Question 1

According to the theory of purchasing-power parity, the nominal exchange rate between two countries must reflect the differing

Accepted Answer

A)  price levels in those countries. 
B)  resource endowments in those countries. 
C)  income levels in those countries. 
D)  standards of living between those countries. 
A)  price levels in those countries. 
B)  resource endowments in those countries. 
C)  income levels in those countries. 
D)  standards of living between those countries.

Question 2

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

Accepted Answer

A)  Disney builds a new amusement park near Barcelona, Spain. 
B)  A U.S. citizen buys bonds issued by the British government. 
C)  A Dutch hotel chain opens a new hotel in the United States. 
D)  A citizen of Singapore buys a bond issued by a U.S. corporation. 
A)  Disney builds a new amusement park near Barcelona, Spain. 
B)  A U.S. citizen buys bonds issued by the British government. 
C)  A Dutch hotel chain opens a new hotel in the United States. 
D)  A citizen of Singapore buys a bond issued by a U.S. corporation.

Question 3

From 1991-2000, U.S. net capital outflow as a percent of GDP became a

Accepted Answer

A)  larger positive number. 
B)  smaller positive number. 
C)  larger negative number. 
D)  smaller negative number. 
A)  larger positive number. 
B)  smaller positive number. 
C)  larger negative number. 
D)  smaller negative number.

Question 4

A country's trade balance

Accepted Answer

A)  must be zero. 
B)  must be greater than zero. 
C)  is greater than zero only if exports are greater than imports. 
D)  is greater than zero only if imports are greater than exports. 
A)  must be zero. 
B)  must be greater than zero. 
C)  is greater than zero only if exports are greater than imports. 
D)  is greater than zero only if imports are greater than exports.

Question 5

When making investment decisions, investors

Accepted Answer

A)  compare the real interest rates offered on different bonds. 
B)  compare the nominal, but not the real, interest rates offered on different bonds. 
C)  purchase the highest-priced bond available. 
D)  All of the above are correct. 
A)  compare the real interest rates offered on different bonds. 
B)  compare the nominal, but not the real, interest rates offered on different bonds. 
C)  purchase the highest-priced bond available. 
D)  All of the above are correct.

Question 6

Susan, a U.S. citizen, builds and operates a kennel in France. This action is an example of

Accepted Answer

A)  investment for Susan and U.S. foreign direct investment. 
B)  investment for Susan and U.S. foreign portfolio investment. 
C)  U.S. foreign direct investment and U.S. domestic investment. 
D)  U.S. foreign portfolio investment and U.S. domestic investment. 
A)  investment for Susan and U.S. foreign direct investment. 
B)  investment for Susan and U.S. foreign portfolio investment. 
C)  U.S. foreign direct investment and U.S. domestic investment. 
D)  U.S. foreign portfolio investment and U.S. domestic investment.

Question 7

Paul, a Canadian citizen, purchases oranges grown in Florida. This purchase is an example of

Accepted Answer

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

Question 8

Last year a country had $700 billion of saving and $900 of investment. What was its net capital outflow? How is it possible for a country to have investment that exceeds saving?

Accepted Answer

Net capital outflow equals saving - dome

Question 9

Net capital outflow measures the imbalance between the amount of

Accepted Answer

A)  foreign assets held by domestic residents and domestic assets held by foreign residents. 
B)  foreign assets bought by domestic residents and the amount of domestic assets bought by foreigners. 
C)  foreign assets bought by domestic residents and the amount of domestic goods and services sold to foreigners. 
D)  None of the above is correct. 
A)  foreign assets held by domestic residents and domestic assets held by foreign residents. 
B)  foreign assets bought by domestic residents and the amount of domestic assets bought by foreigners. 
C)  foreign assets bought by domestic residents and the amount of domestic goods and services sold to foreigners. 
D)  None of the above is correct.

Question 10

Table 31-2
  
-Refer to Table 31-2. In real terms, U.S. goods are less expensive than goods in which countries?

Accepted Answer

A)  Britain and Japan 
B)  Germany and Saudi Arabia 
C)  Germany and Venezuela 
D)  Japan 
A)  Britain and Japan 
B)  Germany and Saudi Arabia 
C)  Germany and Venezuela 
D)  Japan

Question 11

Alfonso, a citizen of Italy, decides to purchase bonds issued by Ireland instead of ones issued by the United States even though the Irish bonds have a higher risk of default. An economic reason for his decision might be that

Accepted Answer

A)  he dislikes U.S. foreign policy. 
B)  the Irish bonds pay a higher rate of interest. 
C)  the U.S. government is more stable than the Irish government. 
D)  None of the above provide an economic reason for buying the riskier bond. 
A)  he dislikes U.S. foreign policy. 
B)  the Irish bonds pay a higher rate of interest. 
C)  the U.S. government is more stable than the Irish government. 
D)  None of the above provide an economic reason for buying the riskier bond.

Question 12

If purchasing-power parity holds, when a country's central bank increases the money supply, its

Accepted Answer

A)  price level rises and its currency appreciates relative to other currencies in the world. 
B)  price level rises and its currency depreciates relative to other currencies in the world. 
C)  price level falls and its currency appreciates relative to other currencies in the world. 
D)  price level falls and its currency depreciates relative to other currencies in the world. 
A)  price level rises and its currency appreciates relative to other currencies in the world. 
B)  price level rises and its currency depreciates relative to other currencies in the world. 
C)  price level falls and its currency appreciates relative to other currencies in the world. 
D)  price level falls and its currency depreciates relative to other currencies in the world.

Question 13

If the exchange rate is 5 Egyptian pounds per U.S. dollar, a watch that costs $25 US dollars costs

Accepted Answer

A)  125 Egyptian pounds 
B)  50 Egyptian pounds 
C)  5 Egyptian pounds 
D)  None of the above is correct. 
A)  125 Egyptian pounds 
B)  50 Egyptian pounds 
C)  5 Egyptian pounds 
D)  None of the above is correct.

Question 14

Which of the following is correct?

Accepted Answer

A)  U.S. exports as a percentage of GDP have about tripled since 1950. The U.S. currently has a trade deficit. 
B)  U.S. exports as a percentage of GDP have about tripled since 1950. The U.S. currently has a trade surplus. 
C)  U.S. exports as a percentage of GDP have about doubled since 1950. The U.S. currently has a trade deficit. 
D)  U.S. exports as a percentage of GDP have about doubled since 1950. The U.S. currently has a trade surplus. 
A)  U.S. exports as a percentage of GDP have about tripled since 1950. The U.S. currently has a trade deficit. 
B)  U.S. exports as a percentage of GDP have about tripled since 1950. The U.S. currently has a trade surplus. 
C)  U.S. exports as a percentage of GDP have about doubled since 1950. The U.S. currently has a trade deficit. 
D)  U.S. exports as a percentage of GDP have about doubled since 1950. The U.S. currently has a trade surplus.

Question 15

Last year a country purchased $1.5 trillion worth of goods and services from foreign countries, sold $2 trillion worth of goods and services to foreign countries and had national saving of $1.25 trillion. What was the value of its domestic investment? Show your work.

Accepted Answer

Net capital outflow = Net expo

Question 16

If the U.S. has a trade deficit and the nominal exchange rate depreciates, then other things the same

Accepted Answer

A)  the trade deficit rises and net capital outflow rises. 
B)  the trade deficit rises and net capital outflow falls. 
C)  the trade deficit falls and net capital outflows rise. 
D)  the trade deficit falls and net capital outflows fall. 
A)  the trade deficit rises and net capital outflow rises. 
B)  the trade deficit rises and net capital outflow falls. 
C)  the trade deficit falls and net capital outflows rise. 
D)  the trade deficit falls and net capital outflows fall.

Question 17

If purchasing-power parity holds, when a country's central bank increases the money supply, a unit of money

Accepted Answer

A)  gains value both in terms of the domestic goods and services it can buy and in terms of the foreign currency it can buy. 
B)  gains value in terms of the domestic goods and services it can buy, but loses value in terms of the foreign currency it can buy. 
C)  loses value in terms of the domestic goods and services it can buy, but gains value in terms of the foreign currency it can buy. 
D)  loses value both in terms of the domestic goods and services it can buy and in terms of the foreign currency it can buy. 
A)  gains value both in terms of the domestic goods and services it can buy and in terms of the foreign currency it can buy. 
B)  gains value in terms of the domestic goods and services it can buy, but loses value in terms of the foreign currency it can buy. 
C)  loses value in terms of the domestic goods and services it can buy, but gains value in terms of the foreign currency it can buy. 
D)  loses value both in terms of the domestic goods and services it can buy and in terms of the foreign currency it can buy.

Question 18

A department store chain in Japan uses yen to purchase 500,000 U.S. dollars from a U.S. bank. It then uses these dollars to buy DVDs from a U.S. filmmaker. As a result of these transactions:
A. By how much and in what direction did U.S. net exports change?
B. By how much and in which direction did U.S. net capital outflow change?

Accepted Answer

A. U.S. net exports

Question 19

If a country's government reduced corruption and reformed its tax system so that businesses found operating there less risky, it's likely that this country's

Accepted Answer

A)  net exports and net capital outflows would increase. 
B)  net exports would increase and its net capital outflows would decrease. 
C)  net exports and net capital outflow would decrease. 
D)  net exports would decrease and its net capital outflow would increase. 
A)  net exports and net capital outflows would increase. 
B)  net exports would increase and its net capital outflows would decrease. 
C)  net exports and net capital outflow would decrease. 
D)  net exports would decrease and its net capital outflow would increase.

Question 20

If a dollar currently purchases 12.5 pesos and someone forecasts that in a year it will purchase 14 pesos, then the forecast is given in

Accepted Answer

A)  real terms and implies the dollar will appreciate. 
B)  real terms and implies the dollar will depreciate. 
C)  nominal terms and implies the dollar will appreciate. 
D)  nominal terms and implies the dollar will depreciate. 
A)  real terms and implies the dollar will appreciate. 
B)  real terms and implies the dollar will depreciate. 
C)  nominal terms and implies the dollar will appreciate. 
D)  nominal terms and implies the dollar will depreciate.

According to the theory of purchasing-power parity, the nominal exchange rate between two countries must reflect the differing

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

From 1991-2000, U.S. net capital outflow as a percent of GDP became a

A country's trade balance

When making investment decisions, investors

Susan, a U.S. citizen, builds and operates a kennel in France. This action is an example of

Paul, a Canadian citizen, purchases oranges grown in Florida. This purchase is an example of

Last year a country had $700 billion of saving and $900 of investment. What was its net capital outflow? How is it possible for a country to have investment that exceeds saving?

Net capital outflow measures the imbalance between the amount of

Table 31-2 -Refer to Table 31-2. In real terms, U.S. goods are less expensive than goods in which countries?

Alfonso, a citizen of Italy, decides to purchase bonds issued by Ireland instead of ones issued by the United States even though the Irish bonds have a higher risk of default. An economic reason for his decision might be that

If purchasing-power parity holds, when a country's central bank increases the money supply, its

If the exchange rate is 5 Egyptian pounds per U.S. dollar, a watch that costs $25 US dollars costs

Which of the following is correct?

Last year a country purchased $1.5 trillion worth of goods and services from foreign countries, sold $2 trillion worth of goods and services to foreign countries and had national saving of $1.25 trillion. What was the value of its domestic investment? Show your work.

If the U.S. has a trade deficit and the nominal exchange rate depreciates, then other things the same

If purchasing-power parity holds, when a country's central bank increases the money supply, a unit of money

If a country's government reduced corruption and reformed its tax system so that businesses found operating there less risky, it's likely that this country's

If a dollar currently purchases 12.5 pesos and someone forecasts that in a year it will purchase 14 pesos, then the forecast is given in

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 the theory of purchasing-power parity, the nominal exchange rate between two countries must reflect the differing

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

From 1991-2000, U.S. net capital outflow as a percent of GDP became a

A country's trade balance

When making investment decisions, investors

Susan, a U.S. citizen, builds and operates a kennel in France. This action is an example of

Paul, a Canadian citizen, purchases oranges grown in Florida. This purchase is an example of

Last year a country had $700 billion of saving and $900 of investment. What was its net capital outflow? How is it possible for a country to have investment that exceeds saving?

Net capital outflow measures the imbalance between the amount of

Table 31-2 -Refer to Table 31-2. In real terms, U.S. goods are less expensive than goods in which countries?

Alfonso, a citizen of Italy, decides to purchase bonds issued by Ireland instead of ones issued by the United States even though the Irish bonds have a higher risk of default. An economic reason for his decision might be that

If purchasing-power parity holds, when a country's central bank increases the money supply, its

If the exchange rate is 5 Egyptian pounds per U.S. dollar, a watch that costs $25 US dollars costs

Which of the following is correct?

Last year a country purchased $1.5 trillion worth of goods and services from foreign countries, sold $2 trillion worth of goods and services to foreign countries and had national saving of $1.25 trillion. What was the value of its domestic investment? Show your work.

If the U.S. has a trade deficit and the nominal exchange rate depreciates, then other things the same

If purchasing-power parity holds, when a country's central bank increases the money supply, a unit of money

If a country's government reduced corruption and reformed its tax system so that businesses found operating there less risky, it's likely that this country's

If a dollar currently purchases 12.5 pesos and someone forecasts that in a year it will purchase 14 pesos, then the forecast is given in

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