Question 1

When the Sykes Corporation an American company) buys shares of Audi stock a German company) for its pension fund, U.S. net capital outflow

Accepted Answer

A)  increases because an American company makes a portfolio investment in Germany. 
B)  declines because an American company makes a portfolio investment in Germany. 
C)  increases because an American company makes a direct investment in Germany. 
D)  declines because an American company makes a direct investment in Germany. 
A)  increases because an American company makes a portfolio investment in Germany. 
B)  declines because an American company makes a portfolio investment in Germany. 
C)  increases because an American company makes a direct investment in Germany. 
D)  declines because an American company makes a direct investment in Germany.

Question 2

Suppose a Starbucks tall latte cost $4.00 in the United States, 5.00 euros in the euro area and $2.50 Australian dollars in Australia. Nominal exchange rates are .80 euros per dollar and 1.4 Australian dollars per U.S. 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 or 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 or Australia

Question 3

If U.S. exports are $150 billion and U.S. imports are $100 billion, which of the following is correct?

Accepted Answer

A)  The U.S. has a trade surplus of $100 billion. 
B)  The U.S. has a trade surplus of $50 billion. 
C)  The U.S. has a trade deficit of $100 billion. 
D)  The U.S. has a trade deficit of $50 billion. 
A)  The U.S. has a trade surplus of $100 billion. 
B)  The U.S. has a trade surplus of $50 billion. 
C)  The U.S. has a trade deficit of $100 billion. 
D)  The U.S. has a trade deficit of $50 billion.

Question 4

During the tough economic times from 2008-2012,

Accepted Answer

A)  investment fell but saving rose, so net capital outflow rose. 
B)  investment fell by more than saving fell, so net capital outflow rose 
C)  investment fell by less than saving fell, so net capital outflow fell. 
D)  investment and saving both fell by about the same percent. 
A)  investment fell but saving rose, so net capital outflow rose. 
B)  investment fell by more than saving fell, so net capital outflow rose 
C)  investment fell by less than saving fell, so net capital outflow fell. 
D)  investment and saving both fell by about the same percent.

Question 5

If the exchange rate changes from 148 Kazakhstan tenge per dollar to 155 Kazakhstan tenge per dollar, the dollar has

Accepted Answer

A)  appreciated. Other things the same, it now takes fewer dollars to buy Kazakhstani goods. 
B)  appreciated. Other things the same, it now takes more dollars to buy Kazakhstani goods. 
C)  depreciated. Other things the same, it now takes fewer dollars to buy Kazakhstani goods. 
D)  depreciated. Other things the same, it now takes more dollars to buy Kazakhstani goods. 
A)  appreciated. Other things the same, it now takes fewer dollars to buy Kazakhstani goods. 
B)  appreciated. Other things the same, it now takes more dollars to buy Kazakhstani goods. 
C)  depreciated. Other things the same, it now takes fewer dollars to buy Kazakhstani goods. 
D)  depreciated. Other things the same, it now takes more dollars to buy Kazakhstani goods.

Question 6

If a country sells more goods and services abroad than it purchases abroad, it has positive net exports and a trade surplus.

Accepted Answer

A) True 
 B)False

Question 7

If Spain has a trade deficit, then

Accepted Answer

A) Foreign countries purchase more Spanish assets than Spain purchases from them. This makes Spanish saving greater than Spanish domestic investment. 
B)  foreign countries purchase more Spanish assets than Spain purchases from them. This makes Spanish saving smaller then Spanish domestic investment.. 
C)  foreign countries purchase fewer Spanish assets than Spain purchases from them. This makes Spanish saving greater than Spanish domestic investment. 
D)  Foreign countries purchase fewer Spanish assets than Spain purchases from them. This makes Spanish saving greater than Spanish domestic investment. 
A) Foreign countries purchase more Spanish assets than Spain purchases from them. This makes Spanish saving greater than Spanish domestic investment. 
B)  foreign countries purchase more Spanish assets than Spain purchases from them. This makes Spanish saving smaller then Spanish domestic investment.. 
C)  foreign countries purchase fewer Spanish assets than Spain purchases from them. This makes Spanish saving greater than Spanish domestic investment. 
D)  Foreign countries purchase fewer Spanish assets than Spain purchases from them. This makes Spanish saving greater than Spanish domestic investment.

Question 8

From 1970 to 1998 the U.S. dollar

Accepted Answer

A)  gained value compared to the Italian lira because inflation was higher in the U.S. 
B)  gained value compared to the Italian lira because inflation was lower in the U.S. 
C)  lost value compared to the Italian lira because inflation was higher in the U.S. 
D)  lost value compared to the Italian lira because inflation was lower in the U.S. 
A)  gained value compared to the Italian lira because inflation was higher in the U.S. 
B)  gained value compared to the Italian lira because inflation was lower in the U.S. 
C)  lost value compared to the Italian lira because inflation was higher in the U.S. 
D)  lost value compared to the Italian lira because inflation was lower in the U.S.

Question 9

A Portuguese company exchanges euros for $60,000 from a U.S. bank. The Portuguese firm then uses the dollars to purchase $60,000 of canning equipment from a U.S. company. As a result of these two transactions alone

Accepted Answer

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

Question 10

A country had a net capital outflow of $1.5 trillion and imports of $0.5 trillion. What was the value of its exports?

Accepted Answer

The answer of A country had a net capital outflow...

Question 11

If purchasing-power parity holds, the price level in the U.S. is 140, and the price level in Canada is 120, which of the following is true?

Accepted Answer

A)  the real exchange rate is 120/140. 
B)  the real exchange rate is 140/120. 
C)  the nominal exchange rate is 120/140 
D)  the nominal exchange rate is 140/120 
A)  the real exchange rate is 120/140. 
B)  the real exchange rate is 140/120. 
C)  the nominal exchange rate is 120/140 
D)  the nominal exchange rate is 140/120

Question 12

It is possible for a country to have domestic investment that exceeds national saving.

Accepted Answer

A) True 
 B)False

Question 13

Table 31-1
  
-Refer to Table 31-1. What are Bolivia's net exports?

Accepted Answer

A)  $30 billion 
B)  $5 billion 
C)  -$5 billion 
D)  -$25 billion 
A)  $30 billion 
B)  $5 billion 
C)  -$5 billion 
D)  -$25 billion

Question 14

If a U.S. textbook publishing company sells texts overseas, U.S. net exports

Accepted Answer

A)  increase, and U.S. net capital outflow increases. 
B)  increase, and U.S. net capital outflow decreases. 
C)  decrease, and U.S. net capital outflow increases. 
D)  decrease, and U.S. net capital outflow decreases. 
A)  increase, and U.S. net capital outflow increases. 
B)  increase, and U.S. net capital outflow decreases. 
C)  decrease, and U.S. net capital outflow increases. 
D)  decrease, and U.S. net capital outflow decreases.

Question 15

Gabrielle, an Italian citizen, uses some previously obtained dollars to purchase a bond issued by a U.S. company. This transaction

Accepted Answer

A)  decreases U.S. net capital outflow. 
B)  does not change U.S. net capital outflow. 
C)  increases U.S. net capital outflow by more than the value of the bond. 
D)  increases U.S. net capital outflow by the value of the bond. 
A)  decreases U.S. net capital outflow. 
B)  does not change U.S. net capital outflow. 
C)  increases U.S. net capital outflow by more than the value of the bond. 
D)  increases U.S. net capital outflow by the value of the bond.

Question 16

In the U.S. a digital camera costs $200. The same camera in London sells for 90 pounds. If the exchange rate were .50 pounds per dollar, then which of the following would be correct?

Accepted Answer

A)  The real exchange rate is greater than 1. A person in London with $200 could exchange them for pounds and have more than enough to buy the camera there. 
B)  The real exchange rate is greater than 1. A person in London with $200 could exchange them for pounds but then wouldn't have enough to buy the camera there. 
C)  The real exchange rate is less than 1. A person in London with $200 could exchange them for pounds and have more than enough to buy the camera there. 
D)  The real exchange rate is less than 1. A person in London with $200 could exchange them for pounds but then wouldn't have enough to buy the camera. 
A)  The real exchange rate is greater than 1. A person in London with $200 could exchange them for pounds and have more than enough to buy the camera there. 
B)  The real exchange rate is greater than 1. A person in London with $200 could exchange them for pounds but then wouldn't have enough to buy the camera there. 
C)  The real exchange rate is less than 1. A person in London with $200 could exchange them for pounds and have more than enough to buy the camera there. 
D)  The real exchange rate is less than 1. A person in London with $200 could exchange them for pounds but then wouldn't have enough to buy the camera.

Question 17

A country recently had a trade deficit of $2.5 trillion and purchased $3 trillion of foreign assets. How many of its assets did foreigners purchase?

Accepted Answer

The answer of A country recently had a trade deficit...

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

Last year a country had exports of $50 billion, imports of $60 billion, and domestic investment of $40 billion. What was its saving last year?

Accepted Answer

A)  $30 billion 
B)  $20 billion 
C)  $10 billion 
D)  -$10 billion 
A)  $30 billion 
B)  $20 billion 
C)  $10 billion 
D)  -$10 billion

Question 20

Other things the same, a country could move from having a trade surplus to having a trade deficit if either

Accepted Answer

A)  saving rose or domestic investment rose. 
B)  saving rose or domestic investment fell. 
C)  saving fell or domestic investment rose. 
D)  saving fell or domestic investment fell. 
A)  saving rose or domestic investment rose. 
B)  saving rose or domestic investment fell. 
C)  saving fell or domestic investment rose. 
D)  saving fell or domestic investment fell.

Exam 18: Open-Economy Macroeconomics: Basic Concepts

When the Sykes Corporation an American company) buys shares of Audi stock a German company) for its pension fund, U.S. net capital outflow

Suppose a Starbucks tall latte cost $4.00 in the United States, 5.00 euros in the euro area and $2.50 Australian dollars in Australia. Nominal exchange rates are .80 euros per dollar and 1.4 Australian dollars per U.S. dollar. Where does purchasing-power parity hold?

If U.S. exports are $150 billion and U.S. imports are $100 billion, which of the following is correct?

During the tough economic times from 2008-2012,

If the exchange rate changes from 148 Kazakhstan tenge per dollar to 155 Kazakhstan tenge per dollar, the dollar has

If a country sells more goods and services abroad than it purchases abroad, it has positive net exports and a trade surplus.

If Spain has a trade deficit, then

From 1970 to 1998 the U.S. dollar

A Portuguese company exchanges euros for $60,000 from a U.S. bank. The Portuguese firm then uses the dollars to purchase $60,000 of canning equipment from a U.S. company. As a result of these two transactions alone

A country had a net capital outflow of $1.5 trillion and imports of $0.5 trillion. What was the value of its exports?

If purchasing-power parity holds, the price level in the U.S. is 140, and the price level in Canada is 120, which of the following is true?

It is possible for a country to have domestic investment that exceeds national saving.

Table 31-1 -Refer to Table 31-1. What are Bolivia's net exports?

If a U.S. textbook publishing company sells texts overseas, U.S. net exports

Gabrielle, an Italian citizen, uses some previously obtained dollars to purchase a bond issued by a U.S. company. This transaction

In the U.S. a digital camera costs $200. The same camera in London sells for 90 pounds. If the exchange rate were .50 pounds per dollar, then which of the following would be correct?

A country recently had a trade deficit of $2.5 trillion and purchased $3 trillion of foreign assets. How many of its assets did foreigners purchase?

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

Last year a country had exports of $50 billion, imports of $60 billion, and domestic investment of $40 billion. What was its saving last year?

Other things the same, a country could move from having a trade surplus to having a trade deficit if either

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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