Deck 13: Open-Economy Macroeconomic Models

Question 1

Net exports of a country are the value of

A) goods and services imported minus the value of goods and services exported.
B) goods and services exported minus the value of goods and services imported.
C) goods exported minus the value of goods imported.
D) goods imported minus the value of goods exported.

Answer 1

B

Question 2

A country sells more to foreign countries than it buys from them. It has

A) a trade surplus and positive net exports.
B) a trade surplus and negative net exports.
C) a trade deficit and positive net exports.
D) a trade deficit and negative net exports.

Answer 2

A

Question 3

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

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

Answer 3

B

Question 4

Which type(s) of economies interact with other economies?

A) only closed economies
B) only open economies
C) closed economies and open economies
D) neither closed nor open economies

Question 5

The value of Peru's exports minus the value of Peru's imports is called

A) Peru's foreign portfolio investment.
B) Peru's foreign direct investment.
C) Peru's net exports.
D) Peru's net imports.

Question 6

Which of the following both reduce net exports?

A) exports rise, imports rise
B) exports rise, imports fall
C) imports rise, exports rise
D) imports rise, exports fall

Question 7

The value of the goods and services Australia purchases from the U.S. are greater than the value of goods and services the U.S. purchases from Australia. The U.S. has

A) positive net exports with Australia and a trade surplus with Australia.
B) positive net exports with Australia and a trade deficit with Australia.
C) negative net exports with Australia and a trade surplus with Australia.
D) negative net exports with Australia and a trade deficit with Australia.

Question 8

If the United States had negative net exports last year, then it

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 9

A country purchases $3 billion of foreign-produced goods and services and sells $2 billion dollars of domestically produced goods and services to foreign countries. It has

A) exports of $3 billion and a trade surplus of $1 billion.
B) exports of $3 billion and a trade deficit of $1 billion.
C) exports of $2 billion and a trade surplus of $1 billion.
D) exports of $2 billion and a trade deficit of $1 billion.

Question 10

International trade

A) raises the standard of living in all trading countries.
B) lowers the standard of living in all trading countries.
C) leaves the standard of living unchanged.
D) raises the standard of living for importing countries and lowers it for exporting countries.

Question 11

If Saudi Arabia had positive net exports last year, then it

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 12

One year a country has negative net exports. The next year it still has negative net exports and imports have risen more than exports.

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

Question 13

A country's trade balance

A) must be zero.
B) must be greater than zero.
C) is greater than zero only if exports are greater than imports.
D) is greater than zero only if imports are greater than exports.

Question 14

When Claudia, a U.S. citizen, purchases a handbag made in France, the purchase is

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

Question 15

Bill, a U.S. citizen, pays a Spanish architect to design a metal casting factory. Which country's exports increase?

A) Spain's
B) the U.S.'s
C) Spain's and the U.S.'s
D) neither Spain's nor the U.S.'s

Question 16

Suppose that a country imports $75 million of goods and services and exports $100 million of goods and services. What is the value of net exports?

A) $175 million
B) $75 million
C) $25 million
D) -$25 million

Question 17

If Germany purchased more goods and services abroad than it sold abroad last year, then it had

A) positive net exports which is a trade surplus.
B) positive net exports which is a trade deficit.
C) negative net exports which is a trade surplus.
D) negative net exports which is a trade deficit.

Question 18

If Norway sold more goods and services abroad than it purchased from abroad, then it had

A) positive net exports which is a trade surplus.
B) positive net exports which is a trade deficit.
C) negative net exports which is a trade surplus.
D) negative net exports which is a trade deficit.

Question 19

Juan lives in Ecuador and purchases a motorcycle manufactured in the United States. The motorcycle is

A) both a U.S. and Ecuadorian export.
B) both a U.S. and Ecuadorian import.
C) a U.S. import and an Ecuadorian export.
D) a U.S. export and an Ecuadorian import.

Question 20

Foreign-produced goods and services that are purchased domestically are called

A) imports.
B) exports.
C) net imports.
D) net exports.

Question 21

If a country has $2.4 billion of net exports and purchases $4.8 billion of goods and services from foreign countries, then it has

A) $7.2 billion of exports and $4.8 billion of imports.
B) $7.2 billion of imports and $4.8 billion of exports.
C) $4.8 billion of exports and $2.4 billion of imports.
D) $4.8 billion of imports and $2.4 billion of exports.

Question 22

If U.S. exports are $300 billion and U.S. imports total $350 billion, which of the following is correct?

A) The U.S. has a trade surplus of $350 billion.
B) The U.S. has a trade surplus of $50 billion.
C) The U.S. has a trade deficit of $350 billion.
D) The U.S. has a trade deficit of $50 billion.

Question 23

Bob traps lobsters in Maine and sells them to a restaurant in Mexico. Other things the same, these sales

A) increase U.S. net exports and has no effect on Mexican net exports.
B) increase U.S. net exports and decrease Mexican net exports.
C) decrease U.S. net exports and have no effect on Mexican net exports.
D) decrease U.S. net exports and increase Mexican net exports.

Question 24

A Swiss company sells chocolates to a retailer in the United States. These sales by themselves

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

Question 25

Sonya, a citizen of Denmark, produces boots and shoes that she sells to department stores in the United States. Other things the same, these sales

A) increase U.S. net exports and have no effect on Danish net exports.
B) decrease U.S. net exports and have no effect on Danish net exports.
C) increase U.S. net exports and decrease Danish net exports.
D) decrease U.S. net exports and increase Danish net exports.

Question 26

If a country has net exports of $8 billion and sold $40 billion of goods and services abroad, then it has

A) $48 billion of imports and $40 billion of exports.
B) $48 billion of exports and $40 billion of imports.
C) $40 billion of imports and $32 billion of exports.
D) $40 billion of exports and $32 billion of imports.

Question 27

You buy a new car built in Sweden. Other things the same, your purchase by itself

A) raises both U.S. exports and U.S. net exports.
B) raises U.S. exports and lowers U.S. net exports.
C) raises both U.S. imports and U.S. net exports.
D) raises U.S. imports and lowers U.S. net exports.

Question 28

If the U.S. has exports of $1.5 trillion and imports of $2.2 trillion, then the U.S.

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 29

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

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 30

Table 13-1

Refer to Table 13-1. What are Bolivia's imports?

A) $60 billion
B) $35 billion
C) $40 billion
D) None of the above are correct.

Question 31

Peru has exports of $31.5 million and imports of $30 million. Peru

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 32

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

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 33

If U.S. exports are $150 billion and U.S. imports are $100 billion, which of the following is correct?

A) The U.S. has a trade surplus of $100 billion.
B) The U.S. has a trade surplus of $50 billion.
C) The U.S. has a trade deficit of $100 billion.
D) The U.S. has a trade deficit of $50 billion.

Question 34

A Ukrainian firm sells diesel locomotives to a U.S. railroad. Other things the same, these sales

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

Question 35

Oceania buys $40 of wine from Escudia and Escudia buys $100 of wool from Oceania. Supposing this is the only trade that these countries do. What are the net exports of Oceania and Escudia in that order?

A) $140 and $140
B) $100 and $40
C) $60 and -$60
D) None of the above is correct.

Question 36

Clear Brook Farms, a U.S. manufacturer of frozen vegetarian entrees, sells cases of its product to stores overseas. These sales

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

Question 37

Table 13-1

Refer to Table 13-1. What are Bolivia's net exports?

A) $30 billion
B) $5 billion
C) -$5 billion
D) -$25 billion

Question 38

A firm in the United Kingdom hires a firm in the U.S. to train its managers. By itself this transaction

A) increases U.S. imports and decreases U.S. net exports.
B) increases U.S. imports and increases U.S. net exports.
C) increases U.S. exports and decreases U.S. net exports.
D) increases U.S. exports and increases U.S. net exports.

Question 39

Table 13-1

Refer to Table 13-1. What are Bolivia's exports?

A) $60 billion
B) $35 billion
C) $10 billion
D) None of the above are correct.

Question 40

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

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 41

If a country had a trade surplus of $50 billion and then its exports rose by $30 billion and its imports rose by $20 billion, its net exports would now be

A) $0 billion.
B) $20 billion.
C) $40 billion.
D) $60 billion.

Question 42

Mike, a U.S. citizen, buys $1,000 worth of olives from Greece. By itself this purchase

A) increases U.S. imports by $1,000 and increases U.S. net exports by $1,000.
B) increases U.S. imports by $1,000 and decreases U.S. net exports by $1,000.
C) increases U.S. exports by $1,000 and increases U.S. net exports by $1,000.
D) increases U.S. exports by $1,000 and decreases U.S. net exports by $1,000.

Question 43

If domestic residents of France purchase 1.2 trillion euros of foreign assets and foreigners purchase 1.5 trillion euros of French assets, then France's net capital outflow is

A) -.3 trillion euros, so it must have a trade deficit.
B) -.3 trillion euros, so it must have a trade surplus.
C) .3 trillion euros, so it must have a trade deficit.
D) .3 trillion euros, so it must have a trade surplus.

Question 44

Net capital outflow is defined as the purchase of

A) foreign assets by domestic residents minus the purchase of domestic assets by foreign residents.
B) foreign assets by domestic residents minus the purchase of foreign goods and services by domestic residents.
C) domestic assets by foreign residents minus the purchase of domestic goods and services by foreign residents.
D) domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.

Question 45

If a country had a trade surplus of $100 billion and then its exports rose by $40 billion and its imports rose by $30 billion, its net exports would now be

A) $110 billion
B) $90 billion.
C) $70 billion.
D) $60 billion.

Question 46

Net capital outflow measures

A) foreign assets held by domestic residents minus domestic assets held by foreign residents.
B) the imbalance between the amount of foreign assets bought by domestic residents and the amount of domestic assets bought by foreigners.
C) the imbalance between the amount of foreign assets bought by domestic residents and the amount of domestic goods and services sold to foreigners.
D) None of the above is correct.

Question 47

The increase in international trade in the United States is partly due to

A) improvements in transportation.
B) advances in telecommunications.
C) increased trade of goods with a high value per pound.
D) All of the above are correct.

Question 48

Which of the following is correct? Over about the last fifty years

A) U.S. exports and U.S. imports each about doubled.
B) U.S. exports and U.S. imports each about tripled.
C) U.S. exports about doubled and U.S. imports about tripled.
D) U.S. exports about tripled and U.S. imports about doubled.

Question 49

If a country had a trade deficit of $10 billion and then its exports rose by $20 billion and its imports rose by $10 billion, its net exports would now be

A) $0
B) $10 billion.
C) -$10 billion.
D) -$20 billion.

Question 50

Which of the following is correct?

A) U.S. exports as a percentage of GDP have more than doubled since 1950. The U.S. currently has a trade surplus.
B) U.S. exports as a percentage of GDP have more than doubled since 1950. The U.S. currently has a trade deficit.
C) U.S. exports as a percentage of GDP have increased, but have not nearly doubled since 1950. The U.S. currently has a trade surplus.
D) U.S. exports as a percentage of GDP have increased, but have not nearly doubled since 1950. The U.S. currently has a trade deficit.

Question 51

If U.S. residents purchase $500 billion of foreign assets and foreigners purchase $1300 billion of U.S. assets,

A) U.S. net capital outflow is $800 billion; capital is flowing into the U.S.
B) U.S. net capital outflow is $800 billion; capital is flowing out of the U.S.
C) U.S. net capital outflow is -$800 billion; capital is flowing into the U.S.
D) U.S. net capital outflow is -$800 billion; capital is flowing out of the U.S.

Question 52

An increase in U.S. sales of movies to other countries raises U.S.

A) exports and so raises the U.S. trade balance.
B) exports and so reduces the U.S. trade balance.
C) imports and so raises the U.S. trade balance.
D) imports and so reduces the U.S. trade balance.

Question 53

U.S. international trade has

A) decreased because of a decrease in the trade of goods with a high value per pound.
B) decreased because of an increase in the trade of goods with a high value per pound.
C) increased because of a decrease in trade of goods with a high value per pound.
D) increased because of an increase in trade of goods with a high value per pound.

Question 54

Net exports measures the difference between a country's

A) income and expenditures.
B) sale of goods and services abroad and purchase of foreign goods and services.
C) sale of domestic assets abroad and purchase of foreign assets.
D) All of the above are correct.

Question 55

Net capital outflow equals the difference between a country's

A) income and expenditure.
B) investment and saving.
C) buying of foreign goods and services and sales of goods and services abroad.
D) purchases of foreign assets and sales of domestic assets abroad.

Question 56

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

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

Question 57

If U.S. consumers decrease their demand for cellphones from Finland, then other things the same Finland's

A) exports and net exports fall.
B) exports fall and net exports rise.
C) imports and net exports fall.
D) imports fall and net exports rise.

Question 58

If U.S. consumers increase their demand for apples from New Zealand, then other things the same New Zealand's

A) imports and net exports rise.
B) imports rise and net exports fall.
C) exports and net exports rise.
D) exports rise and net exports fall.

Question 59

A firm in India hires a U.S. firm to provide economic forecasts. By itself this transaction

A) increases U.S. exports and so increases the U.S. trade balance.
B) increases U.S. exports and so decreases the U.S. trade balance.
C) increases U.S. imports and so increases the U.S. trade balance.
D) increases U.S. imports and so decreases the U.S. trade balance.

Question 60

Net capital outflow equals

A) the purchase of foreign assets by domestic residents.
B) the purchase of domestic assets by foreign residents.
C) the purchase of domestic assets by foreign residents - the purchase of foreign assets by domestic residents
D) the purchase of foreign assets by domestic residents - the purchase of domestic assets by foreign residents

Question 61

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

A) A Greek company opens a cheese factory in the U.S.
B) A German mutual fund buys stock issued by a U.S. corporation.
C) A U.S. beverage company opens a bottling plant in Russia.
D) A U.S. bank buys bonds issued by an Argentinean company.

Question 62

When making investment decisions, investors

A) compare the real interest rates offered on different bonds.
B) compare the nominal, but not the real, interest rates offered on different bonds.
C) purchase the highest-priced bond available.
D) All of the above are correct.

Question 63

Sheri, a U.S. citizen, builds and operates a bookstore in Spain. This action is an example of

A) investment for Sheri and U.S. foreign direct investment.
B) investment for Sheri and U.S. foreign portfolio investment.
C) U.S. foreign direct investment and U.S. domestic investment.
D) U.S. foreign portfolio investment and U.S. domestic investment.

Question 64

Suppose that foreign citizens decide to purchase more U.S. pharmaceuticals and U.S. citizens decide to buy more stock in foreign corporations. Other things the same, these actions

A) raise both U.S. net exports and U.S. net capital outflows.
B) raise U.S. net exports and lower U.S. net capital outflows.
C) lower both U.S. net exports and U.S. net capital outflows.
D) lower U.S. net exports and raise U.S. net capital outflows.

Question 65

John, a U.S. citizen, opens up a Sports bar in Tokyo. This is an example of U.S.

A) exports.
B) imports.
C) foreign portfolio investment.
D) foreign direct investment.

Question 66

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

A) Disney builds a new amusement park near Barcelona, Spain.
B) A U.S. citizen buys bonds issued by the British government.
C) A Dutch hotel chain opens a new hotel in the United States.
D) A citizen of Singapore buys a bond issued by a U.S. corporation.

Question 67

Suppose that more British decide to vacation in the U.S. and that the British purchase more U.S. Treasury bonds. Ignoring how payments are made for these purchases,

A) the first action by itself raises U.S. net exports, the second action by itself raises U.S. net capital outflow.
B) the first action by itself raises U.S. net exports, the second action by itself lowers U.S. net capital outflow.
C) the first action by itself lowers U.S. net exports, the second action by itself raises U.S. net capital outflow.
D) the first action by itself lowers U.S. net exports, the second action by itself lowers U.S. net capital outflow.

Question 68

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

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 69

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

A) A Swedish car manufacturer opens a plant in Tennessee.
B) A Dutch citizen buys shares of stock in a U.S. company.
C) A U.S. based restaurant chain opens new restaurants in India.
D) A U.S. citizen buys stock in companies located in Japan.

Question 70

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

A) Joan, a U.S. citizen, buys bonds issued by a Swedish corporation.
B) Russell, a U.S. citizen, opens a dairy in Italy.
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 71

The purchase of U.S. government bonds by Egyptians is an example of

A) U.S. imports.
B) U.S. exports.
C) foreign portfolio investment by Egyptians.
D) foreign direct investment by Egyptians.

Question 72

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

A) exports.
B) imports.
C) foreign portfolio investment.
D) foreign direct investment.

Question 73

Julie and John are American residents. Julie buys stock issued by a Japanese company. John opens a sporting goods store in Mexico. Whose purchase, by itself, increases the U.S.'s net capital outflow?

A) Julie's
B) John's
C) both Julie's and John's
D) neither Julie's nor John's

Question 74

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

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 75

Suppose that real interest rates in the U.S. rise relative to real interest rates in other countries. This increase would make foreigners

A) more willing to purchase U.S. bonds, so U.S. net capital outflow would fall.
B) more willing to purchase U.S. bonds, so U.S. net capital outflow would rise.
C) less willing to purchase U.S. bonds, so U.S. net capital outflow would fall.
D) less willing to purchase U.S. bonds, so U.S. net capital outflow would rise.

Question 76

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

A) A Polish company opens a shipbuilding plant in the United States.
B) A Bolivian bank buys U.S. corporate bonds.
C) A U.S. bank buys Bolivian corporate bonds.
D) A U.S. furniture maker opens a plant in Mexico.

Question 77

Tom and Anthony are both U.S. citizens. Tom buys construction machinery from a company in Canada to use for his U.S construction company. Anthony opens a cafe in Portugal. Whose action is an example of U.S. foreign direct investment

A) Tom's but not Anthony's.
B) Anthony's but not Tom's.
C) Anthony's and Tom's.
D) Neither Anthony's nor Tom's.

Question 78

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

A) Albert, a German citizen, buys stock in a U.S. computer company.
B) Larry, a citizen of Ireland, opens a fish and chips restaurant in the United States.
C) Nancy, a U.S. citizen, buys bonds issued by a Japanese bank.
D) Dustin, a U.S. citizen, opens a country-western tavern in New Zealand.

Question 79

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?

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

Question 80

Catherine, a citizen of Spain, decides to purchase bonds issued by Chile instead of ones issued by the United States even though the Chilean bonds have a higher risk of default. An economic reason for her decision might be that

A) she dislikes U.S. foreign policy.
B) the Chilean bonds pay a higher rate of interest.
C) the U.S. government is more stable than the Chilean government.
D) None of the above provide an economic reason for buying the riskier bond.