Question 1

U.S- based Dell sells computers to an Irish company that pays with previously obtained U.S. currency. This exchange

Accepted Answer

A)  increases U.S. net capital outflow because the U.S. acquires foreign-owned assets. 
B)  decreases U.S. net capital outflow because the U.S. acquires foreign-owned assets. 
C)  increases U.S. net capital outflow because the U.S. sells capital goods. 
D)  decreases U.S. net capital outflow because the U.S. sells capital goods. 
A)  increases U.S. net capital outflow because the U.S. acquires foreign-owned assets. 
B)  decreases U.S. net capital outflow because the U.S. acquires foreign-owned assets. 
C)  increases U.S. net capital outflow because the U.S. sells capital goods. 
D)  decreases U.S. net capital outflow because the U.S. sells capital goods.

Question 2

If you go to the bank and notice that a dollar buys more Japanese yen than it used to, then the dollar has

Accepted Answer

A)  appreciated. Other things the same, the appreciation would make Americans less likely to travel to Japan. 
B)  appreciated. Other things the same, the appreciation would make Americans more likely to travel to Japan. 
C)  depreciated. Other things the same, the depreciation would make Americans less likely to travel to Japan. 
D)  depreciated. Other things the same, the depreciation would make Americans more likely to travel to Japan. 
A)  appreciated. Other things the same, the appreciation would make Americans less likely to travel to Japan. 
B)  appreciated. Other things the same, the appreciation would make Americans more likely to travel to Japan. 
C)  depreciated. Other things the same, the depreciation would make Americans less likely to travel to Japan. 
D)  depreciated. Other things the same, the depreciation would make Americans more likely to travel to Japan.

Question 3

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 4

A firm in China sells toys to a U.S. department store chain. Other things the same, these sales

Accepted Answer

A)  increase U.S. net exports and decrease Chinese net exports. 
B)  decrease U.S. net exports and increase Chinese net exports. 
C)  increase U.S. and Chinese net exports. 
D)  decrease U.S. and Chinese net exports. 
A)  increase U.S. net exports and decrease Chinese net exports. 
B)  decrease U.S. net exports and increase Chinese net exports. 
C)  increase U.S. and Chinese net exports. 
D)  decrease U.S. and Chinese net exports.

Question 5

In an open economy national saving equals domestic investment plus net capital outflow.

Accepted Answer

A) True 
 B)False

Question 6

Suppose that the real exchange rate between the United States and Kenya 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 Kenyan goods a basket of U.S. goods buys)?

Accepted Answer

A)  an increase in the number of Kenyan shillings that can be purchased with a dollar 
B)  an increase in the price of U.S. goods 
C)  a decrease in the price in Kenyan shillings of Kenyan goods 
D)  All of the above are correct. 
A)  an increase in the number of Kenyan shillings that can be purchased with a dollar 
B)  an increase in the price of U.S. goods 
C)  a decrease in the price in Kenyan shillings of Kenyan goods 
D)  All of the above are correct.

Question 7

Other things the same, an increase in foreign prices raises the real exchange rate.

Accepted Answer

A) True 
 B)False

Question 8

A U.S. purchase of oil from overseas paid for with foreign currency it already owned

Accepted Answer

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

Question 9

Ivan, a Russian citizen, sells several hundred cases of caviar to a restaurant chain in the United States. By itself, this sale

Accepted Answer

A)  increases U.S. net exports and decreases Russian net exports. 
B)  increases U.S. net exports and has no effect on Russian net exports. 
C)  decreases U.S. net exports and increases Russian net exports. 
D)  decreases U.S. net exports and has no effect on Russian net exports. 
A)  increases U.S. net exports and decreases Russian net exports. 
B)  increases U.S. net exports and has no effect on Russian net exports. 
C)  decreases U.S. net exports and increases Russian net exports. 
D)  decreases U.S. net exports and has no effect on Russian net exports.

Question 10

If a McDonald's Big Mac cost $4.50 in the United States and 3.60 euros in the Euro area, then purchasing-power parity implies the nominal exchange rate is how many euros per dollar?

Accepted Answer

A)  1.25 If the value is less than this, it costs more dollars to buy a Big Mac in the U.S. than in the Euro area. 
B)  1.25 If the value is less than this, it costs fewer dollars to buy a Big Mac in the U.S. then in the Euro area. 
C)  .80 If the value is less than this, it costs more dollars to buy a Big Mac in the U.S. than in the Euro area. 
D)  .80 If the value is less than this, it costs fewer dollars to buy a Big Mac in the U.S. than in the Euro area. 
A)  1.25 If the value is less than this, it costs more dollars to buy a Big Mac in the U.S. than in the Euro area. 
B)  1.25 If the value is less than this, it costs fewer dollars to buy a Big Mac in the U.S. then in the Euro area. 
C)  .80 If the value is less than this, it costs more dollars to buy a Big Mac in the U.S. than in the Euro area. 
D)  .80 If the value is less than this, it costs fewer dollars to buy a Big Mac in the U.S. than in the Euro area.

Question 11

Over the past five decades, the U.S. economy has become

Accepted Answer

A)  more closed. 
B)  more open. 
C)  less trade-oriented. 
D)  more self-sufficient. 
A)  more closed. 
B)  more open. 
C)  less trade-oriented. 
D)  more self-sufficient.

Question 12

If Chileans buy more U.S. stocks and bonds and U.S. residents buy more Chilean wine, then

Accepted Answer

A)  both U.S. net exports and U.S. net capital outflows rise. 
B)  U.S. net exports rise and U.S. net capital outflows fall. 
C)  U.S. net exports fall and U.S. net capital outflows rise. 
D)  both U.S. net exports and U.S. net capital outflows fall. 
A)  both U.S. net exports and U.S. net capital outflows rise. 
B)  U.S. net exports rise and U.S. net capital outflows fall. 
C)  U.S. net exports fall and U.S. net capital outflows rise. 
D)  both U.S. net exports and U.S. net capital outflows fall.

Question 13

List the factors that might influence a country's exports, imports, and trade balance.

Accepted Answer

a. the tastes of consumers for domestic

Question 14

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 15

A country has net capital outflow of -10 billion euros and domestic investment of 20 billion euros. What is its national saving?

Accepted Answer

A)  30 billion euros 
B)  10 billion euros 
C)  -10 billion euros 
D)  -30 billion euros 
A)  30 billion euros 
B)  10 billion euros 
C)  -10 billion euros 
D)  -30 billion euros

Question 16

If the exchange rate rises from .65 British pounds per dollar to .70 pounds per dollar, then compared to British goods, U.S. goods become

Accepted Answer

A)  relatively more expensive for both British and U.S. residents. 
B)  relatively more expensive for British residents and relatively less expensive for U.S. residents. 
C)  relatively less expensive for British residents and relatively more expensive for U.S. residents. 
D)  relatively less expensive for both British and U.S. residents. 
A)  relatively more expensive for both British and U.S. residents. 
B)  relatively more expensive for British residents and relatively less expensive for U.S. residents. 
C)  relatively less expensive for British residents and relatively more expensive for U.S. residents. 
D)  relatively less expensive for both British and U.S. residents.

Question 17

If the Mexican nominal exchange rate does not change, but prices rise faster in Mexico than in all other countries, then the Mexican real exchange rate

Accepted Answer

A)  does not change. 
B)  rises. 
C)  declines. 
D)  There is not enough information to answer the question 
A)  does not change. 
B)  rises. 
C)  declines. 
D)  There is not enough information to answer the question

Question 18

Last year a country had $700 billion of saving and $900 of investment. What was its net capital outflow? How is it possible for a country to have investment that exceeds saving?

Accepted Answer

Net capital outflow equals saving - dome

Question 19

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

Accepted Answer

A)  A U.S. legal office opens a branch office in Holland. 
B)  Erica, a U.S. resident, buys bonds issued by the Swiss government. 
C)  Both A and B are examples of U.S. portfolio investment. 
D)  Neither A nor B are examples of U.S. portfolio investment. 
A)  A U.S. legal office opens a branch office in Holland. 
B)  Erica, a U.S. resident, buys bonds issued by the Swiss government. 
C)  Both A and B are examples of U.S. portfolio investment. 
D)  Neither A nor B are examples of U.S. portfolio investment.

Question 20

If the nominal exchange rate e is foreign currency per dollar, the domestic price is P, and the foreign price is P*, then the real exchange rate is defined as

Accepted Answer

A)  e(P*/P). 
B)  e(P/P*). 
C)  e + P*/P. 
D)  e - P/P*. 
A)  e(P*/P). 
B)  e(P/P*). 
C)  e + P*/P. 
D)  e - P/P*.

Exam 31: Open-Economy Macroeconomics: Basic Concepts

U.S- based Dell sells computers to an Irish company that pays with previously obtained U.S. currency. This exchange

If you go to the bank and notice that a dollar buys more Japanese yen than it used to, then the dollar has

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

A firm in China sells toys to a U.S. department store chain. Other things the same, these sales

In an open economy national saving equals domestic investment plus net capital outflow.

Suppose that the real exchange rate between the United States and Kenya 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 Kenyan goods a basket of U.S. goods buys)?

Other things the same, an increase in foreign prices raises the real exchange rate.

A U.S. purchase of oil from overseas paid for with foreign currency it already owned

Ivan, a Russian citizen, sells several hundred cases of caviar to a restaurant chain in the United States. By itself, this sale

If a McDonald's Big Mac cost $4.50 in the United States and 3.60 euros in the Euro area, then purchasing-power parity implies the nominal exchange rate is how many euros per dollar?

Over the past five decades, the U.S. economy has become

If Chileans buy more U.S. stocks and bonds and U.S. residents buy more Chilean wine, then

List the factors that might influence a country's exports, imports, and trade balance.

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 has net capital outflow of -10 billion euros and domestic investment of 20 billion euros. What is its national saving?

If the exchange rate rises from .65 British pounds per dollar to .70 pounds per dollar, then compared to British goods, U.S. goods become

If the Mexican nominal exchange rate does not change, but prices rise faster in Mexico than in all other countries, then the Mexican real exchange rate

Last year a country had $700 billion of saving and $900 of investment. What was its net capital outflow? How is it possible for a country to have investment that exceeds saving?

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

If the nominal exchange rate e is foreign currency per dollar, the domestic price is P, and the foreign price is P*, then the real exchange rate is defined as

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

Filters