Exam 31: Open-Economy Macroeconomics: Basic Concepts

In France a loaf of bread costs 3 euros. In Great Britain a loaf of bread costs 4 pounds. If the exchange rate is .9 pounds per euro, what is the real exchange rate?

If a nation produces more than it spends what do we know about: A. its net exports? B. its net capital outflow? C. its saving in relation to its domestic investment?

If a dollar buys more corn in the U.S. than in Mexico, then

Most of the change from 1991 to 2000 in U.S. net capital outflow as a percent of GDP was due to a(n)

Suppose that the real exchange rate between the United States and Brazil is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate (that is increase the number of baskets of Brazilian goods a basket of U.S. goods buys)?

According to purchasing-power parity, which of the following necessarily equals the ratio of the foreign price level divided by the domestic price level?

When the Mexican peso gets "stronger" relative to the dollar,

Other things the same, if the exchange rate changes from 75 Algerian dinar per dollar to 72 Algerian dinar per dollar, the dollar has

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

When U.S. national saving rises, domestic investment also necessarily rises.

Other things the same, if a country saves less, then

A Turkish firm exchanges lira (Turkish currency) for dollars. It then uses these dollars to purchase computers from the U.S. These actions decrease U.S. net capital outflow and increase U.S. net exports.

When a company from Germany builds an automobile factory in the United States, the German firm has engaged in foreign direct investment.

A country has $20 billion of domestic investment and net capital outflow of $10 billion. What is saving?

Which of the following does purchasing-power parity conclude should equal 1?

If the exchange rate is 1.25 New Zealand dollars per U.S dollar, the price of apples is $2 a pound in the U.S. and 1 New Zealand dollar per pound in New Zealand, what is the real exchange rate?

If Spain has a trade deficit, then

The nominal exchange rate is .80 euros per U.S. dollar and a basket of goods in France costs 1,000 euros while the same basket costs $800 in the U.S. The nominal exchange rate is 1.2 Australian dollars per U.S. dollar and a basket of goods in Australia costs 960 Australian dollars while the same basket costs $800 in the U.S.. Which country has purchasing-power parity with the U.S.?

A U.S. company uses U.K. pounds it already owned to purchase bonds issued by a company in the U.K. Which of these countries has an increase in net capital outflow?

A Swiss watchmaker opens a factory in the United States. This is an example of Swiss