Question 1

A country has $3 billion of domestic investment and net exports of -$2 billion. What is its saving?

Accepted Answer

A)  -$1 billion 
B)  -$2 billion 
C)  $1 billion 
D)  $2 billion 
A)  -$1 billion 
B)  -$2 billion 
C)  $1 billion 
D)  $2 billion

Question 2

A U.S. firm buys apples from New Zealand with New Zealand dollars it got in exchange for U.S. dollars. New Zealand residents then use these dollars to purchase oranges from the U.S. Which of the following increases?

Accepted Answer

A)  New Zealand's net capital outflow and New Zealand's net exports 
B)  only New Zealand's net exports 
C)  only New Zealand's net capital outflow 
D)  neither New Zealand's net exports nor New Zealand's capital outflow 
A)  New Zealand's net capital outflow and New Zealand's net exports 
B)  only New Zealand's net exports 
C)  only New Zealand's net capital outflow 
D)  neither New Zealand's net exports nor New Zealand's capital outflow

Question 3

Which of the following does purchasing-power parity imply?

Accepted Answer

A)  the foreign price level times the nominal exchange rate given as amount of foreign currency per dollar) equals the U.S. price level. 
B)  The price of domestic goods relative to foreign goods cannot change. 
C)  The nominal exchange rate is the ratio of foreign prices to U.S. prices. 
D)  All of the above are correct. 
A)  the foreign price level times the nominal exchange rate given as amount of foreign currency per dollar) equals the U.S. price level. 
B)  The price of domestic goods relative to foreign goods cannot change. 
C)  The nominal exchange rate is the ratio of foreign prices to U.S. prices. 
D)  All of the above are correct.

Question 4

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?

Accepted Answer

Net exports were negative because the va

Question 5

In France a loaf of bread costs 3 euros. In Great Britain a loaf of bread costs 4 pounds. If the exchange rate is .9 pounds per euro, what is the real exchange rate?

Accepted Answer

A)  4/2.7 loaves of British bread per loaf of French bread 
B)  3.6/3 loaves of British bread per loaf of French bread 
C)  3/3.6 loaves of British bread per loaf of French bread 
D)  2.7/4 loaves of British bread per loaf of French bread 
A)  4/2.7 loaves of British bread per loaf of French bread 
B)  3.6/3 loaves of British bread per loaf of French bread 
C)  3/3.6 loaves of British bread per loaf of French bread 
D)  2.7/4 loaves of British bread per loaf of French bread

Question 6

U.S. international trade has

Accepted Answer

A)  decreased because of a decrease in the trade of goods with a high value per pound. 
B)  decreased because of an increase in the trade of goods with a high value per pound. 
C)  increased because of a decrease in trade of goods with a high value per pound. 
D)  increased because of an increase in trade of goods with a high value per pound. 
A)  decreased because of a decrease in the trade of goods with a high value per pound. 
B)  decreased because of an increase in the trade of goods with a high value per pound. 
C)  increased because of a decrease in trade of goods with a high value per pound. 
D)  increased because of an increase in trade of goods with a high value per pound.

Question 7

Jen and Alica are both U.S. citizens. Jen opens a cafe in France. Alicia buys equipment from a company in Canada to use in her factory. Whose action is an example of U.S. foreign direct investment?

Accepted Answer

A)  Jen's and Alica's 
B)  Jen's but not Alicia's 
C)  Alicia's but not Jen's 
D)  Neither Anthony's nor Tom's. 
A)  Jen's and Alica's 
B)  Jen's but not Alicia's 
C)  Alicia's but not Jen's 
D)  Neither Anthony's nor Tom's.

Question 8

In which period was most of the change in U.S. net capital outflow due to an increase in investment in the U.S.?

Accepted Answer

A)  1980-1987 
B)  1991-2000 
C)  2000-2012 
D)  None of the above are correct. 
A)  1980-1987 
B)  1991-2000 
C)  2000-2012 
D)  None of the above are correct.

Question 9

If U.S. residents purchase $600 billion worth of foreign assets and foreigners purchase $300 billion worth of U.S. assets,

Accepted Answer

A)  U.S. net capital outflow is $300 billion; capital is flowing into the U.S. 
B)  U.S. net capital outflow is $300 billion; capital is flowing out of the U.S. 
C)  U.S. net capital outflow is -$300 billion; capital is flowing into the U.S. 
D)  U.S. net capital outflow is -$300 billion; capital is flowing out of the U.S. 
A)  U.S. net capital outflow is $300 billion; capital is flowing into the U.S. 
B)  U.S. net capital outflow is $300 billion; capital is flowing out of the U.S. 
C)  U.S. net capital outflow is -$300 billion; capital is flowing into the U.S. 
D)  U.S. net capital outflow is -$300 billion; capital is flowing out of the U.S.

Question 10

Other things the same, a country could move from having a trade deficit to having a trade surplus if either

Accepted Answer

A)  saving rose or domestic investment rose. 
B)  saving rose or domestic investment fell. 
C)  saving fell or domestic investment rose. 
D)  saving fell or domestic investment fell. 
A)  saving rose or domestic investment rose. 
B)  saving rose or domestic investment fell. 
C)  saving fell or domestic investment rose. 
D)  saving fell or domestic investment fell.

Question 11

Consider an identical basket of goods in both the U.S. and Taiwan. For a given nominal exchange rate, in which case is it certain that the U.S. real exchange rate with Taiwan falls?

Accepted Answer

A)  the price of the basket of goods rises in the U.S. and Taiwan. 
B)  the price of the basket of goods rises in the U.S. and falls in Taiwan. 
C)  the price of the basket of goods falls in the U.S. and rises in Taiwan. 
D)  the price of the basket of goods falls in both the U.S. and Taiwan. 
A)  the price of the basket of goods rises in the U.S. and Taiwan. 
B)  the price of the basket of goods rises in the U.S. and falls in Taiwan. 
C)  the price of the basket of goods falls in the U.S. and rises in Taiwan. 
D)  the price of the basket of goods falls in both the U.S. and Taiwan.

Question 12

Most of the change from 1991 to 2000 in U.S. net capital outflow as a percent of GDP was due to an)

Accepted Answer

A)  decrease in U.S. investment. 
B)  decrease in U.S. national saving. 
C)  increase in U.S. investment. 
D)  increase in U.S. national saving. 
A)  decrease in U.S. investment. 
B)  decrease in U.S. national saving. 
C)  increase in U.S. investment. 
D)  increase in U.S. national saving.

Question 13

If purchasing-power parity holds, the price level in the U.S. is 140, and the price level in Canada is 120, which of the following is true?

Accepted Answer

A)  the real exchange rate is 120/140. 
B)  the real exchange rate is 140/120. 
C)  the nominal exchange rate is 120/140 
D)  the nominal exchange rate is 140/120 
A)  the real exchange rate is 120/140. 
B)  the real exchange rate is 140/120. 
C)  the nominal exchange rate is 120/140 
D)  the nominal exchange rate is 140/120

Question 14

If purchasing-power parity holds, then the value of the

Accepted Answer

A)  nominal exchange rate is equal to one. A dollar buys as many goods in the U.S. as it does overseas. 
B)  nominal exchange rate is equal to one. A dollar buys the quantity of foreign currency equal to the U.S. price level divided by the foreign country's price level. 
C)  real exchange rate is equal to one. A dollar buys as many goods in the U.S. as it does overseas. 
D)  real exchange rate is equal to one. A dollar buys the quantity of foreign currency equal to the U.S. price level divided by the foreign country's price level. 
A)  nominal exchange rate is equal to one. A dollar buys as many goods in the U.S. as it does overseas. 
B)  nominal exchange rate is equal to one. A dollar buys the quantity of foreign currency equal to the U.S. price level divided by the foreign country's price level. 
C)  real exchange rate is equal to one. A dollar buys as many goods in the U.S. as it does overseas. 
D)  real exchange rate is equal to one. A dollar buys the quantity of foreign currency equal to the U.S. price level divided by the foreign country's price level.

Question 15

Suppose the real exchange rate is 1.25 pounds of bananas in Guatemala per pound of bananas in the U.S. If a pound of bananas in the U.S. costs $.50, and the exchange rate is 10 Guatemalan Quetzals per dollar, what is the price of bananas in Guatemala?

Accepted Answer

A)  2.50 Quetzals per pound 
B)  4.00 Quetzals per pound 
C)  5.75 Quetzals per pound 
D)  6.25 Quetzals per pound 
A)  2.50 Quetzals per pound 
B)  4.00 Quetzals per pound 
C)  5.75 Quetzals per pound 
D)  6.25 Quetzals per pound

Question 16

According to purchasing-power parity, if it took 58 Indian rupees to buy a dollar today, but it took 55 to buy it a year ago, then the dollar has

Accepted Answer

A)  appreciated, indicating inflation was higher in the U.S. than in India. 
B)  appreciated, indicating inflation was lower in the U.S. than in India. 
C)  depreciated, indicating inflation was higher in the U.S. than in India. 
D)  depreciated, indicating inflation was lower in the U.S. than in India. 
A)  appreciated, indicating inflation was higher in the U.S. than in India. 
B)  appreciated, indicating inflation was lower in the U.S. than in India. 
C)  depreciated, indicating inflation was higher in the U.S. than in India. 
D)  depreciated, indicating inflation was lower in the U.S. than in India.

Question 17

A Turkish company exchanges liras for dollars and then uses the dollars to purchase medical equipment from a U.S. company. These transactions

Accepted Answer

A)  increase U.S. net exports, and increase Turkish net capital outflow. 
B)  increase U.S. net exports, and decrease Turkish net capital outflow. 
C)  decrease U.S. net exports, and increase Turkish net capital outflow. 
D)  decrease U.S. net exports, and decrease Turkish net capital outflow. 
A)  increase U.S. net exports, and increase Turkish net capital outflow. 
B)  increase U.S. net exports, and decrease Turkish net capital outflow. 
C)  decrease U.S. net exports, and increase Turkish net capital outflow. 
D)  decrease U.S. net exports, and decrease Turkish net capital outflow.

Question 18

The exchange rate is 1.5 Bosnian markas per U.S. dollar. The price of a refrigerator in Bosnia is 1,200 markas while in the U.S. it is $1,000. The real exchange rate is

Accepted Answer

A)  9/5 
B)  5/4 
C)  4/5 
D)  None of the above are correct. 
A)  9/5 
B)  5/4 
C)  4/5 
D)  None of the above are correct.

Question 19

If a country had a trade surplus of $50 billion and then its exports rose by $30 billion and its imports rose by $20 billion, its net exports would now be

Accepted Answer

A)  $0 billion. 
B)  $20 billion. 
C)  $40 billion. 
D)  $60 billion. 
A)  $0 billion. 
B)  $20 billion. 
C)  $40 billion. 
D)  $60 billion.

Question 20

If business opportunities in a country become relatively less attractive relative to those of other countries, then

Accepted Answer

A)  both its net exports and net capital outflows fall. 
B)  both its net exports and net capital outflows rise. 
C)  its net exports fall and its net capital outflows fall. 
D)  its net exports rise and its net capital outflows fall 
A)  both its net exports and net capital outflows fall. 
B)  both its net exports and net capital outflows rise. 
C)  its net exports fall and its net capital outflows fall. 
D)  its net exports rise and its net capital outflows fall

A country has $3 billion of domestic investment and net exports of -$2 billion. What is its saving?

A U.S. firm buys apples from New Zealand with New Zealand dollars it got in exchange for U.S. dollars. New Zealand residents then use these dollars to purchase oranges from the U.S. Which of the following increases?

Which of the following does purchasing-power parity imply?

In France a loaf of bread costs 3 euros. In Great Britain a loaf of bread costs 4 pounds. If the exchange rate is .9 pounds per euro, what is the real exchange rate?

U.S. international trade has

Jen and Alica are both U.S. citizens. Jen opens a cafe in France. Alicia buys equipment from a company in Canada to use in her factory. Whose action is an example of U.S. foreign direct investment?

In which period was most of the change in U.S. net capital outflow due to an increase in investment in the U.S.?

If U.S. residents purchase $600 billion worth of foreign assets and foreigners purchase $300 billion worth of U.S. assets,

Other things the same, a country could move from having a trade deficit to having a trade surplus if either

Consider an identical basket of goods in both the U.S. and Taiwan. For a given nominal exchange rate, in which case is it certain that the U.S. real exchange rate with Taiwan falls?

Most of the change from 1991 to 2000 in U.S. net capital outflow as a percent of GDP was due to an)

If purchasing-power parity holds, the price level in the U.S. is 140, and the price level in Canada is 120, which of the following is true?

If purchasing-power parity holds, then the value of the

Suppose the real exchange rate is 1.25 pounds of bananas in Guatemala per pound of bananas in the U.S. If a pound of bananas in the U.S. costs $.50, and the exchange rate is 10 Guatemalan Quetzals per dollar, what is the price of bananas in Guatemala?

According to purchasing-power parity, if it took 58 Indian rupees to buy a dollar today, but it took 55 to buy it a year ago, then the dollar has

A Turkish company exchanges liras for dollars and then uses the dollars to purchase medical equipment from a U.S. company. These transactions

The exchange rate is 1.5 Bosnian markas per U.S. dollar. The price of a refrigerator in Bosnia is 1,200 markas while in the U.S. it is $1,000. The real exchange rate is

If a country had a trade surplus of $50 billion and then its exports rose by $30 billion and its imports rose by $20 billion, its net exports would now be

If business opportunities in a country become relatively less attractive relative to those of other countries, then

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

A country has $3 billion of domestic investment and net exports of -$2 billion. What is its saving?

A U.S. firm buys apples from New Zealand with New Zealand dollars it got in exchange for U.S. dollars. New Zealand residents then use these dollars to purchase oranges from the U.S. Which of the following increases?

Which of the following does purchasing-power parity imply?

In France a loaf of bread costs 3 euros. In Great Britain a loaf of bread costs 4 pounds. If the exchange rate is .9 pounds per euro, what is the real exchange rate?

U.S. international trade has

Jen and Alica are both U.S. citizens. Jen opens a cafe in France. Alicia buys equipment from a company in Canada to use in her factory. Whose action is an example of U.S. foreign direct investment?

In which period was most of the change in U.S. net capital outflow due to an increase in investment in the U.S.?

If U.S. residents purchase $600 billion worth of foreign assets and foreigners purchase $300 billion worth of U.S. assets,

Other things the same, a country could move from having a trade deficit to having a trade surplus if either

Consider an identical basket of goods in both the U.S. and Taiwan. For a given nominal exchange rate, in which case is it certain that the U.S. real exchange rate with Taiwan falls?

Most of the change from 1991 to 2000 in U.S. net capital outflow as a percent of GDP was due to an)

If purchasing-power parity holds, the price level in the U.S. is 140, and the price level in Canada is 120, which of the following is true?

If purchasing-power parity holds, then the value of the

Suppose the real exchange rate is 1.25 pounds of bananas in Guatemala per pound of bananas in the U.S. If a pound of bananas in the U.S. costs $.50, and the exchange rate is 10 Guatemalan Quetzals per dollar, what is the price of bananas in Guatemala?

According to purchasing-power parity, if it took 58 Indian rupees to buy a dollar today, but it took 55 to buy it a year ago, then the dollar has

A Turkish company exchanges liras for dollars and then uses the dollars to purchase medical equipment from a U.S. company. These transactions

The exchange rate is 1.5 Bosnian markas per U.S. dollar. The price of a refrigerator in Bosnia is 1,200 markas while in the U.S. it is $1,000. The real exchange rate is

If a country had a trade surplus of $50 billion and then its exports rose by $30 billion and its imports rose by $20 billion, its net exports would now be

If business opportunities in a country become relatively less attractive relative to those of other countries, then

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