Question 1

Eric, a resident of Sweden, purchases a book printed in the U.S. Which country's exports increase?

Accepted Answer

A)  Sweden's 
B)  the U.S.'s 
C)  Sweden's and the U.S.'s 
D)  neither Sweden's nor the U.S.'s 
A)  Sweden's 
B)  the U.S.'s 
C)  Sweden's and the U.S.'s 
D)  neither Sweden's nor the U.S.'s

Question 2

A pair of running shoes costs $70 in the U.S. If the price of the same shoes is 4500 rupees in India and the exchange rate is 60 rupees per dollar, than the real exchange rate is

Accepted Answer

A)  more than 1, so a profit could be made by buying these shoes in the U.S. and selling them in India. 
B)  more than 1, so a profit could be made by buying these shoes in India and selling them in the U.S. 
C)  less than 1, so a profit could be made by buying these shoes in the U.S. and selling them in India. 
D)  less than 1, so a profit could be made by buying these shoes in India and selling them in the U.S. 
A)  more than 1, so a profit could be made by buying these shoes in the U.S. and selling them in India. 
B)  more than 1, so a profit could be made by buying these shoes in India and selling them in the U.S. 
C)  less than 1, so a profit could be made by buying these shoes in the U.S. and selling them in India. 
D)  less than 1, so a profit could be made by buying these shoes in India and selling them in the U.S.

Question 3

The nominal exchange rate is 32 Russian rubles per dollar. The price of a bushel of wheat is 260 rubles in Russia and $7 in the U.S.
A. What is the real exchange rate? Show your work.
B. Can arbitragers make a profit?
C. If your answer to B is yes, where would arbitragers buy and where would they sell.

Accepted Answer

A. The real exchange rate = $7

Question 4

Which of the following equations is correct?

Accepted Answer

A)  Y = C + I + G + NCO 
B)  NX = NCO 
C)  NCO = S - I 
D)  All of the above are correct. 
A)  Y = C + I + G + NCO 
B)  NX = NCO 
C)  NCO = S - I 
D)  All of the above are correct.

Question 5

If sales of Saudi Arabian oil to the rest of the world increase and Saudis use the proceeds to buy foreign goods, which of the following increases?

Accepted Answer

A)  Saudi Arabian net exports but not Saudi Arabian net capital outflow 
B)  Saudi Arabian net capital outflow but not Saudi Arabian net exports 
C)  both Saudi Arabian net exports and net capital outflow 
D)  neither Saudi Arabian net exports nor net capital outflow 
A)  Saudi Arabian net exports but not Saudi Arabian net capital outflow 
B)  Saudi Arabian net capital outflow but not Saudi Arabian net exports 
C)  both Saudi Arabian net exports and net capital outflow 
D)  neither Saudi Arabian net exports nor net capital outflow

Question 6

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 7

The price of a basket of goods is $2000 in the U.S. If purchasing-power parity holds, and the dollar buys two units of some country's currency, then how many units of foreign currency does the same basket of goods cost in that country?

Accepted Answer

A)  4000 
B)  2000 
C)  1000 
D)  None of the above are correct. 
A)  4000 
B)  2000 
C)  1000 
D)  None of the above are correct.

Question 8

If a U.S. dollar purchases 4 Argentinean pesos, and a gallon of milk costs $3 in the U.S. and 6 pesos in Argentina what is the real exchange rate?

Accepted Answer

A)  2 
B)  3/2 
C)  2/3 
D)  1/2 
A)  2 
B)  3/2 
C)  2/3 
D)  1/2

Question 9

If U.S. consumers decrease their demand for cell phones from Finland, then other things the same Finland's

Accepted Answer

A)  exports and net exports fall. 
B)  exports fall and net exports rise. 
C)  imports and net exports fall. 
D)  imports fall and net exports rise. 
A)  exports and net exports fall. 
B)  exports fall and net exports rise. 
C)  imports and net exports fall. 
D)  imports fall and net exports rise.

Question 10

Most of the change from 1980 to 1987 in U.S. net capital outflow as a percent of GDP was due to an)

Accepted Answer

A)  decrease in U.S. investment. 
B)  decrease in U.S. national saving. 
C)  increase in U.S. investment. 
D)  increase in U.S. national saving. 
A)  decrease in U.S. investment. 
B)  decrease in U.S. national saving. 
C)  increase in U.S. investment. 
D)  increase in U.S. national saving.

Question 11

If U.S. residents purchase $600 billion worth of foreign assets and foreigners purchase $300 billion worth of U.S. assets,

Accepted Answer

A)  U.S. net capital outflow is $300 billion; capital is flowing into the U.S. 
B)  U.S. net capital outflow is $300 billion; capital is flowing out of the U.S. 
C)  U.S. net capital outflow is -$300 billion; capital is flowing into the U.S. 
D)  U.S. net capital outflow is -$300 billion; capital is flowing out of the U.S. 
A)  U.S. net capital outflow is $300 billion; capital is flowing into the U.S. 
B)  U.S. net capital outflow is $300 billion; capital is flowing out of the U.S. 
C)  U.S. net capital outflow is -$300 billion; capital is flowing into the U.S. 
D)  U.S. net capital outflow is -$300 billion; capital is flowing out of the U.S.

Question 12

In an open economy, gross domestic product equals $2,450 billion, consumption expenditure equals $1,390 billion, government expenditure equals $325 billion, investment equals $510 and net capital outflow equals $225 billion. What is national saving?

Accepted Answer

A)  $225 billion 
B)  $510 billion 
C)  $735 billion 
D)  $1,390 billion 
A)  $225 billion 
B)  $510 billion 
C)  $735 billion 
D)  $1,390 billion

Question 13

A dozen eggs cost $2 in the U.S. and 12 pesos in Argentina. If the real exchange rate is 5/6, what is the nominal exchange rate? Show your work.

Accepted Answer

The real exchange rate = 5/6 =

Question 14

The exchange rate is 1.5 Bosnian markas per U.S. dollar. The price of a refrigerator in Bosnia is 1,200 markas while in the U.S. it is $1,000. The real exchange rate is

Accepted Answer

A)  9/5 
B)  5/4 
C)  4/5 
D)  None of the above are correct. 
A)  9/5 
B)  5/4 
C)  4/5 
D)  None of the above are correct.

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

Last year a country had exports of $100 billion, imports of $70 billion, and purchased $60 billion worth of foreign assets. What was the value of domestic assets purchased by foreigners?

Accepted Answer

A)  $70 billion 
B)  $40 billion 
C)  $30 billion 
D)  $10 billion 
A)  $70 billion 
B)  $40 billion 
C)  $30 billion 
D)  $10 billion

Question 17

If Canada's national saving exceeds its domestic investment, then Canada has

Accepted Answer

A)  positive net capital outflows and negative net exports. 
B)  positive net capital outflows and positive net exports. 
C)  negative net capital outflows and negative net exports. 
D)  negative net capital outflows and positive net exports. 
A)  positive net capital outflows and negative net exports. 
B)  positive net capital outflows and positive net exports. 
C)  negative net capital outflows and negative net exports. 
D)  negative net capital outflows and positive net exports.

Question 18

A U.S. fast food restaurant chain sells dollars for Argentinean pesos and then uses the pesos to buy Argentinean beef. Which of the following do these transactions increase?

Accepted Answer

A)  Argentinean net capital outflow and Argentinean net exports 
B)  only Argentinean net exports 
C)  only Argentinean net capital outflow 
D)  neither Argentinean net exports nor Argentinean capital outflow 
A)  Argentinean net capital outflow and Argentinean net exports 
B)  only Argentinean net exports 
C)  only Argentinean net capital outflow 
D)  neither Argentinean net exports nor Argentinean capital outflow

Question 19

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 20

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.

Exam 18: Open-Economy Macroeconomics: Basic Concepts

Eric, a resident of Sweden, purchases a book printed in the U.S. Which country's exports increase?

A pair of running shoes costs $70 in the U.S. If the price of the same shoes is 4500 rupees in India and the exchange rate is 60 rupees per dollar, than the real exchange rate is

Which of the following equations is correct?

If sales of Saudi Arabian oil to the rest of the world increase and Saudis use the proceeds to buy foreign goods, which of the following increases?

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

The price of a basket of goods is $2000 in the U.S. If purchasing-power parity holds, and the dollar buys two units of some country's currency, then how many units of foreign currency does the same basket of goods cost in that country?

If a U.S. dollar purchases 4 Argentinean pesos, and a gallon of milk costs $3 in the U.S. and 6 pesos in Argentina what is the real exchange rate?

If U.S. consumers decrease their demand for cell phones from Finland, then other things the same Finland's

Most of the change from 1980 to 1987 in U.S. net capital outflow as a percent of GDP was due to an)

If U.S. residents purchase $600 billion worth of foreign assets and foreigners purchase $300 billion worth of U.S. assets,

In an open economy, gross domestic product equals $2,450 billion, consumption expenditure equals $1,390 billion, government expenditure equals $325 billion, investment equals $510 and net capital outflow equals $225 billion. What is national saving?

A dozen eggs cost $2 in the U.S. and 12 pesos in Argentina. If the real exchange rate is 5/6, what is the nominal exchange rate? Show your work.

The exchange rate is 1.5 Bosnian markas per U.S. dollar. The price of a refrigerator in Bosnia is 1,200 markas while in the U.S. it is $1,000. The real exchange rate is

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.

Last year a country had exports of $100 billion, imports of $70 billion, and purchased $60 billion worth of foreign assets. What was the value of domestic assets purchased by foreigners?

If Canada's national saving exceeds its domestic investment, then Canada has

A U.S. fast food restaurant chain sells dollars for Argentinean pesos and then uses the pesos to buy Argentinean beef. Which of the following do these transactions increase?

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

When making investment decisions, investors

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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