Question 1

In the United States, domestic investment is greater than national saving.

Accepted Answer

A) True 
 B)False

Question 2

Between 2007 and 2011 the value of the U.S. dollar fell by more than 60 percent against the Japanese yen. This fall in the price of the dollar against the yen was ________ for Japanese companies that exported to the United States and ________ for U.S. companies that exported to Japan.

Accepted Answer

A)  good; good 
B)  bad; good 
C)  good; bad 
D)  bad; bad

Question 3

Figure 29-1 
-Refer to Figure 29-1. The appreciation of the dollar is represented as a movement from

Accepted Answer

A)  B to A. 
B)  D to C. 
C)  C to B. 
D)  C to A.

Question 4

The decline in the value of the yen after 2012 occurred as a result of the Japanese central bank, the Bank of Japan, following an expansionary monetary policy. Investors expected that the result would be lower nominal Japanese interest rates and a higher inflation rate. In response, investors ________, causing the value of the yen to decline against the dollar.

Accepted Answer

A)  sold Japanese financial assets and bought U.S. financial assets 
B)  sold Japanese financial assets and sold U.S. financial assets 
C)  bought Japanese financial assets and sold U.S. financial assets 
D)  bought Japanese financial assets and bought U.S. financial assets

Question 5

If the United States has a current account deficit and the capital account is zero, which of the following must be true?

Accepted Answer

A)  The balance on the financial account must equal the balance on the current account. 
B)  Net foreign investment must be negative as well. 
C)  Domestic private saving must be less than net foreign investment. 
D)  Domestic public saving must be less than net foreign investment.

Question 6

According to the saving and investment equation, if net foreign investment falls by $35 million,

Accepted Answer

A)  national saving in excess of domestic investment will decrease by $35 million. 
B)  national savings will rise by $35 million. 
C)  domestic investment will fall by $35 million. 
D)  national saving in excess of domestic investment will rise by $35 million.

Question 7

Ceteris paribus, a rise in interest rates in the United States will cause the yen price of the dollar in international exchange markets to ________. I.e., the dollar ________ in value against the yen.

Accepted Answer

A)  increase; appreciates 
B)  increase; depreciates 
C)  decrease; depreciates 
D)  decrease; appreciates

Question 8

Assuming the United States is the "domestic" country, if the real exchange rate between the United States and Russia decreases from 28 to 23,

Accepted Answer

A)  the prices of U.S. goods and services have decreased by 5% relative to Russia. 
B)  the prices of U.S. goods and services have increased by 25.5% relative to Russia. 
C)  the prices of U.S. goods and services have decreased by 18% relative to Russia. 
D)  the prices of U.S. goods and services have increased by 22% relative to Russia.

Question 9

Expansionary fiscal policy crowds out both domestic investment and net exports.

Accepted Answer

A) True 
 B)False

Question 10

The price of ________ in terms of ________ is referred to as the real exchange rate.

Accepted Answer

A)  foreign goods; foreign services 
B)  domestic goods; the domestic currency 
C)  domestic goods; domestic services 
D)  domestic goods; foreign goods

Question 11

Which of the following would increase net exports in the United States?

Accepted Answer

A)  The United States purchases 500 silver necklaces from Mexico. 
B)  The government of Mexico purchases 500 Ford F-150 pickup trucks from the United States. 
C)  A Mexican citizen purchases 25 shares of stock in Ford Motor Company. 
D)  The U.S. government donates $5 million to Mexico to help victims of drought in Mexico.

Question 12

Currency traders expect the value of the dollar to fall. What effect will this have on the demand for dollars and the supply of dollars in the foreign exchange market?

Accepted Answer

A)  Demand for dollars will increase, and supply of dollars will decrease. 
B)  Demand for dollars will increase, and supply of dollars will increase. 
C)  Demand for dollars will decrease, and supply of dollars will increase. 
D)  Demand for dollars will decrease, and supply of dollars will decrease.

Question 13

If currency speculators decide that the value of the dollar should rise in the future relative to the yen, this will increase the demand for dollars and decrease the supply of dollars.

Accepted Answer

A) True 
 B)False

Question 14

If net exports are positive for China, it must be true that China is experiencing net outflows of capital.

Accepted Answer

A) True 
 B)False

Question 15

Ceteris paribus, a real depreciation of the dollar will decrease net exports in the United States.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following transactions would be included in Germany's current account?

Accepted Answer

A)  A German citizen purchases 100 shares of Texas Instruments stock. 
B)  An American citizen purchases 100 shares of BMW stock. 
C)  A German citizen purchases a new Volkswagen made in Germany. 
D)  An American citizen purchases a new Volkswagen made in Germany.

Question 17

Figure 29-1 
-Refer to Figure 29-1. Currency speculators believe that the value of the euro will increase relative to the dollar. Assuming all else remains constant, how would this be represented?

Accepted Answer

A)  Supply would decrease, demand would decrease and the economy moves from B to C to D. 
B)  Supply would increase, demand would decrease and the economy moves from C to B to A. 
C)  Supply would decrease, demand would increase and the economy moves from A to D to C. 
D)  Supply would increase, demand would increase and the economy moves from D to A to B.

Question 18

Based on the following information, what is the balance on the current account? Exports of goods and services = $12 billion
Imports of goods and services = $14 billion
Net income on investments = -$4 billion
Net transfers = -$1 billion
Increase in foreign holdings of assets in the United States = $6 billion
Increase in U.S. holdings of assets in foreign countries = -$3 billion

Accepted Answer

A)  -$7 billion 
B)  -$3 billion 
C)  -$2 billion 
D)  $1 billion

Question 19

Figure 29-2 
-Refer to Figure 29-2. Consider the market for U.S. Dollars against the British pound shown in the graph above. From this graph we can conclude that the dollar price of a British pound has ________ to ________ dollars per pound

Accepted Answer

A)  decreased; 0.46 
B)  increased; 2.17 
C)  decreased; 2.00 
D)  increased; 0.50

Question 20

In 2013, global profits for McDonald's ________ when measured in local currencies than they did when measured in dollars. This occurred because the value of the U.S. dollar increased relative to most other currencies.

Accepted Answer

A)  increased by more 
B)  decreased by more 
C)  increased by less 
D)  decreased by less

Exam 29: Macroeconomics in an Open Economy

In the United States, domestic investment is greater than national saving.

Between 2007 and 2011 the value of the U.S. dollar fell by more than 60 percent against the Japanese yen. This fall in the price of the dollar against the yen was for Japanese companies that exported to the United States and for U.S. companies that exported to Japan.

Figure 29-1 -Refer to Figure 29-1. The appreciation of the dollar is represented as a movement from

If the United States has a current account deficit and the capital account is zero, which of the following must be true?

According to the saving and investment equation, if net foreign investment falls by $35 million,

Ceteris paribus, a rise in interest rates in the United States will cause the yen price of the dollar in international exchange markets to . I.e., the dollar in value against the yen.

Assuming the United States is the "domestic" country, if the real exchange rate between the United States and Russia decreases from 28 to 23,

Expansionary fiscal policy crowds out both domestic investment and net exports.

The price of in terms of is referred to as the real exchange rate.

Which of the following would increase net exports in the United States?

Currency traders expect the value of the dollar to fall. What effect will this have on the demand for dollars and the supply of dollars in the foreign exchange market?

If currency speculators decide that the value of the dollar should rise in the future relative to the yen, this will increase the demand for dollars and decrease the supply of dollars.

If net exports are positive for China, it must be true that China is experiencing net outflows of capital.

Ceteris paribus, a real depreciation of the dollar will decrease net exports in the United States.

Which of the following transactions would be included in Germany's current account?

Figure 29-1 -Refer to Figure 29-1. Currency speculators believe that the value of the euro will increase relative to the dollar. Assuming all else remains constant, how would this be represented?

Figure 29-2 -Refer to Figure 29-2. Consider the market for U.S. Dollars against the British pound shown in the graph above. From this graph we can conclude that the dollar price of a British pound has to dollars per pound

In 2013, global profits for McDonald's ________ when measured in local currencies than they did when measured in dollars. This occurred because the value of the U.S. dollar increased relative to most other currencies.

Exam 29: Macroeconomics in an Open Economy

In the United States, domestic investment is greater than national saving.

Between 2007 and 2011 the value of the U.S. dollar fell by more than 60 percent against the Japanese yen. This fall in the price of the dollar against the yen was ________ for Japanese companies that exported to the United States and ________ for U.S. companies that exported to Japan.

Figure 29-1 -Refer to Figure 29-1. The appreciation of the dollar is represented as a movement from

If the United States has a current account deficit and the capital account is zero, which of the following must be true?

According to the saving and investment equation, if net foreign investment falls by $35 million,

Ceteris paribus, a rise in interest rates in the United States will cause the yen price of the dollar in international exchange markets to ________. I.e., the dollar ________ in value against the yen.

Assuming the United States is the "domestic" country, if the real exchange rate between the United States and Russia decreases from 28 to 23,

Expansionary fiscal policy crowds out both domestic investment and net exports.

The price of ________ in terms of ________ is referred to as the real exchange rate.

Which of the following would increase net exports in the United States?

Currency traders expect the value of the dollar to fall. What effect will this have on the demand for dollars and the supply of dollars in the foreign exchange market?

If currency speculators decide that the value of the dollar should rise in the future relative to the yen, this will increase the demand for dollars and decrease the supply of dollars.

If net exports are positive for China, it must be true that China is experiencing net outflows of capital.

Ceteris paribus, a real depreciation of the dollar will decrease net exports in the United States.

Which of the following transactions would be included in Germany's current account?

Figure 29-1 -Refer to Figure 29-1. Currency speculators believe that the value of the euro will increase relative to the dollar. Assuming all else remains constant, how would this be represented?

Figure 29-2 -Refer to Figure 29-2. Consider the market for U.S. Dollars against the British pound shown in the graph above. From this graph we can conclude that the dollar price of a British pound has ________ to ________ dollars per pound

In 2013, global profits for McDonald's ________ when measured in local currencies than they did when measured in dollars. This occurred because the value of the U.S. dollar increased relative to most other currencies.

Between 2007 and 2011 the value of the U.S. dollar fell by more than 60 percent against the Japanese yen. This fall in the price of the dollar against the yen was for Japanese companies that exported to the United States and for U.S. companies that exported to Japan.

Ceteris paribus, a rise in interest rates in the United States will cause the yen price of the dollar in international exchange markets to . I.e., the dollar in value against the yen.

The price of in terms of is referred to as the real exchange rate.

Figure 29-2 -Refer to Figure 29-2. Consider the market for U.S. Dollars against the British pound shown in the graph above. From this graph we can conclude that the dollar price of a British pound has to dollars per pound