Question 1

A country recently had saving of 250 billion euro and domestic investment of 400 billion euro. What was the value of this country's net exports? Show your work.

Accepted Answer

The answer of A country recently had saving of 250...

Question 2

If Walmart buys $50 million worth of consumer goods from China and sells them in the U.S., and China uses the $50 million to purchase U.S. bonds, U.S. net exports and U.S. net capital outflow both fall.

Accepted Answer

A) True 
 B)False

Question 3

Other things the same, according to purchasing-power parity, if over the next few years Mexico has a higher money supply growth rate than the U.S., then

Accepted Answer

A)  prices in Mexico will rise by a larger percentage than in the U.S. So, the dollar will appreciate against the Mexican peso. 
B)  prices in Mexico will rise by larger percentage than in the U.S. So, the dollar will depreciate against the Mexican peso. 
C)  prices in Mexico will rise by a smaller percentage than in the U.S. So, the dollar will appreciate against the Mexican peso. 
D)  prices in Mexico will rise by a smaller percentage than in the U.S. So, the dollar will depreciate against the Mexican peso.

Question 4

Suppose a Starbucks tall latte cost $4.00 in the United States and 2.50 euros in the Euro area. Also, suppose a McDonald's Big Mac costs $4.50 in the United States and 3.60 euros in the Euro area. If the nominal exchange rate is .80 euros per dollar, which goods have prices that are consistent with purchasing-power parity?

Accepted Answer

A)  both the tall latte and the Big Mac 
B)  the tall latte but not the Big Mac 
C)  the Big Mac but not the tall latte 
D)  neither the Big Mac nor the tall latte

Question 5

A farmer in Mexico purchases a tractor made in the U.S. This purchase is an example of

Accepted Answer

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

Question 6

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 7

Jill, a U.S. citizen, uses some euros to purchase a bond issued by a French vineyard. This exchange

Accepted Answer

A)  decreases U.S. net capital outflow. 
B)  increases U.S. net capital outflow by more than the value of the bond. 
C)  increases U.S. net capital outflow by the value of the bond. 
D)  does not change U.S. net capital outflow.

Question 8

Other things the same, if a country's domestic investment decreases, 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 9

If over the next year the inflation rate in the euro area is higher than the inflation rate in Japan, then the euro should depreciate relative to the Japanese yen.

Accepted Answer

A) True 
 B)False

Question 10

A country recently had saving of 300 billion euros and domestic investment of 200 billion euros. What was the value of this country's net exports? Explain how you found your answer.

Accepted Answer

The answer of A country recently had saving of 300...

Question 11

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 12

If a nation produces less 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 less than it...

Question 13

If prices in the U.S. rise faster than prices in the United Kingdom, then according to the doctrine of purchasing- power parity the U.S. nominal exchange rate should rise

Accepted Answer

A) True 
 B)False

Question 14

A country's trade balance

Accepted Answer

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 15

A U.S. grocery store chain bought $800,000 worth of Kenyan currency from a bank in Kenya. It then used these funds to buy $800,000 worth of coffee from Kenyan coffee growers.
As a result of this exchange, by how much and in which direction did:
A. U.S. net exports change?
B. U.S. net capital outflow change?

Accepted Answer

The answer of A U.S. grocery store chain bought $800,000...

Question 16

Which of the following does purchasing-power parity imply?

Accepted Answer

A)  The purchasing power of the dollar is the same in the U.S. as in foreign countries. 
B)  The price of domestic goods relative to foreign goods cannot change. 
C)  The nominal exchange rate is the ratio of U.S. prices to foreign prices. 
D)  All of the above are correct.

Question 17

Suppose that money supply growth continues to be higher in Turkey than it is in the United States. What does purchasing-power parity imply will happen to the real and to the nominal exchange rate?

Accepted Answer

The answer of Suppose that money supply growth continues to...

Question 18

The price of a basket of goods is $2000 in the U.S. If purchasing-power parity holds, and the dollar buys two units of some country's currency, then how many units of foreign currency does the same basket of goods cost in that country?

Accepted Answer

A)  4000 
B)  2000 
C)  1000 
D)  None of the above are correct.

Question 19

If the real exchange rate for coal is 1.5, the price of coal in the U.S. is $50 per ton, and the price of coal in Britain is 20 British pounds per ton, what is the nominal exchange rate?

Accepted Answer

A)  15/4 
B)  5/3 
C)  3/5 
D)  4/15

Question 20

Other things the same, if the exchange rate changes from 30 Thai bhat per dollar to 25 Thai bhat per dollar, then the dollar has

Accepted Answer

A)  appreciated and so buys more Thai goods. 
B)  appreciated and so buys fewer Thai goods. 
C)  depreciated and so buys more Thai goods. 
D)  depreciated and so buys fewer Thai goods.

Exam 31: Open-Economy Macroeconomics: Basic Concepts

A country recently had saving of 250 billion euro and domestic investment of 400 billion euro. What was the value of this country's net exports? Show your work.

If Walmart buys $50 million worth of consumer goods from China and sells them in the U.S., and China uses the $50 million to purchase U.S. bonds, U.S. net exports and U.S. net capital outflow both fall.

Other things the same, according to purchasing-power parity, if over the next few years Mexico has a higher money supply growth rate than the U.S., then

A farmer in Mexico purchases a tractor made in the U.S. This purchase is an example of

Jill, a U.S. citizen, uses some euros to purchase a bond issued by a French vineyard. This exchange

Other things the same, if a country's domestic investment decreases, then

If over the next year the inflation rate in the euro area is higher than the inflation rate in Japan, then the euro should depreciate relative to the Japanese yen.

A country recently had saving of 300 billion euros and domestic investment of 200 billion euros. What was the value of this country's net exports? Explain how you found your answer.

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?

If a nation produces less 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?

If prices in the U.S. rise faster than prices in the United Kingdom, then according to the doctrine of purchasing- power parity the U.S. nominal exchange rate should rise

A country's trade balance

Which of the following does purchasing-power parity imply?

Suppose that money supply growth continues to be higher in Turkey than it is in the United States. What does purchasing-power parity imply will happen to the real and to the nominal exchange rate?

The price of a basket of goods is $2000 in the U.S. If purchasing-power parity holds, and the dollar buys two units of some country's currency, then how many units of foreign currency does the same basket of goods cost in that country?

If the real exchange rate for coal is 1.5, the price of coal in the U.S. is $50 per ton, and the price of coal in Britain is 20 British pounds per ton, what is the nominal exchange rate?

Other things the same, if the exchange rate changes from 30 Thai bhat per dollar to 25 Thai bhat per dollar, then the dollar has