Question 1

A country has net capital outflow of $40 billion. Which of the following is consistent with this net capital outflow?

Accepted Answer

A)  It has -$40 billion of net exports. 
B)  Purchases of foreign assets by domestic residents exceed purchases of domestic assets by foreign residents by $40 billion. 
C)  Its saving is $35 billion and its domestic investment is $5 billion. 
D)  All of the above are consistent with a net capital outflow of $40 billion. 
A)  It has -$40 billion of net exports. 
B)  Purchases of foreign assets by domestic residents exceed purchases of domestic assets by foreign residents by $40 billion. 
C)  Its saving is $35 billion and its domestic investment is $5 billion. 
D)  All of the above are consistent with a net capital outflow of $40 billion.

Question 2

From 2008 to 2012 both U.S. saving and U.S. investment fell.

Accepted Answer

A) True 
 B)False

Question 3

Other things the same, which of the following could explain a rise in Sweden's net capital outflow?

Accepted Answer

A)  interest rates on Swedish bonds rise 
B)  the probability of default on Swedish bonds rises 
C)  Sweden enacts a law reducing taxes on income earned by foreign-owned businesses operating in Sweden 
D)  None of the above are correct. 
A)  interest rates on Swedish bonds rise 
B)  the probability of default on Swedish bonds rises 
C)  Sweden enacts a law reducing taxes on income earned by foreign-owned businesses operating in Sweden 
D)  None of the above are correct.

Question 4

A Big Mac in Japan costs 400 yen while it costs $4.50 in the U.S.. The nominal exchange rate is 100 yen per dollar. Which of the following would both make the real exchange rate move towards purchasing-power parity?

Accepted Answer

A)  the price of Big Macs in the U.S. falls, the nominal exchange rate falls 
B)  the price of Big Macs in the U.S. falls, the nominal exchange rate rises 
C)  the price of Big Macs in the U.S. rises, the nominal exchange rate falls 
D)  the price of Big Macs in the U.S. rises, the nominal exchange rate rises 
A)  the price of Big Macs in the U.S. falls, the nominal exchange rate falls 
B)  the price of Big Macs in the U.S. falls, the nominal exchange rate rises 
C)  the price of Big Macs in the U.S. rises, the nominal exchange rate falls 
D)  the price of Big Macs in the U.S. rises, the nominal exchange rate rises

Question 5

One year a country has positive net exports. The next year it still has positive but larger net exports

Accepted Answer

A)  its trade surplus fell. 
B)  its trade surplus rose. 
C)  its trade deficit fell. 
D)  its trade deficit rose 
A)  its trade surplus fell. 
B)  its trade surplus rose. 
C)  its trade deficit fell. 
D)  its trade deficit rose

Question 6

Mark, a U.S. citizen, buys stock in a British Shipping company. This purchase is an example of

Accepted Answer

A)  investment for Mark and U.S. foreign direct investment. 
B)  investment for Mark and U.S. foreign portfolio investment. 
C)  saving for Mark and U.S. foreign direct investment. 
D)  saving for Mark and U.S. foreign portfolio investment. 
A)  investment for Mark and U.S. foreign direct investment. 
B)  investment for Mark and U.S. foreign portfolio investment. 
C)  saving for Mark and U.S. foreign direct investment. 
D)  saving for Mark and U.S. foreign portfolio investment.

Question 7

While vacationing in Italy, you see an interesting meal on a menu. The price is 24 euros.
A. If the exchange rate is .80 euros per dollar, how many dollars would you have to give up to buy the meal?
B. If the dollar appreciated against the euro, but the price of the meal remained 24 euro, would the meal cost more or fewer dollars? Explain.

Accepted Answer

A. 24 euros = $x times .80 eur

Question 8

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 9

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?

Accepted Answer

It costs less in France where

Question 10

A tall latte in China costs 30 yuan. The same latte in the U.S. costs 4 dollars. If the exchange rate is 6.5 yuan per dollar then, the real exchange rate is

Accepted Answer

A)  .867 so the good is more expensive in the U.S. 
B)  .867 so the good is more expensive in China. 
C)  1.154 so the god is more expensive in the U.S. 
D)  1.154 so the good is more expensive in China. 
A)  .867 so the good is more expensive in the U.S. 
B)  .867 so the good is more expensive in China. 
C)  1.154 so the god is more expensive in the U.S. 
D)  1.154 so the good is more expensive in China.

Question 11

Under what circumstances does purchasing-power parity explain how exchange rates are determined, and why is it not completely accurate?

Accepted Answer

Purchasing-power parity works well in he

Question 12

What is the logic behind the theory of purchasing-power parity?

Accepted Answer

The logic behind purchasing-power parity

Question 13

If a dollar buys more rice in the China. than in the U.S., then

Accepted Answer

A)  the real exchange rate is greater than 1; a profit might be made by buying rice in the U.S. and selling it in China. 
B)  the real exchange rate is greater than 1; a profit might be made by buying rice in China. and selling it in the U.S. 
C)  the real exchange rate is less than 1; a profit might be made by buying rice in the U.S. and selling it in China. 
D)  the real exchange rate is less than 1; a profit might be made by buying rice in China and selling it in the U.S. 
A)  the real exchange rate is greater than 1; a profit might be made by buying rice in the U.S. and selling it in China. 
B)  the real exchange rate is greater than 1; a profit might be made by buying rice in China. and selling it in the U.S. 
C)  the real exchange rate is less than 1; a profit might be made by buying rice in the U.S. and selling it in China. 
D)  the real exchange rate is less than 1; a profit might be made by buying rice in China and selling it in the U.S.

Question 14

Suppose a country's net capital outflow does not change, but its investment rises by $250 billion.

Accepted Answer

A)  Its saving must have risen by $250 billion so its net exports have risen. 
B)  Its saving must have risen by $250 billion, but its net exports are unchanged. 
C)  Its saving must have fallen by $250 billion, so its net exports have fallen. 
D)  Its saving must have fallen by $250 billion, but its net exports are unchanged. 
A)  Its saving must have risen by $250 billion so its net exports have risen. 
B)  Its saving must have risen by $250 billion, but its net exports are unchanged. 
C)  Its saving must have fallen by $250 billion, so its net exports have fallen. 
D)  Its saving must have fallen by $250 billion, but its net exports are unchanged.

Question 15

A certain cell phone sells for 2400 yuan in China and for $300 in the U.S. The nominal exchange rate is 6.5 yuan per dollar.
A. Find the real exchange rate. Show your work.
B. In terms of dollars where is the cell phone cheaper?

Accepted Answer

The real exchange rate = $300

Question 16

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 17

When Jamie, a U.S. citizen, purchases a wool jacket made in Ireland, the purchase is

Accepted Answer

A)  both a U.S. and Irish import. 
B)  a U.S. import and an Irish export. 
C)  a U.S. export and an Irish import. 
D)  neither an export nor an import for either country. 
A)  both a U.S. and Irish import. 
B)  a U.S. import and an Irish export. 
C)  a U.S. export and an Irish import. 
D)  neither an export nor an import for either country.

Question 18

Net capital outflow is the purchase of domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.

Accepted Answer

A) True 
 B)False

Question 19

If a U.S. shirt maker purchases cotton from Egypt, 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 20

A country has $100 million of net exports and $170 million of saving. Net capital outflow is

Accepted Answer

A)  $70 million and domestic investment is $170 million. 
B)  $70 million and domestic investment is $270 million. 
C)  $100 million and domestic investment is $70 million. 
D)  None of the above is correct. 
A)  $70 million and domestic investment is $170 million. 
B)  $70 million and domestic investment is $270 million. 
C)  $100 million and domestic investment is $70 million. 
D)  None of the above is correct.

Exam 31: Open-Economy Macroeconomics: Basic Concepts

A country has net capital outflow of $40 billion. Which of the following is consistent with this net capital outflow?

From 2008 to 2012 both U.S. saving and U.S. investment fell.

Other things the same, which of the following could explain a rise in Sweden's net capital outflow?

A Big Mac in Japan costs 400 yen while it costs $4.50 in the U.S.. The nominal exchange rate is 100 yen per dollar. Which of the following would both make the real exchange rate move towards purchasing-power parity?

One year a country has positive net exports. The next year it still has positive but larger net exports

Mark, a U.S. citizen, buys stock in a British Shipping company. This purchase is an example of

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

A tall latte in China costs 30 yuan. The same latte in the U.S. costs 4 dollars. If the exchange rate is 6.5 yuan per dollar then, the real exchange rate is

Under what circumstances does purchasing-power parity explain how exchange rates are determined, and why is it not completely accurate?

What is the logic behind the theory of purchasing-power parity?

If a dollar buys more rice in the China. than in the U.S., then

Suppose a country's net capital outflow does not change, but its investment rises by $250 billion.

A certain cell phone sells for 2400 yuan in China and for $300 in the U.S. The nominal exchange rate is 6.5 yuan per dollar. A. Find the real exchange rate. Show your work. B. In terms of dollars where is the cell phone cheaper?

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

When Jamie, a U.S. citizen, purchases a wool jacket made in Ireland, the purchase is

Net capital outflow is the purchase of domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.

If a U.S. shirt maker purchases cotton from Egypt, U.S. net exports

A country has $100 million of net exports and $170 million of saving. Net capital outflow is

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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