Question 1

If a U.S. firm buys Chinese toys using previously obtained Chinese currency, then both U.S. net exports and U.S. net capital outflow decrease.

Accepted Answer

A) True 
 B)False

Question 2

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?

Accepted Answer

The real exchange rate = .75 x

Question 3

Other things the same, the real exchange rate between U.S. and Belgian goods would be higher if

Accepted Answer

A)  prices in the U.S. were higher, or the number of euro the dollar purchased were higher. 
B)  prices in the U.S. were higher, or the number of euro the dollar purchased were lower. 
C)  prices in the U.S. were lower, or the number of euro the dollar purchased were higher. 
D)  prices in the U.S. were lower, or the number of euro the dollar purchased were lower. 
A)  prices in the U.S. were higher, or the number of euro the dollar purchased were higher. 
B)  prices in the U.S. were higher, or the number of euro the dollar purchased were lower. 
C)  prices in the U.S. were lower, or the number of euro the dollar purchased were higher. 
D)  prices in the U.S. were lower, or the number of euro the dollar purchased were lower.

Question 4

In 2011 the U.S. began with a trade deficit. During the year exports rose by more than imports. What should have happened to the U.S. trade deficit?

Accepted Answer

It should

Question 5

If a nation produces less 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?

Accepted Answer

A. Its net exports are negativ

Question 6

A Big Mac in Japan costs 400 yen while it costs $4.50 in the U.S.. The nominal exchange rate is 100 yen per dollar. Which of the following would both make the real exchange rate move towards purchasing-power parity?

Accepted Answer

A)  the price of Big Macs in the U.S. falls, the nominal exchange rate falls 
B)  the price of Big Macs in the U.S. falls, the nominal exchange rate rises 
C)  the price of Big Macs in the U.S. rises, the nominal exchange rate falls 
D)  the price of Big Macs in the U.S. rises, the nominal exchange rate rises 
A)  the price of Big Macs in the U.S. falls, the nominal exchange rate falls 
B)  the price of Big Macs in the U.S. falls, the nominal exchange rate rises 
C)  the price of Big Macs in the U.S. rises, the nominal exchange rate falls 
D)  the price of Big Macs in the U.S. rises, the nominal exchange rate rises

Question 7

An Italian company exchanges euros for dollars from U.S. residents and then uses the dollars to buy U.S. products to sell in its stores in Rome. U.S. residents who exchanged their dollars for euros use the euros to buy bonds issued by French corporations. At this point

Accepted Answer

A)  both U.S. net exports and U.S. net capital outflows have risen. 
B)  both U.S. net exports and U.S. net capital outflow have fallen. 
C)  U.S. net exports have risen and U.S. net capital outflow have fallen. 
D)  U.S. net exports have fallen and U.S. net capital outflow have risen. 
A)  both U.S. net exports and U.S. net capital outflows have risen. 
B)  both U.S. net exports and U.S. net capital outflow have fallen. 
C)  U.S. net exports have risen and U.S. net capital outflow have fallen. 
D)  U.S. net exports have fallen and U.S. net capital outflow have risen.

Question 8

If a Starbucks tall latte cost $3.20 in the United States and 3 euros in the Euro area, then purchasing-power parity implies the nominal exchange rate is how many euros per dollar?

Accepted Answer

A)  .938 If the exchange rate is less than this, it costs more dollars to buy a tall latte in the U.S. than in the Euro area. 
B)  .938 If the exchange rate is less than this, it costs fewer dollars to buy a tall latte in the U.S. then in the Euro area. 
C)  1.067 If the exchange rate is less than this, it costs more dollars to buy a tall latte in the U.S. than in the Euro area. 
D)  1.067 If the exchange rate is less than this, it costs fewer dollars to buy a tall latte in the U.S. than in the Euro area. 
A)  .938 If the exchange rate is less than this, it costs more dollars to buy a tall latte in the U.S. than in the Euro area. 
B)  .938 If the exchange rate is less than this, it costs fewer dollars to buy a tall latte in the U.S. then in the Euro area. 
C)  1.067 If the exchange rate is less than this, it costs more dollars to buy a tall latte in the U.S. than in the Euro area. 
D)  1.067 If the exchange rate is less than this, it costs fewer dollars to buy a tall latte in the U.S. than in the Euro area.

Question 9

Suppose that real interest rates in the U.S. rise relative to real interest rates in other countries. This increase would make foreigners

Accepted Answer

A)  more willing to purchase U.S. bonds, so U.S. net capital outflow would fall. 
B)  more willing to purchase U.S. bonds, so U.S. net capital outflow would rise. 
C)  less willing to purchase U.S. bonds, so U.S. net capital outflow would fall. 
D)  less willing to purchase U.S. bonds, so U.S. net capital outflow would rise. 
A)  more willing to purchase U.S. bonds, so U.S. net capital outflow would fall. 
B)  more willing to purchase U.S. bonds, so U.S. net capital outflow would rise. 
C)  less willing to purchase U.S. bonds, so U.S. net capital outflow would fall. 
D)  less willing to purchase U.S. bonds, so U.S. net capital outflow would rise.

Question 10

One year a country has negative net exports. The next year it still has negative net exports and imports have risen more than 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 11

If the Kenyan nominal exchange rate declines, and prices are unchanged in Kenya and abroad, then the Kenyan real exchange rate

Accepted Answer

A)  does not change. 
B)  rises. 
C)  declines 
D)  None of the above is necessarily correct. 
A)  does not change. 
B)  rises. 
C)  declines 
D)  None of the above is necessarily correct.

Question 12

When a company from Germany builds an automobile factory in the United States, the German firm has engaged in foreign direct investment.

Accepted Answer

A) True 
 B)False

Question 13

Other things the same, the real exchange rate between American and Chinese goods would be higher if

Accepted Answer

A)  prices of Chinese goods were higher, or the number of yuan a dollar purchased was higher. 
B)  prices of Chinese goods were higher, or the number of yuan a dollar purchased was lower. 
C)  prices of Chinese goods were lower, or the number of yuan a dollar purchased was higher. 
D)  prices of Chinese goods were lower, or the number of yuan a dollar purchased was lower. 
A)  prices of Chinese goods were higher, or the number of yuan a dollar purchased was higher. 
B)  prices of Chinese goods were higher, or the number of yuan a dollar purchased was lower. 
C)  prices of Chinese goods were lower, or the number of yuan a dollar purchased was higher. 
D)  prices of Chinese goods were lower, or the number of yuan a dollar purchased was lower.

Question 14

Foreign-produced goods and services that are purchased domestically are called

Accepted Answer

A)  imports. 
B)  exports. 
C)  net imports. 
D)  net exports. 
A)  imports. 
B)  exports. 
C)  net imports. 
D)  net exports.

Question 15

Which of the following is an example of U.S. foreign direct investment?

Accepted Answer

A)  A U.S. based mutual fund buys stock in Eastern European companies. 
B)  A U.S. citizen builds and operates a coffee shop in the Netherlands. 
C)  A Swiss bank buys a U.S. government bond. 
D)  A German tractor factory opens a plant in Waterloo, Iowa. 
A)  A U.S. based mutual fund buys stock in Eastern European companies. 
B)  A U.S. citizen builds and operates a coffee shop in the Netherlands. 
C)  A Swiss bank buys a U.S. government bond. 
D)  A German tractor factory opens a plant in Waterloo, Iowa.

Question 16

Matt and Melinda are American residents. Matt buys stock issued by a German corporation. Melinda opens a shoe factory in Panama. Whose purchase, by itself, increases the U.S.'s net capital outflow?

Accepted Answer

A)  Matt's 
B)  Melinda's 
C)  both Matt's and Melinda's 
D)  neither Matt's nor Melinda's 
A)  Matt's 
B)  Melinda's 
C)  both Matt's and Melinda's 
D)  neither Matt's nor Melinda's

Question 17

When the Sykes Corporation an American company) buys shares of Audi stock a German company) for its pension fund, U.S. net capital outflow

Accepted Answer

A)  increases because an American company makes a portfolio investment in Germany. 
B)  declines because an American company makes a portfolio investment in Germany. 
C)  increases because an American company makes a direct investment in Germany. 
D)  declines because an American company makes a direct investment in Germany. 
A)  increases because an American company makes a portfolio investment in Germany. 
B)  declines because an American company makes a portfolio investment in Germany. 
C)  increases because an American company makes a direct investment in Germany. 
D)  declines because an American company makes a direct investment in Germany.

Question 18

Suppose that the real exchange rate between the United States and Brazil is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate that is increase the number of baskets of Brazilian goods a basket of U.S. goods buys)?

Accepted Answer

A)  an increase in the quantity of Brazilian currency that can be purchased with a dollar 
B)  a decrease in the price of U.S. goods 
C)  an increase in the price in Brazilian currency of Brazilian goods 
D)  All of the above are correct. 
A)  an increase in the quantity of Brazilian currency that can be purchased with a dollar 
B)  a decrease in the price of U.S. goods 
C)  an increase in the price in Brazilian currency of Brazilian goods 
D)  All of the above are correct.

Question 19

Suppose that the real exchange rate between the United States and South Korea is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate that is increase the number of baskets of South Korean goods a basket of U.S goods buys)?

Accepted Answer

A)  a decrease in the quantity of South Korean currency that can be purchased with a dollar 
B)  a decrease in the price of U.S. baskets of goods 
C)  a decrease in the price in South Korean currency of South Korean goods. 
D)  None of the above is correct. 
A)  a decrease in the quantity of South Korean currency that can be purchased with a dollar 
B)  a decrease in the price of U.S. baskets of goods 
C)  a decrease in the price in South Korean currency of South Korean goods. 
D)  None of the above is correct.

Question 20

Which of the following events would be consistent with purchasing-power parity?

Accepted Answer

A)  The price level in the United States rises more rapidly than that in Ireland and the real exchange rate defined as Irish goods per unit of U.S. goods stays the same. 
B)  The money supply in the United States rises more rapidly than in Egypt and the nominal exchange rate defined as Egyptian pounds per dollar falls. 
C)  Earl, a worldwide traveler, looks at exchange rates and worldwide breakfast prices one morning and finds that whatever country he decides to go to he can convert $15 into enough local currency to buy the same breakfast. 
D)  All of the above are correct. 
A)  The price level in the United States rises more rapidly than that in Ireland and the real exchange rate defined as Irish goods per unit of U.S. goods stays the same. 
B)  The money supply in the United States rises more rapidly than in Egypt and the nominal exchange rate defined as Egyptian pounds per dollar falls. 
C)  Earl, a worldwide traveler, looks at exchange rates and worldwide breakfast prices one morning and finds that whatever country he decides to go to he can convert $15 into enough local currency to buy the same breakfast. 
D)  All of the above are correct.

If a U.S. firm buys Chinese toys using previously obtained Chinese currency, then both U.S. net exports and U.S. net capital outflow decrease.

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?

Other things the same, the real exchange rate between U.S. and Belgian goods would be higher if

In 2011 the U.S. began with a trade deficit. During the year exports rose by more than imports. What should have happened to the U.S. trade deficit?

If a nation produces less 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?

A Big Mac in Japan costs 400 yen while it costs $4.50 in the U.S.. The nominal exchange rate is 100 yen per dollar. Which of the following would both make the real exchange rate move towards purchasing-power parity?

An Italian company exchanges euros for dollars from U.S. residents and then uses the dollars to buy U.S. products to sell in its stores in Rome. U.S. residents who exchanged their dollars for euros use the euros to buy bonds issued by French corporations. At this point

If a Starbucks tall latte cost $3.20 in the United States and 3 euros in the Euro area, then purchasing-power parity implies the nominal exchange rate is how many euros per dollar?

Suppose that real interest rates in the U.S. rise relative to real interest rates in other countries. This increase would make foreigners

One year a country has negative net exports. The next year it still has negative net exports and imports have risen more than exports.

If the Kenyan nominal exchange rate declines, and prices are unchanged in Kenya and abroad, then the Kenyan real exchange rate

When a company from Germany builds an automobile factory in the United States, the German firm has engaged in foreign direct investment.

Other things the same, the real exchange rate between American and Chinese goods would be higher if

Foreign-produced goods and services that are purchased domestically are called

Which of the following is an example of U.S. foreign direct investment?

Matt and Melinda are American residents. Matt buys stock issued by a German corporation. Melinda opens a shoe factory in Panama. Whose purchase, by itself, increases the U.S.'s net capital outflow?

When the Sykes Corporation an American company) buys shares of Audi stock a German company) for its pension fund, U.S. net capital outflow

Suppose that the real exchange rate between the United States and Brazil is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate that is increase the number of baskets of Brazilian goods a basket of U.S. goods buys)?

Suppose that the real exchange rate between the United States and South Korea is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate that is increase the number of baskets of South Korean goods a basket of U.S goods buys)?

Which of the following events would be consistent with purchasing-power parity?

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 a U.S. firm buys Chinese toys using previously obtained Chinese currency, then both U.S. net exports and U.S. net capital outflow decrease.

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?

Other things the same, the real exchange rate between U.S. and Belgian goods would be higher if

In 2011 the U.S. began with a trade deficit. During the year exports rose by more than imports. What should have happened to the U.S. trade deficit?

If a nation produces less 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?

A Big Mac in Japan costs 400 yen while it costs $4.50 in the U.S.. The nominal exchange rate is 100 yen per dollar. Which of the following would both make the real exchange rate move towards purchasing-power parity?

An Italian company exchanges euros for dollars from U.S. residents and then uses the dollars to buy U.S. products to sell in its stores in Rome. U.S. residents who exchanged their dollars for euros use the euros to buy bonds issued by French corporations. At this point

If a Starbucks tall latte cost $3.20 in the United States and 3 euros in the Euro area, then purchasing-power parity implies the nominal exchange rate is how many euros per dollar?

Suppose that real interest rates in the U.S. rise relative to real interest rates in other countries. This increase would make foreigners

One year a country has negative net exports. The next year it still has negative net exports and imports have risen more than exports.

If the Kenyan nominal exchange rate declines, and prices are unchanged in Kenya and abroad, then the Kenyan real exchange rate

When a company from Germany builds an automobile factory in the United States, the German firm has engaged in foreign direct investment.

Other things the same, the real exchange rate between American and Chinese goods would be higher if

Foreign-produced goods and services that are purchased domestically are called

Which of the following is an example of U.S. foreign direct investment?

Matt and Melinda are American residents. Matt buys stock issued by a German corporation. Melinda opens a shoe factory in Panama. Whose purchase, by itself, increases the U.S.'s net capital outflow?

When the Sykes Corporation an American company) buys shares of Audi stock a German company) for its pension fund, U.S. net capital outflow

Suppose that the real exchange rate between the United States and Brazil is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate that is increase the number of baskets of Brazilian goods a basket of U.S. goods buys)?

Suppose that the real exchange rate between the United States and South Korea is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate that is increase the number of baskets of South Korean goods a basket of U.S goods buys)?

Which of the following events would be consistent with purchasing-power parity?

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