Question 1

While vacationing in Agra, India, the price of one night's stay at your hotel room rises from 6600 rupees to 7200 rupees. If the exchange rate was previously 55 rupees per dollar, what would the exchange rate need to be now in order for the number of dollars you pay for your room to remain the same? Does this imply the rupee depreciated or appreciated against the dollar?

Accepted Answer

The answer of While vacationing in Agra, India, the price...

Question 2

An American brewery sells dollars to obtain euros. It then uses the euros to buy brewing equipment from a German company. These transactions

Accepted Answer

A)  increase U.S. net capital outflow because Germans obtain U.S. assets. 
B)  decrease U.S. net capital outflow because Germans obtain U.S. assets. 
C)  increase U.S. net capital outflow because the U.S. buys capital goods. 
D)  decrease U.S. net capital outflow because the U.S. buys capital goods.

Question 3

If a country's imports exceed its exports it has a trade surplus.

Accepted Answer

A) True 
 B)False

Question 4

A German mutual fund sells euros to a U.S. bank for $20,000. The mutual fund then uses these dollars to purchase a bond issued by United Express, a U.S. delivery company. As a result of these two transactions, what happened to U.S. net capital outflow?

Accepted Answer

A)  It fell by $40,000. 
B)  It fell by $20,000. 
C)  It was unchanged. 
D)  It rose by $20,000.

Question 5

An open economy's GDP is always given by

Accepted Answer

A)  Y = C + I + G. 
B)  Y = C + I + G + T. 
C)  Y = C + I + G + S. 
D)  Y = C + I + G + NX.

Question 6

Dave, a U.S. citizen buys a bicycle manufactured in China. Dave's purchase is

Accepted Answer

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

Question 7

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

Accepted Answer

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 8

Colonial America had little industry and so had mostly raw materials to export. At the same time, there were many opportunities to purchase capital goods and earn a high rate of return because there was little existing capital so that the marginal product of capital was relatively high. What does this suggest about net exports and net capital outflow in colonial America?

Accepted Answer

The answer of Colonial America had little industry and so...

Question 9

Purchasing-power parity implies that the nominal exchange rate given as foreign currency per unit of U.S. currency must rise if the price levels) in

Accepted Answer

A)  foreign countries rise. 
B)  the United States rises. 
C)  all countries rise. 
D)  all countries fall.

Question 10

For an economy as a whole, net exports must equal minus one times net capital outflow.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is correct?

Accepted Answer

A)  U.S. exports as a percentage of GDP have about tripled since 1950. The U.S. currently has a trade deficit. 
B)  U.S. exports as a percentage of GDP have about tripled since 1950. The U.S. currently has a trade surplus. 
C)  U.S. exports as a percentage of GDP have about doubled since 1950. The U.S. currently has a trade deficit. 
D)  U.S. exports as a percentage of GDP have about doubled since 1950. The U.S. currently has a trade surplus.

Question 12

If a nation produces more than it spends what do we know about:
A. its net exports?
B. its net capital outflow?
C. its saving in relation to its domestic investment?

Accepted Answer

The answer of If a nation produces more than it...

Question 13

If purchasing-power parity holds, when a country's central bank decreases the money supply, its

Accepted Answer

A)  price level rises and its currency appreciates relative to other currencies in the world. 
B)  price level falls and its currency appreciates relative to other currencies in the world. 
C)  price level rises and its currency depreciates relative to other currencies in the world. 
D)  price level falls and its currency depreciates relative to other currencies in the world.

Question 14

A U.S. firm opens a factory that produces power tools in Korea.

Accepted Answer

A)  This increases U.S. net capital outflow and decreases Korean net capital outflow. 
B)  This decreases U.S. net capital outflow and increases Korean net capital outflow. 
C)  This increases only U.S. net capital outflow. 
D)  This increases only Korean net capital outflow.

Question 15

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.

Question 16

If the unit of foreign currency is the peso, in which case is the real exchange rate 1.2?

Accepted Answer

A)  the U.S. price is $2, the foreign price is 5 pesos, and the exchange rate is 3 pesos per dollar. 
B)  the U.S. price is $3, the foreign price is 18 pesos, and the exchange rate is 5 pesos per dollar. 
C)  the U.S. price is $5, the foreign price 12 pesos, and the exchange rate is 2 pesos per dollar. 
D)  the U.S. price is $10, the foreign price is 3 pesos, and the exchange rate is 4 pesos per dollar.

Question 17

If it took as many dollars to buy goods in the United States as it did to buy enough currency to buy the same goods in India, the real exchange rate would be computed as how many Indian goods per U.S. goods?

Accepted Answer

A)  one 
B)  the number of dollars needed to buy U.S. goods divided by the number of rupees needed to buy Indian goods 
C)  the number of rupees needed to buy Indian goods divided by the number of dollars needed to buy U.S. goods 
D)  None of the above is correct.

Question 18

Suppose the real exchange rate is 5/4 of a Canadian textbook per U.S. textbook , a U.S. textbook costs $150, and a Canadian one costs 120 Canadian dollars. To the nearest penny, what is the nominal exchange rate?

Accepted Answer

A)  .64 Canadian dollars per U.S. dollar 
B)  1 Canadian dollar per U.S. dollar 
C)  1.56 Canadian dollars per U.S. dollar 
D)  None of the above is correct.

Question 19

Table 31-2
 
-Refer to Table 31-2. Which currencyies) isare) have a higher nominal exchange rate than predicted by the doctrine of purchasing-power parity?

Accepted Answer

A)  the bolivar and the pound 
B)  the euro and the riyal 
C)  the yen 
D)  the pound

Question 20

During a hyperinflation the real domestic value of a country's currency

Accepted Answer

A)  falls and its nominal exchange rate depreciates. 
B)  falls and its nominal exchange rate appreciates. 
C)  rises and its nominal exchange rate depreciates. 
D)  rises and its nominal exchange rate appreciates.

Exam 18: Open-Economy Macroeconomics: Basic Concepts