Question 1

If saving is greater than domestic investment, then

Accepted Answer

A) there is a trade deficit and Y > C + I + G. B) there is a trade deficit and Y C + I + G. D) there is a trade surplus and Y < C + I + G. A) there is a trade deficit and Y > C + I + G. B) there is a trade deficit and Y C + I + G. D) there is a trade surplus and Y < C + I + G.

Question 2

If the exchange rate is 8 Moroccan dirhams per U.S. dollars, a crate of oranges costs 400 dirhams in the Moroccan capital of Rabat, and a similar crate of oranges in Miami sells for $55 dollars, then

Accepted Answer

A)  the real exchange rate is greater than one and arbitrageurs could profit by buying oranges in the U.S. and selling them in Morocco. 
B)  the real exchange rate is greater than one and arbitrageurs could profit by buying oranges in Morocco and selling them in the U.S. 
C)  the real exchange rate is less than one and arbitrageurs could profit by buying oranges in the U.S. and selling them in Morocco. 
D)  the real exchange rate is less than one and arbitrageurs could profit by buying oranges in Morocco and selling them in the U.S. 
A)  the real exchange rate is greater than one and arbitrageurs could profit by buying oranges in the U.S. and selling them in Morocco. 
B)  the real exchange rate is greater than one and arbitrageurs could profit by buying oranges in Morocco and selling them in the U.S. 
C)  the real exchange rate is less than one and arbitrageurs could profit by buying oranges in the U.S. and selling them in Morocco. 
D)  the real exchange rate is less than one and arbitrageurs could profit by buying oranges in Morocco and selling them in the U.S.

Question 3

Other things the same, an increase in domestic prices raises the real exchange rate.

Accepted Answer

A) True 
 B)False

Question 4

An appreciation of the U.S. real exchange rate induces U.S. consumers to buy

Accepted Answer

A)  fewer domestic goods and fewer foreign goods. 
B)  more domestic goods and fewer foreign goods. 
C)  fewer domestic goods and more foreign goods. 
D)  more domestic goods and more foreign goods. 
A)  fewer domestic goods and fewer foreign goods. 
B)  more domestic goods and fewer foreign goods. 
C)  fewer domestic goods and more foreign goods. 
D)  more domestic goods and more foreign goods.

Question 5

A U.S. firm exchanges dollars for yen and then uses them to buy Japanese goods. Overall as a result of these transactions

Accepted Answer

A)  both U.S. net capital outflow and U.S. net exports rise. 
B)  both U.S. net capital outflow and U.S. net exports fall. 
C)  U.S. net capital outflow rises and U.S. net exports fall. 
D)  U.S. net capital outflow falls and U.S. net exports rise. 
A)  both U.S. net capital outflow and U.S. net exports rise. 
B)  both U.S. net capital outflow and U.S. net exports fall. 
C)  U.S. net capital outflow rises and U.S. net exports fall. 
D)  U.S. net capital outflow falls and U.S. net exports rise.

Question 6

Purchasing-power parity implies that the nominal exchange rate given as foreign currency per unit of U.S. currency must rise if the price levels) in

Accepted Answer

A)  foreign countries rise. 
B)  the United States rises. 
C)  all countries rise. 
D)  all countries fall. 
A)  foreign countries rise. 
B)  the United States rises. 
C)  all countries rise. 
D)  all countries fall.

Question 7

A country has $45 million of domestic investment and net capital outflow of -$60 million. What is its saving?

Accepted Answer

A)  $15 million 
B)  -$15 million 
C)  $105 million 
D)  -$105 million 
A)  $15 million 
B)  -$15 million 
C)  $105 million 
D)  -$105 million

Question 8

Net capital outflow

Accepted Answer

A)  is always greater than net exports. 
B)  is always less than net exports. 
C)  is always equal to net exports. 
D)  could be any of the above. 
A)  is always greater than net exports. 
B)  is always less than net exports. 
C)  is always equal to net exports. 
D)  could be any of the above.

Question 9

Suppose a McDonalds Big Mac cost $4.40 in the United States and 3.30 euros in the euro area and 5.72 Australian dollars in Australia. If exchange rates are .75 euros per dollar and 1.3 Australian dollars per dollar, where does purchasing-power parity hold?

Accepted Answer

A)  both the euro area and Australia 
B)  the euro area but not Australia 
C)  Australia but not the euro area 
D)  neither the euro area nor Australia 
A)  both the euro area and Australia 
B)  the euro area but not Australia 
C)  Australia but not the euro area 
D)  neither the euro area nor Australia

Question 10

Suppose that the real exchange rate between the United States and Kenya 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 Kenyan goods a basket of U.S. goods buys)?

Accepted Answer

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

Question 11

If you are vacationing in France and the dollar depreciates relative to the euro, then

Accepted Answer

A)  the dollar buys more euros. It will take fewer dollars to buy a good that costs 50 euros. 
B)  the dollar buys more euros. It will take more dollars to buy a good that costs 50 euros. 
C)  the dollar buys fewer euros. It will take fewer dollars to buy a good that costs 50 euros. 
D)  the dollar buys fewer euros. It will take more dollars to buy a good that costs 50 euros. 
A)  the dollar buys more euros. It will take fewer dollars to buy a good that costs 50 euros. 
B)  the dollar buys more euros. It will take more dollars to buy a good that costs 50 euros. 
C)  the dollar buys fewer euros. It will take fewer dollars to buy a good that costs 50 euros. 
D)  the dollar buys fewer euros. It will take more dollars to buy a good that costs 50 euros.

Question 12

If the U.S. real exchange rate appreciates, U.S. exports

Accepted Answer

A)  increase and U.S. imports decrease. 
B)  decrease and U.S. imports increase. 
C)  and U.S. imports both increase. 
D)  and U.S. imports both decrease. 
A)  increase and U.S. imports decrease. 
B)  decrease and U.S. imports increase. 
C)  and U.S. imports both increase. 
D)  and U.S. imports both decrease.

Question 13

A country sells more to foreign countries than it buys from them. It has

Accepted Answer

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

Question 14

Which of the following statements is correct for an open economy with a trade surplus?

Accepted Answer

A)  The trade surplus cannot last for very many years. 
B)  The trade surplus must be offset by negative net capital outflow. 
C)  The trade surplus implies that the country's national saving is greater than domestic investment. 
D)  None of the above is correct. 
A)  The trade surplus cannot last for very many years. 
B)  The trade surplus must be offset by negative net capital outflow. 
C)  The trade surplus implies that the country's national saving is greater than domestic investment. 
D)  None of the above is correct.

Question 15

In Ireland, a pint of beer costs 3 euros. In Australia, a pint of beer costs 4 Australian dollars. If the exchange rate is .8 euros per Australian dollar, what is the real exchange rate?

Accepted Answer

A)  4/2.4 pints of Irish beer per pint of Australian beer 
B)  3/3.2 pint of Irish beer per pint of Australian beer 
C)  3.2/3 pints of Irish beer per pint of Australian beer 
D)  2.4/4 pints of Irish beer per pint of Australian beer 
A)  4/2.4 pints of Irish beer per pint of Australian beer 
B)  3/3.2 pint of Irish beer per pint of Australian beer 
C)  3.2/3 pints of Irish beer per pint of Australian beer 
D)  2.4/4 pints of Irish beer per pint of Australian beer

Question 16

A firm in China sells toys to a U.S. department store chain. Other things the same, these sales

Accepted Answer

A)  increase U.S. net exports and decrease Chinese net exports. 
B)  decrease U.S. net exports and increase Chinese net exports. 
C)  increase U.S. and Chinese net exports. 
D)  decrease U.S. and Chinese net exports. 
A)  increase U.S. net exports and decrease Chinese net exports. 
B)  decrease U.S. net exports and increase Chinese net exports. 
C)  increase U.S. and Chinese net exports. 
D)  decrease U.S. and Chinese net exports.

Question 17

A utilities company in the Netherlands buys wind generators made by a U.S. company. It pays from them with previously obtained dollars. By itself, this exchange

Accepted Answer

A)  increases both U.S. net exports and U.S. net capital outflow. 
B)  decreases both U.S. net exports and U.S. net capital outflow. 
C)  increases U.S. net exports and does not affect U.S. net capital outflow. 
D)  None of the above is correct. 
A)  increases both U.S. net exports and U.S. net capital outflow. 
B)  decreases both U.S. net exports and U.S. net capital outflow. 
C)  increases U.S. net exports and does not affect U.S. net capital outflow. 
D)  None of the above is correct.

Question 18

According to purchasing-power parity, if the Federal Reserve increased the money supply

Accepted Answer

A)  U.S. prices would rise and the nominal exchange rate would rise. 
B)  U.S. prices would rise and the nominal exchange rate would fall. 
C)  U.S. prices would fall and the nominal exchange rate would rise. 
D)  U.S. prices and the nominal exchange rate would fall. 
A)  U.S. prices would rise and the nominal exchange rate would rise. 
B)  U.S. prices would rise and the nominal exchange rate would fall. 
C)  U.S. prices would fall and the nominal exchange rate would rise. 
D)  U.S. prices and the nominal exchange rate would fall.

Question 19

Many economists believe that the theory of purchasing-power parity describes the forces that determine exchange rates in the long run.

Accepted Answer

A) True 
 B)False

Question 20

If Walmart buys $50 million worth of consumer goods from China and sells them in the U.S., and China uses the $50 million to purchase U.S. bonds, U.S. net exports and U.S. net capital outflow both fall.

Accepted Answer

A) True 
 B)False

If saving is greater than domestic investment, then

If the exchange rate is 8 Moroccan dirhams per U.S. dollars, a crate of oranges costs 400 dirhams in the Moroccan capital of Rabat, and a similar crate of oranges in Miami sells for $55 dollars, then

Other things the same, an increase in domestic prices raises the real exchange rate.

An appreciation of the U.S. real exchange rate induces U.S. consumers to buy

A U.S. firm exchanges dollars for yen and then uses them to buy Japanese goods. Overall as a result of these transactions

Purchasing-power parity implies that the nominal exchange rate given as foreign currency per unit of U.S. currency must rise if the price levels) in

A country has $45 million of domestic investment and net capital outflow of -$60 million. What is its saving?

Net capital outflow

Suppose a McDonalds Big Mac cost $4.40 in the United States and 3.30 euros in the euro area and 5.72 Australian dollars in Australia. If exchange rates are .75 euros per dollar and 1.3 Australian dollars per dollar, where does purchasing-power parity hold?

Suppose that the real exchange rate between the United States and Kenya 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 Kenyan goods a basket of U.S. goods buys)?

If you are vacationing in France and the dollar depreciates relative to the euro, then

If the U.S. real exchange rate appreciates, U.S. exports

A country sells more to foreign countries than it buys from them. It has

Which of the following statements is correct for an open economy with a trade surplus?

In Ireland, a pint of beer costs 3 euros. In Australia, a pint of beer costs 4 Australian dollars. If the exchange rate is .8 euros per Australian dollar, what is the real exchange rate?

A firm in China sells toys to a U.S. department store chain. Other things the same, these sales

A utilities company in the Netherlands buys wind generators made by a U.S. company. It pays from them with previously obtained dollars. By itself, this exchange

According to purchasing-power parity, if the Federal Reserve increased the money supply

Many economists believe that the theory of purchasing-power parity describes the forces that determine exchange rates in the long run.

If Walmart buys $50 million worth of consumer goods from China and sells them in the U.S., and China uses the $50 million to purchase U.S. bonds, U.S. net exports and U.S. net capital outflow both fall.

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 saving is greater than domestic investment, then

If the exchange rate is 8 Moroccan dirhams per U.S. dollars, a crate of oranges costs 400 dirhams in the Moroccan capital of Rabat, and a similar crate of oranges in Miami sells for $55 dollars, then

Other things the same, an increase in domestic prices raises the real exchange rate.

An appreciation of the U.S. real exchange rate induces U.S. consumers to buy

A U.S. firm exchanges dollars for yen and then uses them to buy Japanese goods. Overall as a result of these transactions

Purchasing-power parity implies that the nominal exchange rate given as foreign currency per unit of U.S. currency must rise if the price levels) in

A country has $45 million of domestic investment and net capital outflow of -$60 million. What is its saving?

Net capital outflow

Suppose a McDonalds Big Mac cost $4.40 in the United States and 3.30 euros in the euro area and 5.72 Australian dollars in Australia. If exchange rates are .75 euros per dollar and 1.3 Australian dollars per dollar, where does purchasing-power parity hold?

Suppose that the real exchange rate between the United States and Kenya 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 Kenyan goods a basket of U.S. goods buys)?

If you are vacationing in France and the dollar depreciates relative to the euro, then

If the U.S. real exchange rate appreciates, U.S. exports

A country sells more to foreign countries than it buys from them. It has

Which of the following statements is correct for an open economy with a trade surplus?

In Ireland, a pint of beer costs 3 euros. In Australia, a pint of beer costs 4 Australian dollars. If the exchange rate is .8 euros per Australian dollar, what is the real exchange rate?

A firm in China sells toys to a U.S. department store chain. Other things the same, these sales

A utilities company in the Netherlands buys wind generators made by a U.S. company. It pays from them with previously obtained dollars. By itself, this exchange

According to purchasing-power parity, if the Federal Reserve increased the money supply

Many economists believe that the theory of purchasing-power parity describes the forces that determine exchange rates in the long run.

If Walmart buys $50 million worth of consumer goods from China and sells them in the U.S., and China uses the $50 million to purchase U.S. bonds, U.S. net exports and U.S. net capital outflow both fall.

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