Deck 34: Open-Market Macroeconomics

Question 1

A country that has a trade surplus:

A)imports more than it exports.
B)has a negative trade balance.
C)sells more goods abroad than it buys from abroad.
D)All of these statements are true.

Answer 1

sells more goods abroad than it buys from abroad.

Question 2

China imports ___________ from the U.S.compared to how many goods the U.S.imports from China.

A)less
B)more
C)about the same
D)practically nothing

Answer 2

less

Question 3

Overall,the U.S.government has borrowed:

A)more than $1.6 trillion from Chinese investors through selling U.S.Treasury securities.
B)roughly $1.9 billion from Chinese investors through selling U.S.Treasury securities.
C)about $273 billion from Mexican investors through selling U.S.Treasury securities.
D)approximately $365 billion from investors from the UK through selling U.S.Treasury securities.

Answer 3

more than $1.6 trillion from Chinese investors through selling U.S.Treasury securities.

Question 4

When a country imports more than it exports,it has a:

A)trade deficit.
B)trade surplus.
C)zero trade balance.
D)policy which forbids exportation.

Question 5

The balance of trade is the value of:

A)exports minus the value of imports.
B)imports minus the value of exports.
C)total goods purchased by the U.S.from abroad.
D)total goods sold by the U.S.to parties abroad.

Question 6

Apple is an American company,but its iPhones are assembled in China.The sale of each iPhone then is counted in GDP as:

A)C,consumption.
B)I,investment.
C)Im,an import.
D)Ex,an export.

Question 7

In 2010,the sale of iPhones contributed $1.9 billion to U.S.:

A)imports.
B)GDP.
C)exports.
D)consumption.

Question 8

A country who has a trade deficit:

A)imports more than it exports.
B)has a negative trade balance.
C)buys more goods abroad than it sells abroad.
D)All of these statements are true.

Question 9

In the U.S.over the last 50 years:

A)imports have grown and exports have fallen.
B)both imports and exports have grown dramatically.
C)both imports and exports have fallen dramatically.
D)the percent of GDP that represents imports and exports has remained fairly steady.

Question 10

A country that typically runs a trade surplus is:

A)China.
B)Germany.
C)Japan.
D)All of these countries run trade surpluses.

Question 11

For nearly every year since 1970,the United States has:

A)imported more than it exported.
B)exported more than it imported.
C)imported about the same as it has exported.
D)held to very isolationist trade policy.

Question 12

The value of exports minus the value of imports is called the:

A)trade value.
B)net trade balance.
C)balance of trade.
D)net trade value.

Question 13

The sale of each iPhone in the U.S.counts as:

A)an import,because they are assembled in China.
B)an import,because they are assembled in Mexico.
C)an export,because they are assembled in China.
D)an export,because they are produced in the U.S.

Question 14

A country that typically runs a trade surplus is:

A)the United States.
B)China.
C)France.
D)Canada.

Question 15

A trade surplus occurs when a country:

A)imports more than it exports.
B)imports less than it exports.
C)has a negative balance of trade.
D)has a zero balance of trade.

Question 16

For nearly every year since 1970,the United States has:

A)had a positive trade balance.
B)imported more than it exported.
C)sold more goods abroad than it bought from abroad.
D)All of these statements are true.

Question 17

In 2010,the trade gap between the U.S.and China was:

A)$92 billion.
B)$273 billion.
C)$365 billion.
D)$1 trillion.

Question 18

A main trading partner with the U.S.is:

A)Hungary.
B)Russia.
C)Italy.
D)Canada.

Question 19

In 2010,imports and exports each represented:

A)about 15 percent of U.S.GDP.
B)about 1 percent of U.S.GDP.
C)about 40 percent of U.S.GDP.
D)nearly 70 percent of U.S.GDP.

Question 20

A country that typically runs a trade deficit is:

A)the United States.
B)Germany.
C)China.
D)Japan.

Question 21

The type of good with the largest trade deficit in the U.S.is:

A)capital goods.
B)consumption goods.
C)industrial goods.
D)None of these statements is true.

Question 22

One of the largest portfolio investments comes from:

A)U.S.purchases of Chinese consumption goods.
B)U.S.purchases of Chinese government debt.
C)Chinese purchases of U.S.government debt.
D)Chinese purchases of U.S.capital goods.

Question 23

The gains from trade in the U.S.come from:

A)capital goods.
B)consumption goods.
C)industrial supplies.
D)automotive vehicles.

Question 24

IBM buys treasury bonds from the UK as part of its investment portfolio.This is an example of:

A)foreign direct investment.
B)foreign portfolio investment.
C)importing.
D)exporting.

Question 25

Anheuser-Busch purchased the Labatt brewery in Canada and has expanded its market and product offerings.This is an example of:

A)foreign direct investment.
B)foreign portfolio investment.
C)importing.
D)exporting.

Question 26

The investment when a firm runs part of its operation abroad or invests in another company abroad is called:

A)portfolio investment.
B)import investment.
C)export investment.
D)foreign direct investment.

Question 27

A main trading partner with the U.S.is:

A)South Africa.
B)Japan.
C)Norway.
D)Saudi Arabia.

Question 28

Portfolio investment can generally travel across borders _________ foreign direct investment can.

A)not as quickly as
B)just as quickly as
C)more quickly than
D)None of these statements is true.

Question 29

Josh runs a landscaping business in Vermont and decides to hire two people in India to maintain his bookkeeping for him electronically.Josh is happy because he can pay them much less than he would pay a bookkeeper in the U.S. ,and the workers enjoy a higher quality of life in India thanks to their jobs with Josh's company.Josh's actions are an example of:

A)foreign portfolio investment.
B)foreign direct investment.
C)importing.
D)exporting.

Question 30

The only type of good with a trade surplus in the U.S.is:

A)foods,feeds,and beverages.
B)capital goods.
C)industrial goods.
D)automotive goods.

Question 31

Alan bought 20 shares of Labatt's stock for himself to celebrate his favorite foreign beer company in 2000.Alan's purchase is an example of:

A)foreign direct investment.
B)foreign portfolio investment.
C)importing.
D)exporting.

Question 32

An advantage of foreign direct investment versus domestic investment for businesses can be:

A)to cut costs of production.
B)to reduce overall risk relative to financial investments available at home.
C)to increase profit without having to pay taxes on the earnings.
D)None of these is an advantage of FDI.

Question 33

Ford opens a parts manufacturing plant in Haiti,which ships its parts back to the U.S.to be assembled in Detroit.Running the factory in Haiti is an example of:

A)foreign direct investment.
B)foreign portfolio investment.
C)importing.
D)exporting.

Question 34

Champlain College in Vermont runs a satellite campus in Dublin,Ireland.This is an example of:

A)foreign portfolio investment.
B)foreign direct investment.
C)importing.
D)exporting.

Question 35

Foreign direct investment is when:

A)a firm runs part of its operation abroad or invests in another company abroad.
B)investors buy foreign financial assets like stocks,bonds,or government securities.
C)investment is funded by foreign sources but operated domestically.
D)None of these statements is true.

Question 36

Countries that have a trade surplus have a:

A)positive net capital outflow.
B)positive net capital inflow.
C)negative net capital outflow.
D)None of these statements is true.

Question 37

The net capital outflow is the:

A)net flow of capital goods owned outside a country.
B)net flow of funds invested outside of a country.
C)net flow of capital goods owned within a country.
D)net flow of funds invested within a country.

Question 38

If a country has a net capital inflow,it means they:

A)have a trade surplus.
B)have a trade deficit.
C)have more exports than imports.
D)None of these statements is true.

Question 39

Your Uncle Harry gives you stock in Samsung for your birthday.The stock is an example of:

A)foreign direct investment.
B)foreign portfolio investment.
C)importing.
D)exporting.

Question 40

One reason the Chinese buy a great deal of U.S.government debt is because:

A)they have dollars left over from the sale of their goods to the U.S.and want to buy something dollar denominated.
B)they know the risk involved is lower for U.S.government bonds than it is for any other government bond in the world.
C)the rate of return for U.S.government bonds is higher than any other investment.
D)None of these statements is true.

Question 41

When people invest at home,it is called _____,and when they invest abroad it is called _______.

A)I;NCO
B)I;NX
C)S;I
D)S;NCO

Question 42

Savings for an economy is equal to:

A)private savings - public savings.
B)public savings - private savings.
C)private savings + public savings.
D)investment - net exports.

Question 43

For any given country,the net capital outflows to all other countries equal:

A)net exports to all other countries.
B)net capital inflows from all other countries.
C)national savings.
D)None of these statements is true.

Question 44

The U.S.is able to maintain a large trade deficit because:

A)when the business cycle is in a boom,it will be a trade surplus.
B)it is balanced by a large capital surplus.
C)it is balanced by a large capital deficit.
D)None of these statements is true.

Question 45

The trade in goods,services,and capital comprises:

A)trillions of dollars around the world.
B)billions of dollars around the world.
C)quadrillions of dollars around the world.
D)millions of dollars around the world.

Question 46

The balance of payments:

A)is the accounting of trade in financial assets.
B)is the accounting of trade in goods and capital.
C)is positive when a country has a trade deficit.
D)is negative when a country has a trade surplus.

Question 47

The rapid movement of money across borders can easily overwhelm a country's financial markets when:

A)a country has a heavily leveraged banking system.
B)the required reserves are relatively low.
C)the interest rates are relatively high.
D)a country is small.

Question 48

Portfolio investment can generally travel across borders quickly because it usually involves:

A)transfers between two bank accounts.
B)the shipment of equipment from one place to another.
C)the hiring or firing of foreign workers.
D)None of these statements is true.

Question 49

Which of the following can sometimes be referred to as "hot money"?

A)Foreign portfolio investment
B)Foreign direct investment
C)Net capital inflow
D)Net capital outflow

Question 50

The balance-of-payments identity is an equation that shows that the value of:

A)net exports equals the net capital outflow.
B)net capital inflow equals the net capital outflow.
C)imports must equal exports.
D)payments from a country equals payments to a country.

Question 51

When people choose to invest at home it is called ________,and when they invest abroad it is called _______.

A)investment;foreign savings
B)investment;net capital outflow
C)savings;net capital outflow
D)savings;net direct investment

Question 52

Which of the following is foreign portfolio investment sometimes called?

A)Hot investment
B)Quick sale
C)Hot money
D)None of these statements is true.

Question 53

In a closed economy S = I,so in an open economy:

A)S = I - NX.
B)S = I + NX.
C)S + I = NX.
D)S + NX = I.

Question 54

The amount of money in an economy that people can invest is equal to:

A)their income.
B)the value of their output.
C)the value of consumption after gains from trade have been made.
D)their savings.

Question 55

Foreign portfolio investment is sometimes called hot money because:

A)it can be withdrawn from a country very quickly.
B)it is growing very difficult to trace.
C)it is often invested in the assets which yield the highest returns in the world.
D)earnings often go untaxed by the home government.

Question 56

The income-expenditure identity for an open economy is:

A)Im - Ex = C + I.
B)Y = C + I +G.
C)Y = C + I + G + NX.
D)Y + G = C + I - NX.

Question 57

China's high net exports must be balanced by:

A)low net capital outflows.
B)high net capital outflows.
C)high net imports.
D)high net capital inflows.

Question 58

In general,the accounting of trade in goods and capital is known as the:

A)balance of trade.
B)net capital outflow.
C)balance of payments.
D)trade surplus.

Question 59

The income-expenditure identity for a closed economy is:

A)Y = C + I +G.
B)Im - Ex = C + I.
C)Y = C + I + G + NX.
D)Y + G = C + I - NX.

Question 60

People in an open economy who wish to invest can either:

A)invest at home or abroad.
B)buy stocks or bonds.
C)buy financial assets or durable goods.
D)invest in private companies or public companies.

Question 61

NCO plus domestic investment forms the:

A)demand for loanable funds in an open economy.
B)demand for loanable funds in a closed economy.
C)supply of loanable funds in an open economy.
D)supply of loanable funds in a closed economy.

Question 62

If Allan lives in Boston and decides to buy a pair of hockey skates from Canada for $100,and the Canadian he bought them from buys a baseball hat and jersey for $100 from Boston,then the U.S.:

A)net exports and net capital outflow are both zero.
B)net exports and net capital outflow both equal -$100.
C)net exports is zero and net capital outflow is -$100.
D)net exports equals -$100 and net capital outflow is zero.

Question 63

When Dave in Detroit,MI buys stock in Ford Motor Co. ,NCO:

A)increases.
B)is unaffected.
C)decreases.
D)is zero.

Question 64

In the market for loanable funds in an open economy,international investment:

A)comes from capital outflow.
B)comes from capital inflow.
C)is money invested outside its originating country.
D)All of these statements are true.

Question 65

When interest rates in the U.S.decline,we can expect:

A)capital inflows and capital outflows to decrease.
B)capital inflows and capital outflows to increase.
C)capital inflow to decrease,and capital outflow to increase.
D)capital outflow to decrease,and capital inflow to increase.

Question 66

When Wilma in Wisconsin buys stock in BMW in Germany,NCO:

A)decreases.
B)is unaffected.
C)increases.
D)is zero.

Question 67

When Sam in San Francisco buys stock in Fuji Film,he is contributing to:

A)capital investment for Japan.
B)capital inflow for the U.S.
C)domestic investment in the U.S.
D)None of these statements is true.

Question 68

In the market for loanable funds in an open economy,the demand for loanable funds:

A)can be demanded for domestic investment or international investment.
B)is equal to national income.
C)is equal to private investment.
D)is equal to public investment.

Question 69

If we consider the savings,investment,and net exports in the United States in recent years,the gap between savings and investment is almost exactly:

A)the net capital outflow.
B)the balance of payments.
C)direct foreign investment.
D)the trade balance.

Question 70

In the market for loanable funds in an open economy,the supply of loanable funds:

A)can come from domestic savers or savers abroad.
B)is equal to national savings.
C)is equal to private savings.
D)is equal to public savings.

Question 71

When Kim in Korea buys stock in GE (General Electric),NCO:

A)decreases.
B)is unaffected.
C)increases.
D)is zero.

Question 72

When Natalie in New York buys stock in Hyundai in Korea,NCO:

A)decreases.
B)is unaffected.
C)increases.
D)is zero.

Question 73

If Bob in Texas buys bonbons made in France for $25,and the French chocolatier buys stock in IBM for $25,then the French:

A)net exports and net capital outflow are both zero.
B)net exports and net capital outflow both equal -$25.
C)net exports is zero and net capital outflow is $25.
D)net exports equals $25 and net capital outflow is zero.

Question 74

If Wes in Wisconsin buys $200 worth of stock in Toshiba,and the Japanese use the $200 to buy a wheel of cheese from Wes,then the U.S.:

A)net exports and net capital outflow are both zero.
B)net exports and net capital outflow both equal $200.
C)net exports is zero and net capital outflow is $200.
D)net exports equals $200 and net capital outflow is zero.

Question 75

In the last three decades,the U.S.has seen money flow __________ in search of profitable investment opportunities.

A)out of the U.S.to foreign countries
B)into the U.S.from foreign countries
C)into the market for loanable funds
D)out of the market for loanable funds

Question 76

Net capital outflow is:

A)capital inflow - capital outflow.
B)capital outflow - capital inflow.
C)foreign dollars invested domestically.
D)domestic dollars invested internationally.

Question 77

When Pierre in Paris,France buys stock in Disney,Inc. ,he is contributing to:

A)capital outflow for the U.S.
B)capital inflow for the U.S.
C)domestic investment in the U.S.
D)private savings in the U.S.

Question 78

When Pam from Pennsylvania buys stock in Ford Motor Co. ,she is contributing to:

A)domestic investment in the U.S.
B)capital outflow for the U.S.
C)capital inflow for the U.S.
D)foreign direct investment for the U.S.

Question 79

The U.S.'s high trade deficit must be balanced by:

A)net capital inflows.
B)high net capital outflows.
C)low net capital outflows.
D)None of these statements is true.

Question 80

If Rhoda in Hungary buys taffy from Matt in Maine for $20,and Matt buys stock in his favorite goulash restaurant in Hungary for $20,then the U.S.:

A)net exports and net capital outflow are both zero.
B)net exports and net capital outflow both equal $20.
C)net exports is zero and net capital outflow is $20.
D)net exports equals $20 and net capital outflow is zero.