Question 1

If France had positive net exports last year, then it

Accepted Answer

A)  sold more abroad than it purchased abroad and had a trade surplus. 
B)  sold more abroad than it purchased abroad and had a trade deficit. 
C)  bought more abroad than it sold abroad and had a trade surplus. 
D)  bought more abroad than it sold abroad and had a trade deficit. 
A)  sold more abroad than it purchased abroad and had a trade surplus. 
B)  sold more abroad than it purchased abroad and had a trade deficit. 
C)  bought more abroad than it sold abroad and had a trade surplus. 
D)  bought more abroad than it sold abroad and had a trade deficit.

Question 2

A Japanese bank buys U.S. government bonds, this purchase

Accepted Answer

A)  increases U.S. net capital outflow and has no affect on Japanese net capital outflow. 
B)  increases U.S. net capital outflow and increases Japanese net capital outflow. 
C)  increases U.S. net capital outflow, but decreases Japanese net capital outflow. 
D)  decreases U.S. net capital outflow, but increases Japanese net capital outflow. 
A)  increases U.S. net capital outflow and has no affect on Japanese net capital outflow. 
B)  increases U.S. net capital outflow and increases Japanese net capital outflow. 
C)  increases U.S. net capital outflow, but decreases Japanese net capital outflow. 
D)  decreases U.S. net capital outflow, but increases Japanese net capital outflow.

Question 3

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 4

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?

Accepted Answer

A)  Cancun, New York 
B)  Munich, Tokyo 
C)  Tokyo, Munich 
D)  New York, Cancun 
A)  Cancun, New York 
B)  Munich, Tokyo 
C)  Tokyo, Munich 
D)  New York, Cancun

Question 5

You are planning a graduation trip to Mexico. Other things the same, if the dollar appreciates relative to the peso, then

Accepted Answer

A)  the dollar buys fewer pesos. Your hotel room in Mexico will require fewer dollars. 
B)  the dollar buys fewer pesos. Your hotel room in Mexico will require more dollars. 
C)  the dollar buys more pesos. Your hotel room in Mexico will require fewer dollars. 
D)  the dollar buys more pesos. Your hotel room in Mexico will require more dollars. 
A)  the dollar buys fewer pesos. Your hotel room in Mexico will require fewer dollars. 
B)  the dollar buys fewer pesos. Your hotel room in Mexico will require more dollars. 
C)  the dollar buys more pesos. Your hotel room in Mexico will require fewer dollars. 
D)  the dollar buys more pesos. Your hotel room in Mexico will require more dollars.

Question 6

A Turkish company exchanges liras for dollars and then uses the dollars to purchase medical equipment from a U.S. company. These transactions

Accepted Answer

A)  increase U.S. net exports, and increase Turkish net capital outflow. 
B)  increase U.S. net exports, and decrease Turkish net capital outflow. 
C)  decrease U.S. net exports, and increase Turkish net capital outflow. 
D)  decrease U.S. net exports, and decrease Turkish net capital outflow. 
A)  increase U.S. net exports, and increase Turkish net capital outflow. 
B)  increase U.S. net exports, and decrease Turkish net capital outflow. 
C)  decrease U.S. net exports, and increase Turkish net capital outflow. 
D)  decrease U.S. net exports, and decrease Turkish net capital outflow.

Question 7

Egypt has exports of $500 million and imports of $750 million. Egypt

Accepted Answer

A)  sells more overseas then it buys from overseas; it has a trade deficit. 
B)  sells more overseas then it buys from overseas; it has a trade surplus. 
C)  buys more from overseas then it sells overseas; it has a trade deficit. 
D)  buys more from overseas then it sells overseas; it has a trade surplus. 
A)  sells more overseas then it buys from overseas; it has a trade deficit. 
B)  sells more overseas then it buys from overseas; it has a trade surplus. 
C)  buys more from overseas then it sells overseas; it has a trade deficit. 
D)  buys more from overseas then it sells overseas; it has a trade surplus.

Question 8

The nominal exchange rate is 2 Barbados dollars per U.S. dollar. If the price of a good in Barbados is 3 Barbados dollars and the price in the U.S. is 2 U.S. dollars, what is the real exchange rate to the nearest 100th?

Accepted Answer

A)  3 Barbados goods per U.S. good 
B)  1.33 Barbados goods per U.S. good 
C)  .75 Barbados goods per U.S. good 
D)  none of the above is correct 
A)  3 Barbados goods per U.S. good 
B)  1.33 Barbados goods per U.S. good 
C)  .75 Barbados goods per U.S. good 
D)  none of the above is correct

Question 9

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 10

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 11

Which of the following does purchasing-power parity imply?

Accepted Answer

A)  the foreign price level times the nominal exchange rate (given as amount of foreign currency per dollar) equals the U.S. price level. 
B)  The price of domestic goods relative to foreign goods cannot change. 
C)  The nominal exchange rate is the ratio of foreign prices to U.S. prices. 
D)  All of the above are correct. 
A)  the foreign price level times the nominal exchange rate (given as amount of foreign currency per dollar) equals the U.S. price level. 
B)  The price of domestic goods relative to foreign goods cannot change. 
C)  The nominal exchange rate is the ratio of foreign prices to U.S. prices. 
D)  All of the above are correct.

Question 12

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

Accepted Answer

A)  A U.S. based mutual fund buys stock in Eastern European companies. 
B)  A U.S. citizen builds and operates a coffee shop in the Netherlands. 
C)  A Swiss bank buys a U.S. government bond. 
D)  A German tractor factory opens a plant in Waterloo, Iowa. 
A)  A U.S. based mutual fund buys stock in Eastern European companies. 
B)  A U.S. citizen builds and operates a coffee shop in the Netherlands. 
C)  A Swiss bank buys a U.S. government bond. 
D)  A German tractor factory opens a plant in Waterloo, Iowa.

Question 13

If a country's exports were 500 billion pesos and its imports were 300 billion pesos, what would its trade balance be?

Accepted Answer

a 200 bill

Question 14

If a country has a trade surplus

Accepted Answer

A)  it has positive net exports and positive net capital outflow. 
B)  it has positive net exports and negative net capital outflow. 
C)  it has negative net exports and positive net capital outflow. 
D)  it has negative net exports and negative net capital outflow. 
A)  it has positive net exports and positive net capital outflow. 
B)  it has positive net exports and negative net capital outflow. 
C)  it has negative net exports and positive net capital outflow. 
D)  it has negative net exports and negative net capital outflow.

Question 15

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 16

Table 31-2  
-Refer to Table 31-2. For which country(ies) in the table does purchasing-power parity with the U.S. hold?

Accepted Answer

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

Question 17

If the American company Stryker builds and operates a new factory in France,

Accepted Answer

A)  it engages in foreign direct investment. By itself this action lowers U.S. net capital outflow. 
B)  it engages in foreign direct investment. By itself this action raises U.S. net capital outflow. 
C)  it engages in foreign portfolio investment. By itself this action lowers U.S. net capital outflow. 
D)  it engages in foreign portfolio investment. By itself this action raises U.S. net capital outflow. 
A)  it engages in foreign direct investment. By itself this action lowers U.S. net capital outflow. 
B)  it engages in foreign direct investment. By itself this action raises U.S. net capital outflow. 
C)  it engages in foreign portfolio investment. By itself this action lowers U.S. net capital outflow. 
D)  it engages in foreign portfolio investment. By itself this action raises U.S. net capital outflow.

Question 18

Paine Pharmaceuticals produces medicines in the U.S. Its overseas sales

Accepted Answer

A)  are an export of the U.S. and increase U.S. net exports. 
B)  are an export of the U.S. and decrease U.S. net exports. 
C)  are an import of the U.S. and increase U.S. net exports. 
D)  are an import of the U.S. and decrease U.S. net exports. 
A)  are an export of the U.S. and increase U.S. net exports. 
B)  are an export of the U.S. and decrease U.S. net exports. 
C)  are an import of the U.S. and increase U.S. net exports. 
D)  are an import of the U.S. and decrease U.S. net exports.

Question 19

A country has a trade deficit. Its

Accepted Answer

A)  net capital outflow must be positive, and saving is larger than investment. 
B)  net capital outflow must be positive and saving is smaller than investment. 
C)  net capital outflow must be negative and saving is larger than investment. 
D)  net capital outflow must be negative and saving is smaller than investment. 
A)  net capital outflow must be positive, and saving is larger than investment. 
B)  net capital outflow must be positive and saving is smaller than investment. 
C)  net capital outflow must be negative and saving is larger than investment. 
D)  net capital outflow must be negative and saving is smaller than investment.

Question 20

Carl and Carly are American residents. Carl buys stock of a corporation in Austria. Carly opens a coffee shop in Austria. Whose purchase, by itself, decreases Austria's net capital outflow?

Accepted Answer

A)  Carl's 
B)  Carly's 
C)  both Carl's and Carly's 
D)  neither Carl's nor Carly's 
A)  Carl's 
B)  Carly's 
C)  both Carl's and Carly's 
D)  neither Carl's nor Carly's

Exam 31: Open-Economy Macroeconomics: Basic Concepts

If France had positive net exports last year, then it

A Japanese bank buys U.S. government bonds, this purchase

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

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?

You are planning a graduation trip to Mexico. Other things the same, if the dollar appreciates relative to the peso, then

A Turkish company exchanges liras for dollars and then uses the dollars to purchase medical equipment from a U.S. company. These transactions

Egypt has exports of $500 million and imports of $750 million. Egypt

The nominal exchange rate is 2 Barbados dollars per U.S. dollar. If the price of a good in Barbados is 3 Barbados dollars and the price in the U.S. is 2 U.S. dollars, what is the real exchange rate to the nearest 100th?

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

Which of the following is correct?

Which of the following does purchasing-power parity imply?

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

If a country's exports were 500 billion pesos and its imports were 300 billion pesos, what would its trade balance be?

If a country has a trade surplus

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

Table 31-2 -Refer to Table 31-2. For which country(ies) in the table does purchasing-power parity with the U.S. hold?

If the American company Stryker builds and operates a new factory in France,

Paine Pharmaceuticals produces medicines in the U.S. Its overseas sales

A country has a trade deficit. Its

Carl and Carly are American residents. Carl buys stock of a corporation in Austria. Carly opens a coffee shop in Austria. Whose purchase, by itself, decreases Austria's net capital outflow?

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

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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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