $150, then what is the real exchange rate?

According to purchasing-power parity, if a basket of goods costs $100 in the U.S. and the same basket costs 800 pesos in Argentina, then what is the nominal exchange rate?

According to purchasing-power parity what should the nominal exchange rate between the U.S. and another country be equal to?

If the U.S. price level is increasing by 3 percent annually and the Japanese price level is increasing by 1 percent annually, then according to purchasing-power parity, by about what percent would the nominal exchange rate be changing?

In an open economy, national saving can be less than investment.

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 and Its Natural Rate

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 Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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Exam 13: Open-Economy Macroeconomics: Basic Concepts

According to purchasing-power parity, if prices in the United States increase by a smaller percentage than prices in the United Kingdom, then the

A farmer in Mexico purchases a tractor made in the U.S. This purchase is an example of

If citizens of a country are not saving much, it is better to

A country has $100 million of net exports and $170 million of saving. Net capital outflow is

Other things the same, if the exchange rate changes from 6 Chinese yuan per dollar to 7 Chinese yuan per dollar, then the dollar

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

If a country were to save more, but its domestic investment remained the same, then which of the following would rise?

A U.S. citizen buys bonds issued by an automobile manufacturer in Japan. Her expenditures are U.S.

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.

Other things the same, if U.S. net capital outflow rises, so does U.S. saving.

Suppose the real exchange rate is 3/4 gallon of country A's gasoline per gallon of U.S. gasoline, a gallon of U.S. gasoline costs $3.00 U.S., and a gallon of gas in country A costs 6 units of their currency. What is the nominal exchange rate?

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,

International trade

A U.S. firm opens a factory that produces power tools in Korea.

If the exchange rate is .70 euro per dollar, the price of an MP3 player in Paris is 150 euros and the price of an MP3 player in the U.S. is $150, then what is the real exchange rate?

According to purchasing-power parity, if a basket of goods costs $100 in the U.S. and the same basket costs 800 pesos in Argentina, then what is the nominal exchange rate?

According to purchasing-power parity what should the nominal exchange rate between the U.S. and another country be equal to?

If the U.S. price level is increasing by 3 percent annually and the Japanese price level is increasing by 1 percent annually, then according to purchasing-power parity, by about what percent would the nominal exchange rate be changing?

In an open economy, national saving can be less than investment.

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 and Its Natural Rate

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 Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters