Question 1

Other things the same,a country could move from having a trade surplus to having a trade deficit if either

Accepted Answer

A) saving rose or domestic investment rose. 
B) saving rose or domestic investment fell. 
C) saving fell or domestic investment rose. 
D) saving fell or domestic investment fell.

Question 2

If Spain has a trade deficit,then

Accepted Answer

A) foreign countries purchase more Spanish assets than Spain purchases from them.This makes Spanish saving greater than Spanish domestic investment. 
B) foreign countries purchase more Spanish assets than Spain purchases from them.This makes Spanish saving smaller then Spanish domestic investment. 
C) foreign countries purchase fewer Spanish assets than Spain purchases from them.This makes Spanish saving greater than Spanish domestic investment. 
D) foreign countries purchase fewer Spanish assets than Spain purchases from them.This makes Spanish saving greater than Spanish domestic investment

Question 3

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

Accepted Answer

A) increase U.S.net exports and have 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 4

If a U.S.textbook publishing company sells texts overseas,U.S.net exports

Accepted Answer

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

Question 5

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

Accepted Answer

A) net capital outflow rises,so net exports rise. 
B) net capital outflow rises,so net exports fall. 
C) net capital outflow falls,so net exports rise. 
D) net capital outflow falls,so net exports fall.

Question 6

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

Accepted Answer

A) net capital outflow rises,so net exports rise. 
B) net capital outflow rises,so net exports fall. 
C) net capital outflow falls,so net exports rise. 
D) net capital outflow falls,so net exports fall.

Question 7

If a country changes its corporate tax laws so that foreign businesses build and manage more business in that country,then the net capital outflow of that country

Accepted Answer

A) and the net capital outflow of other countries rise. 
B) rises and the net capital outflow of other countries fall. 
C) falls and the net capital outflow of other countries rise. 
D) None of the above are correct.

Question 8

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.

Question 9

If the American company Stryker builds and operates a new factory in France,

Accepted Answer

A) it engages in foreign direct investment.By itself this action lowers U.S.net capital outflow. 
B) it engages in foreign direct investment.By itself this action raises U.S.net capital outflow. 
C) it engages in foreign portfolio investment.By itself this action lowers U.S.net capital outflow. 
D) it engages in foreign portfolio investment.By itself this action raises U.S.net capital outflow.

Question 10

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

Accepted Answer

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 11

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

Accepted Answer

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 12

Between 2000 and 2009,tough economic times lead to

Accepted Answer

A) investment falling by a larger percentage than saving rose,so net capital outflow rose. 
B) investment falling by by a larger percentage than saving,so net capital outflow rose. 
C) investement falling by a smaller percentage than saving,so net capital outflow fell. 
D) investment and saving both falling by about the same percentage.

Question 13

A U.S.fast food restaurant chain sells dollars for Argentinean pesos and then uses the pesos to buy Argentinean beef.Which of the following do these transactions increase?

Accepted Answer

A) Argentinean net capital outflow and Argentinean net exports 
B) only Argentinean net exports 
C) only Argentinean net capital outflow 
D) neither Argentinean net exports nor Argentinean capital outflow

Question 14

A country's trade balance will fall if

Accepted Answer

A) either investment or saving rise. 
B) either investment falls or saving rises. 
C) either saving falls or investment rises. 
D) either investment or saving fall.

Question 15

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

Accepted Answer

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 16

From 2000 to 2012 the U.S.had a trade

Accepted Answer

A) surplus and a large net capital inflow. 
B) surplus and a large net capital outflow. 
C) deficit and a large net capital inflow. 
D) deficit and a large net capital outflow.

Question 17

Paul,a Canadian citizen,purchases oranges grown in Florida.This purchase is an example of

Accepted Answer

A) a U.S.import and a Canadian export 
B) a U.S.export and a Canadian import 
C) an export for both the U.S.and Canada 
D) an import for both Canada and the U.S.

Question 18

In an open economy,gross domestic product equals $1,650 billion,government expenditure equals $250 billion,and savings equals $550 billion.What is consumption expenditure?

Accepted Answer

A) $250 billion 
B) $300 billion 
C) $550 billion 
D) $850 billion

Question 19

Other things the same,which of the following could explain a rise in Sweden's net capital outflow?

Accepted Answer

A) interest rates on Swedish bonds rise 
B) the probability of default on Swedish bonds rises 
C) Sweden enacts a law reducing taxes on income earned by foreign-owned businesses operating in Sweden 
D) None of the above are correct.

Question 20

If a country has a trade surplus then

Accepted Answer

A) S > I and Y > C + I + G. B) S > I and Y C + I + G. D) S < I and Y < C + I + G.

Exam 18: Open Economy Macroeconomics Basic Concepts: The International Flows of Goods and Capital