Question 1

If Germany purchased more goods and services abroad than it sold abroad last year, 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 2

If U.S. consumers decrease their demand for cell phones from Finland, then other things the same Finland's

Accepted Answer

A)  exports and net exports fall. 
B)  exports fall and net exports rise. 
C)  imports and net exports fall. 
D)  imports fall and net exports rise. 
A)  exports and net exports fall. 
B)  exports fall and net exports rise. 
C)  imports and net exports fall. 
D)  imports fall and net exports rise.

Question 3

According to purchasing-power parity, inflation in the U.S. causes the dollar to

Accepted Answer

A)  depreciate relative to all other currencies. 
B)  depreciate relative to currencies of countries that have lower inflation rates. 
C)  appreciate relative to all other countries. 
D)  appreciate relative to currencies of countries that have lower inflation rates. 
A)  depreciate relative to all other currencies. 
B)  depreciate relative to currencies of countries that have lower inflation rates. 
C)  appreciate relative to all other countries. 
D)  appreciate relative to currencies of countries that have lower inflation rates.

Question 4

A country has a trade deficit. Its

Accepted Answer

A)  net capital outflow must be positive, and saving is larger than investment. 
B)  net capital outflow must be positive and saving is smaller than investment. 
C)  net capital outflow must be negative and saving is larger than investment. 
D)  net capital outflow must be negative and saving is smaller than investment. 
A)  net capital outflow must be positive, and saving is larger than investment. 
B)  net capital outflow must be positive and saving is smaller than investment. 
C)  net capital outflow must be negative and saving is larger than investment. 
D)  net capital outflow must be negative and saving is smaller than investment.

Question 5

One year a country has positive net exports. The next year it still has positive but larger net exports

Accepted Answer

A)  its trade surplus fell. 
B)  its trade surplus rose. 
C)  its trade deficit fell. 
D)  its trade deficit rose 
A)  its trade surplus fell. 
B)  its trade surplus rose. 
C)  its trade deficit fell. 
D)  its trade deficit rose

Question 6

Ann, a U.S. citizen, uses some previously obtained euros to purchase a bond issued by a Spanish company. This transaction

Accepted Answer

A)  increases U.S. net capital outflow by more than the value of the bond. 
B)  increases U.S. net capital outflow by the value of the bond. 
C)  does not change U.S. net capital outflow. 
D)  decreases U.S. net capital outflow. 
A)  increases U.S. net capital outflow by more than the value of the bond. 
B)  increases U.S. net capital outflow by the value of the bond. 
C)  does not change U.S. net capital outflow. 
D)  decreases U.S. net capital outflow.

Question 7

From 1970 to 1998 the U.S. dollar

Accepted Answer

A)  gained value compared to the German mark because inflation was higher in the U.S. 
B)  gained value compared to the German mark because inflation was lower in the U.S. 
C)  lost value compared to the German mark because inflation was higher in the U.S. 
D)  lost value compared to the German mark because inflation was lower in the U.S. 
A)  gained value compared to the German mark because inflation was higher in the U.S. 
B)  gained value compared to the German mark because inflation was lower in the U.S. 
C)  lost value compared to the German mark because inflation was higher in the U.S. 
D)  lost value compared to the German mark because inflation was lower in the U.S.

Question 8

Suppose a lobster supper in Maine costs fewer dollars than a Lobster supper in Paris, France. Explain why this is inconsistent with purchasing-power parity and explain why the inconsistency may exist.

Accepted Answer

According to purchasing-power parity, a

Question 9

The law of one price states that

Accepted Answer

A)  a good must sell at the price fixed by law. 
B)  a good must sell at the same price at all locations. 
C)  a good cannot sell for a price greater than the legal price ceiling. 
D)  nominal exchange rates will not vary. 
A)  a good must sell at the price fixed by law. 
B)  a good must sell at the same price at all locations. 
C)  a good cannot sell for a price greater than the legal price ceiling. 
D)  nominal exchange rates will not vary.

Question 10

According to purchasing-power parity, if over the course of a year the price level in the U.S. rises more than in Canada, then which of the following rises?

Accepted Answer

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

Question 11

A U.S. citizen buys bonds issued by a construction equipment manufacturer in Poland. Her expenditures are U.S.

Accepted Answer

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

Question 12

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 ones) of these is foreign direct investment? Which ones) would be taken into account when computing U.S. net capital outflows?

Accepted Answer

The building of the

Question 13

Table 31-2
  
-Refer to Table 31-2. Which currencies’ is/are have a nominal exchange rate less than that predicted by the doctrine of purchasing-power parity?

Accepted Answer

A)  the euro and the riyal 
B)  the pound and the yen 
C)  the bolivar 
D)  the yen 
A)  the euro and the riyal 
B)  the pound and the yen 
C)  the bolivar 
D)  the yen

Question 14

A good in the U.S. costs $20. The same good costs 150 pesos in Mexico. If the nominal exchange rate is 10 pesos per dollar, what is the real exchange rate?

Accepted Answer

A)  4/3 so the good is more expensive in the U.S. 
B)  4/3 so the good is more expensive in Mexico 
C)  3/4 so the good is more expensive in the U.S. 
D)  3/4 so the good is more expensive in Mexico 
A)  4/3 so the good is more expensive in the U.S. 
B)  4/3 so the good is more expensive in Mexico 
C)  3/4 so the good is more expensive in the U.S. 
D)  3/4 so the good is more expensive in Mexico

Question 15

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.

Accepted Answer

A. 24 euros = $x times .80 eur

Question 16

The theory of purchasing-power parity primarily explains

Accepted Answer

A)  why trade deficits tend to move to zero over time. 
B)  how foreign prices affect domestic prices. 
C)  the determination of the real exchange rate. 
D)  why a change in the real exchange rate changes a country's net exports. 
A)  why trade deficits tend to move to zero over time. 
B)  how foreign prices affect domestic prices. 
C)  the determination of the real exchange rate. 
D)  why a change in the real exchange rate changes a country's net exports.

Question 17

According to the doctrine of purchasing-power parity, which of the following should depreciate if over the next year the inflation rate is higher in the U.S. than in the Euro area?

Accepted Answer

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

Question 18

A country has net capital outflow of $40 billion. Which of the following is consistent with this net capital outflow?

Accepted Answer

A)  It has -$40 billion of net exports. 
B)  Purchases of foreign assets by domestic residents exceed purchases of domestic assets by foreign residents by $40 billion. 
C)  Its saving is $35 billion and its domestic investment is $5 billion. 
D)  All of the above are consistent with a net capital outflow of $40 billion. 
A)  It has -$40 billion of net exports. 
B)  Purchases of foreign assets by domestic residents exceed purchases of domestic assets by foreign residents by $40 billion. 
C)  Its saving is $35 billion and its domestic investment is $5 billion. 
D)  All of the above are consistent with a net capital outflow of $40 billion.

Question 19

Which of the following does purchasing-power parity conclude should equal 1?

Accepted Answer

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

Question 20

Suppose that the nominal exchange rate is 80 yen per dollar, that the price of a basket of goods in the U.S. is $500 and the price of a basket of goods in Japan is 50,000 yen. Suppose that these values change to 100 yen per dollar, $600, and 70,000 yen. Then the real exchange rate would

Accepted Answer

A)  appreciate which by itself would make U.S. net exports fall. 
B)  appreciate which by itself would make U.S. net exports rise. 
C)  depreciate which by itself would make U.S. net exports fall. 
D)  depreciate which by itself would make U.S. net exports rise. 
A)  appreciate which by itself would make U.S. net exports fall. 
B)  appreciate which by itself would make U.S. net exports rise. 
C)  depreciate which by itself would make U.S. net exports fall. 
D)  depreciate which by itself would make U.S. net exports rise.

If Germany purchased more goods and services abroad than it sold abroad last year, then it had

If U.S. consumers decrease their demand for cell phones from Finland, then other things the same Finland's

According to purchasing-power parity, inflation in the U.S. causes the dollar to

A country has a trade deficit. Its

One year a country has positive net exports. The next year it still has positive but larger net exports

Ann, a U.S. citizen, uses some previously obtained euros to purchase a bond issued by a Spanish company. This transaction

From 1970 to 1998 the U.S. dollar

Suppose a lobster supper in Maine costs fewer dollars than a Lobster supper in Paris, France. Explain why this is inconsistent with purchasing-power parity and explain why the inconsistency may exist.

The law of one price states that

According to purchasing-power parity, if over the course of a year the price level in the U.S. rises more than in Canada, then which of the following rises?

A U.S. citizen buys bonds issued by a construction equipment manufacturer in Poland. Her expenditures are U.S.

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 ones) of these is foreign direct investment? Which ones) would be taken into account when computing U.S. net capital outflows?

Table 31-2 -Refer to Table 31-2. Which currencies’ is/are have a nominal exchange rate less than that predicted by the doctrine of purchasing-power parity?

A good in the U.S. costs $20. The same good costs 150 pesos in Mexico. If the nominal exchange rate is 10 pesos per dollar, what is the real exchange rate?

The theory of purchasing-power parity primarily explains

According to the doctrine of purchasing-power parity, which of the following should depreciate if over the next year the inflation rate is higher in the U.S. than in the Euro area?

A country has net capital outflow of $40 billion. Which of the following is consistent with this net capital outflow?

Which of the following does purchasing-power parity conclude should equal 1?

Suppose that the nominal exchange rate is 80 yen per dollar, that the price of a basket of goods in the U.S. is $500 and the price of a basket of goods in Japan is 50,000 yen. Suppose that these values change to 100 yen per dollar, $600, and 70,000 yen. Then the real exchange rate would

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

If Germany purchased more goods and services abroad than it sold abroad last year, then it had

If U.S. consumers decrease their demand for cell phones from Finland, then other things the same Finland's

According to purchasing-power parity, inflation in the U.S. causes the dollar to

A country has a trade deficit. Its

One year a country has positive net exports. The next year it still has positive but larger net exports

Ann, a U.S. citizen, uses some previously obtained euros to purchase a bond issued by a Spanish company. This transaction

From 1970 to 1998 the U.S. dollar

Suppose a lobster supper in Maine costs fewer dollars than a Lobster supper in Paris, France. Explain why this is inconsistent with purchasing-power parity and explain why the inconsistency may exist.

The law of one price states that

According to purchasing-power parity, if over the course of a year the price level in the U.S. rises more than in Canada, then which of the following rises?

A U.S. citizen buys bonds issued by a construction equipment manufacturer in Poland. Her expenditures are U.S.

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 ones) of these is foreign direct investment? Which ones) would be taken into account when computing U.S. net capital outflows?

Table 31-2 -Refer to Table 31-2. Which currencies’ is/are have a nominal exchange rate less than that predicted by the doctrine of purchasing-power parity?

A good in the U.S. costs $20. The same good costs 150 pesos in Mexico. If the nominal exchange rate is 10 pesos per dollar, what is the real exchange rate?

The theory of purchasing-power parity primarily explains

According to the doctrine of purchasing-power parity, which of the following should depreciate if over the next year the inflation rate is higher in the U.S. than in the Euro area?

A country has net capital outflow of $40 billion. Which of the following is consistent with this net capital outflow?

Which of the following does purchasing-power parity conclude should equal 1?

Suppose that the nominal exchange rate is 80 yen per dollar, that the price of a basket of goods in the U.S. is $500 and the price of a basket of goods in Japan is 50,000 yen. Suppose that these values change to 100 yen per dollar, $600, and 70,000 yen. Then the real exchange rate would

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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