Question 1

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 2

If purchasing-power parity holds, then the value of the

Accepted Answer

A)  real exchange rate is equal to one. 
B)  nominal exchange rate is equal to one. 
C)  real exchange rate is equal to the nominal exchange rate. 
D)  real exchange rate is equal to the difference in inflation rates between the two countries. 
A)  real exchange rate is equal to one. 
B)  nominal exchange rate is equal to one. 
C)  real exchange rate is equal to the nominal exchange rate. 
D)  real exchange rate is equal to the difference in inflation rates between the two countries.

Question 3

If purchases of French assets by foreigners are less than French purchases of foreign assets, then France has a

Accepted Answer

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

Question 4

The country of Sylvania has a GDP of $900, investment of $200, government purchases of $200, and net capital outflow of -$100. What is consumption?

Accepted Answer

A)  $700 
B)  $600 
C)  $500 
D)  $300 
A)  $700 
B)  $600 
C)  $500 
D)  $300

Question 5

Suppose that a country has $120 billion of national saving, and $80 billion of domestic investment. Is this possible? Where did the other $40 billion of national savings go?

Accepted Answer

This is possible for an open economy. Th

Question 6

If a German firm buys goods from a U.S. firm with dollars it obtains by exchanging euros for dollars, both U.S. net exports and U.S. net capital outflow increase.

Accepted Answer

A) True 
 B)False

Question 7

The country of Elbia has a GDP of $2,000, consumption of $1,300, and government purchases of $400. Which of the following is equal to $300?

Accepted Answer

A)  domestic investment 
B)  domestic investment plus net capital outflow 
C)  domestic investment minus net capital outflow 
D)  None of the above is correct. 
A)  domestic investment 
B)  domestic investment plus net capital outflow 
C)  domestic investment minus net capital outflow 
D)  None of the above is correct.

Question 8

According to purchasing-power parity, if a basket of goods costs $100 in the U.S. and the same basket costs 800 pesos in Argentina, then what is the nominal exchange rate?

Accepted Answer

A)  8 pesos per dollar 
B)  1 peso per dollar 
C)  1/8 peso per dollar 
D)  none of the above is correct 
A)  8 pesos per dollar 
B)  1 peso per dollar 
C)  1/8 peso per dollar 
D)  none of the above is correct

Question 9

If Chileans buy more U.S. stocks and bonds and U.S. residents buy more Chilean wine, then

Accepted Answer

A)  both U.S. net exports and U.S. net capital outflows rise. 
B)  U.S. net exports rise and U.S. net capital outflows fall. 
C)  U.S. net exports fall and U.S. net capital outflows rise. 
D)  both U.S. net exports and U.S. net capital outflows fall. 
A)  both U.S. net exports and U.S. net capital outflows rise. 
B)  U.S. net exports rise and U.S. net capital outflows fall. 
C)  U.S. net exports fall and U.S. net capital outflows rise. 
D)  both U.S. net exports and U.S. net capital outflows fall.

Question 10

Citizens in India buy music from the U.S. To do so they use Indian rupees to purchase U.S. dollars. If U.S. citizens hold these rupees rather than spending them, what happens to U.S. net exports and U.S. net capital outflows?

Accepted Answer

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

Question 11

Nominal exchange rates

Accepted Answer

A)  vary little over time. 
B)  vary substantially over time. 
C)  appreciate over time for most countries. 
D)  depreciate over time for most countries. 
A)  vary little over time. 
B)  vary substantially over time. 
C)  appreciate over time for most countries. 
D)  depreciate over time for most countries.

Question 12

Suppose that foreign citizens decide to purchase more U.S. pharmaceuticals and U.S. citizens decide to buy more stock in foreign corporations. Other things the same, these actions

Accepted Answer

A)  raise both U.S. net exports and U.S. net capital outflows. 
B)  raise U.S. net exports and lower U.S. net capital outflows. 
C)  lower both U.S. net exports and U.S. net capital outflows. 
D)  lower U.S. net exports and raise U.S. net capital outflows. 
A)  raise both U.S. net exports and U.S. net capital outflows. 
B)  raise U.S. net exports and lower U.S. net capital outflows. 
C)  lower both U.S. net exports and U.S. net capital outflows. 
D)  lower U.S. net exports and raise U.S. net capital outflows.

Question 13

The value of Austria's exports minus the value of Austria's imports is called

Accepted Answer

A)  Austria's net exports. 
B)  Austria's net imports. 
C)  Austria's foreign portfolio investment 
D)  Austria's foreign direct investment. 
A)  Austria's net exports. 
B)  Austria's net imports. 
C)  Austria's foreign portfolio investment 
D)  Austria's foreign direct investment.

Question 14

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 15

The ability to profit by purchasing wheat in the U.S. and selling it in China implies that the

Accepted Answer

A)  nominal exchange rate is less than 1. 
B)  nominal exchange rate is greater than 1. 
C)  real exchange rate is less than 1. 
D)  real exchange rate is greater than 1. 
A)  nominal exchange rate is less than 1. 
B)  nominal exchange rate is greater than 1. 
C)  real exchange rate is less than 1. 
D)  real exchange rate is greater than 1.

Question 16

A farmer in Mexico purchases a tractor made in the U.S. This purchase is an example of

Accepted Answer

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

Question 17

Net capital outflow equals

Accepted Answer

A)  the value of domestic assets purchased by foreigners. 
B)  the value of foreign assets purchased by domestic residents. 
C)  the value of domestic assets purchased by foreigners - the value of foreign assets purchased by domestic residents. 
D)  the value of foreign assets purchased by domestic residents - the value of domestic assets purchased by foreigners. 
A)  the value of domestic assets purchased by foreigners. 
B)  the value of foreign assets purchased by domestic residents. 
C)  the value of domestic assets purchased by foreigners - the value of foreign assets purchased by domestic residents. 
D)  the value of foreign assets purchased by domestic residents - the value of domestic assets purchased by foreigners.

Question 18

Last month a country sold more goods and services to residents of foreign countries than it purchased from them. What does this imply about this country's trade balance?

Accepted Answer

This count

Question 19

Other things the same, if a country's domestic investment decreases, then

Accepted Answer

A)  net capital outflow rises, so net exports rise. 
B)  net capital outflow rises, so net exports fall. 
C)  net capital outflow falls, so net exports rise. 
D)  net capital outflow falls, so net exports fall. 
A)  net capital outflow rises, so net exports rise. 
B)  net capital outflow rises, so net exports fall. 
C)  net capital outflow falls, so net exports rise. 
D)  net capital outflow falls, so net exports fall.

Question 20

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.

Exam 18: Open-Economy Macroeconomics: Basic Concepts

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

If purchasing-power parity holds, then the value of the

If purchases of French assets by foreigners are less than French purchases of foreign assets, then France has a

The country of Sylvania has a GDP of $900, investment of $200, government purchases of $200, and net capital outflow of -$100. What is consumption?

Suppose that a country has $120 billion of national saving, and $80 billion of domestic investment. Is this possible? Where did the other $40 billion of national savings go?

If a German firm buys goods from a U.S. firm with dollars it obtains by exchanging euros for dollars, both U.S. net exports and U.S. net capital outflow increase.

The country of Elbia has a GDP of $2,000, consumption of $1,300, and government purchases of $400. Which of the following is equal to $300?

According to purchasing-power parity, if a basket of goods costs $100 in the U.S. and the same basket costs 800 pesos in Argentina, then what is the nominal exchange rate?

If Chileans buy more U.S. stocks and bonds and U.S. residents buy more Chilean wine, then

Citizens in India buy music from the U.S. To do so they use Indian rupees to purchase U.S. dollars. If U.S. citizens hold these rupees rather than spending them, what happens to U.S. net exports and U.S. net capital outflows?

Nominal exchange rates

Suppose that foreign citizens decide to purchase more U.S. pharmaceuticals and U.S. citizens decide to buy more stock in foreign corporations. Other things the same, these actions

The value of Austria's exports minus the value of Austria's imports is called

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

The ability to profit by purchasing wheat in the U.S. and selling it in China implies that the

A farmer in Mexico purchases a tractor made in the U.S. This purchase is an example of

Net capital outflow equals

Last month a country sold more goods and services to residents of foreign countries than it purchased from them. What does this imply about this country's trade balance?

Other things the same, if a country's domestic investment decreases, then

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

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

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 Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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