Exam 18: Open-Economy Macroeconomics: Basic Concepts

When the central bank of some country prints large quantities of money, that county's currency loses value both in terms of the goods and services it buys and in terms of the amount of foreign currencies it can buy.

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

While on vacation in Europe you notice that a tablet computer is selling for 600 euros in France and for 533 pounds in Britain. You also know that the exchange rates are .75 euros per dollar and .65 British pounds per dollar. Where is the number of dollars you would pay for the tablet lower? How many dollars would you have to pay to buy it there?

How do the nominal exchange rate and the real exchange rate differ?

Other things the same, if the exchange rate changes from .8 euros per dollar to .9 euros per dollar, the dollar

If saving is greater than domestic investment, then

Exchange rates are 100 yen per dollar, 0.8 euro per dollar, and 12 pesos per dollar. A bottle of beer in New York costs 6 dollars, 500 yen in Tokyo, 6 euro in Munich, and 84 pesos in Cancun. Where is the most expensive and the cheapest beer, in that order?

U.S.-based John Deere sells machinery to residents of South Africa who pay with South African currency the rand).

If a country has positive net capital outflows, then its net exports are

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

Suppose that the real return from operating factories in Canada rises relative to the real rate of return in the United States. Other things the same,

If the price of a sofa is $800 in the U.S. and 2400 pesos in Argentina, and the exchange rate is 4 pesos per dollar, what is the real exchange rate?

If a bushel of wheat costs $6.40 in the United States, costs 40 pesos in Mexico, and the nominal exchange rate is 10 pesos per dollar, then the real exchange rate is

Prices in both the U.S. and India rise, but prices in India increase by a smaller percentage. According to purchasing- power parity the U.S. dollar

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

A U.S. retailer buys shoes from an Italian company. The Italian firm then uses all of the revenues to buy leather from the U.S. These transactions

If the U.S. real exchange rate is greater than 1, then there is the possibility of arbitraging by buying foreign goods to sell in the U.S.

A country's saving is greater than its domestic investment. This difference means that its

Bill, a U.S. citizen, pays a Spanish architect to design a metal casting factory. Which country's exports increase?

Firms in Saudi Arabia sell oil to the U.S. Other things the same, these oil sales