Question 1

From 1970 to 1998 the U.S. dollar

Accepted Answer

A)  gained value compared to the Italian lira because inflation was higher in Italy. 
B)  gained value compared to the Italian lira because inflation was lower in Italy. 
C)  lost value compared to the Italian lira because inflation was higher in Italy. 
D)  lost value compared to the Italian lira because inflation was lower in Italy.

Question 2

Most of the change from 1980 to 1987 in U.S. net capital outflow as a percent of GDP was due to a(n)

Accepted Answer

A)  decrease in U.S. investment. 
B)  decrease in U.S. national saving. 
C)  increase in U.S. investment. 
D)  increase in U.S. national saving.

Question 3

A quality men's suit in the U.S. costs $400. The same suit costs 300 British pounds in the U.K. The nominal exchange rate is .60 pounds per dollar.
A. Find the real exchange rate. Show your work.
B. In terms of dollars where is the suit cheaper?

Accepted Answer

The answer of A quality men's suit in the U.S....

Question 4

If purchasing-power parity holds, a bushel of rice costs $10 in the U.S., and the nominal exchange rate is 25 Thai baht per dollar, what is the price of rice in Thailand?

Accepted Answer

A)  400 baht 
B)  250 bhat 
C)  100 bhat 
D)  None of the above is correct.

Question 5

If Canada's national saving exceeds its domestic investment, then Canada has

Accepted Answer

A)  positive net capital outflows and negative net exports. 
B)  positive net capital outflows and positive net exports. 
C)  negative net capital outflows and negative net exports. 
D)  negative net capital outflows and positive net exports.

Question 6

How do the nominal exchange rate and the real exchange rate differ?

Accepted Answer

The answer of How do the nominal exchange rate and...

Question 7

A basket of goods costs $800 in the U.S. In Belgium the basket of goods costs 640 euros and the exchange rate is .80 euros per U.S. dollar. In Japan the basket of goods costs 90,000 yen and the exchange rate is 90 yen per dollar. Which country has purchasing-power parity with the U.S.?

Accepted Answer

A)  both Belgium and Japan 
B)  Belgium but not Japan 
C)  Japan but not Belgium 
D)  neither Belgium nor Japan

Question 8

Sam, a U.S. citizen, buys bonds issued by a Greek company that bottles olives. Sam's purchase is

Accepted Answer

A)  foreign direct investment. By itself it increases U.S. net capital outflow. 
B)  foreign direct investment. By itself it decreases U.S. net capital outflow. 
C)  foreign portfolio investment. By itself it increases U.S. net capital outflow. 
D)  foreign portfolio investment. By itself it decreases U.S. net capital outflow.

Question 9

If a country has saving of $2 trillion and investment of $1.5 trillion, then it has

Accepted Answer

A)  a trade surplus and its net capital outflow = $.5 trillion. 
B)  a trade surplus and its net capital outflow = -$.5 trillion. 
C)  a trade deficit and its net capital outflow = $.5 trillion. 
D)  a trade deficit and its net capital outflow = -$.5 trillion.

Question 10

If the exchange rate is 60 Indian rupees per dollar and a bushel of rice costs 200 rupees in India and $3 in the U.S., then the real exchange rate is

Accepted Answer

A)  greater than one and arbitrageurs could profit by buying rice in the U.S. and selling it in India. 
B)  greater than one and arbitrageurs could profit by buying rice in India and selling it in the U.S.. 
C)  less than one and arbitrageurs could profit by buying rice in the U.S. and selling it in India. 
D)  less than one and arbitrageurs could profit by buying rice in India and selling it in the U.S..

Question 11

According to purchasing-power parity, if over the course of a year the price level in the U.S. rises more than in Canada, then which of the following rises?

Accepted Answer

A)  the U.S. real exchange rate, but not the U.S. nominal exchange rate 
B)  the U.S. nominal exchange rate, but not the U.S. real exchange rate 
C)  the U.S. nominal exchange rate and the U.S. real exchange rate 
D)  neither the real exchange rate nor the nominal exchange rate

Question 12

If business opportunities in a country become relatively less attractive relative to those of other countries, then

Accepted Answer

A)  both its net exports and net capital outflows fall. 
B)  both its net exports and net capital outflows rise. 
C)  its net exports fall and its net capital outflows fall. 
D)  its net exports rise and its net capital outflows fall

Question 13

If a country has Y > C + I + G, then

Accepted Answer

A) S > I and it has a trade surplus. B) S > I and it has a trade deficit. C) S < I and it has a trade surplus. D) S < I and it has a trade deficit.

Question 14

If over the next few years inflation is higher in Mexico than in the U.S., then according to purchasing-power parity which of the following should rise?

Accepted Answer

A)  the U.S. real exchange rate but not the U.S. nominal exchange rate 
B)  the U.S. nominal exchange rate but not the U.S. real exchange rate 
C)  the U.S. real exchange rate but not the U.S. nominal exchange rate 
D)  neither the U.S. real nor the U.S. nominal exchange rate

Question 15

In the U.S. a digital camera costs $200. The same camera in London sells for 90 pounds. If the exchange rate were .50 pounds per dollar, then which of the following would be correct?

Accepted Answer

A)  The real exchange rate is greater than 1. A person in London with $200 could exchange them for pounds and have more than enough to buy the camera there. 
B)  The real exchange rate is greater than 1. A person in London with $200 could exchange them for pounds but then wouldn't have enough to buy the camera there. 
C)  The real exchange rate is less than 1. A person in London with $200 could exchange them for pounds and have more than enough to buy the camera there. 
D)  The real exchange rate is less than 1. A person in London with $200 could exchange them for pounds but then wouldn't have enough to buy the camera.

Question 16

A Chinese company exchanges yuan (Chinese currency) for dollars. It uses these dollars to purchase scrap metal from a U.S. company. As a result of these transactions, Chinese

Accepted Answer

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

Question 17

The real exchange rate is the nominal exchange rate, defined as foreign currency per dollar, times

Accepted Answer

A)  U.S. prices minus foreign prices. 
B)  U.S. prices divided by foreign prices. 
C)  foreign prices divided by U.S. prices. 
D)  None of the above is correct.

Question 18

If a country's net exports fall, then its net capital outflow falls by the same amount.

Accepted Answer

A) True 
 B)False

Question 19

According to purchasing-power parity, if the price of a basket of goods in the U.S. rose from $1,500 to $2,000 and the price of the same basket of goods rose from 600 units of some other country's currency to 1,000 units of that country's currency, then the

Accepted Answer

A)  nominal exchange rate would appreciate. 
B)  nominal exchange rate would depreciate. 
C)  real exchange rate would appreciate. 
D)  real exchange rate would depreciate.

Question 20

The theory of purchasing­power parity states that a unit of a country's currency should be able to buy the same quantity of goods in foreign countries as it does in the domestic economy.

Accepted Answer

A) True 
 B)False

Exam 31: Open-Economy Macroeconomics: Basic Concepts

From 1970 to 1998 the U.S. dollar

Most of the change from 1980 to 1987 in U.S. net capital outflow as a percent of GDP was due to a(n)

A quality men's suit in the U.S. costs $400. The same suit costs 300 British pounds in the U.K. The nominal exchange rate is .60 pounds per dollar. A. Find the real exchange rate. Show your work. B. In terms of dollars where is the suit cheaper?

If purchasing-power parity holds, a bushel of rice costs $10 in the U.S., and the nominal exchange rate is 25 Thai baht per dollar, what is the price of rice in Thailand?

If Canada's national saving exceeds its domestic investment, then Canada has

How do the nominal exchange rate and the real exchange rate differ?

A basket of goods costs $800 in the U.S. In Belgium the basket of goods costs 640 euros and the exchange rate is .80 euros per U.S. dollar. In Japan the basket of goods costs 90,000 yen and the exchange rate is 90 yen per dollar. Which country has purchasing-power parity with the U.S.?

Sam, a U.S. citizen, buys bonds issued by a Greek company that bottles olives. Sam's purchase is

If a country has saving of $2 trillion and investment of $1.5 trillion, then it has

If the exchange rate is 60 Indian rupees per dollar and a bushel of rice costs 200 rupees in India and $3 in the U.S., then the real exchange rate is

According to purchasing-power parity, if over the course of a year the price level in the U.S. rises more than in Canada, then which of the following rises?

If business opportunities in a country become relatively less attractive relative to those of other countries, then

If a country has Y > C + I + G, then

If over the next few years inflation is higher in Mexico than in the U.S., then according to purchasing-power parity which of the following should rise?

In the U.S. a digital camera costs $200. The same camera in London sells for 90 pounds. If the exchange rate were .50 pounds per dollar, then which of the following would be correct?

A Chinese company exchanges yuan (Chinese currency) for dollars. It uses these dollars to purchase scrap metal from a U.S. company. As a result of these transactions, Chinese

The real exchange rate is the nominal exchange rate, defined as foreign currency per dollar, times

If a country's net exports fall, then its net capital outflow falls by the same amount.

According to purchasing-power parity, if the price of a basket of goods in the U.S. rose from $1,500 to $2,000 and the price of the same basket of goods rose from 600 units of some other country's currency to 1,000 units of that country's currency, then the

The theory of purchasingpower parity states that a unit of a country's currency should be able to buy the same quantity of goods in foreign countries as it does in the domestic economy.

Exam 31: Open-Economy Macroeconomics: Basic Concepts

From 1970 to 1998 the U.S. dollar

Most of the change from 1980 to 1987 in U.S. net capital outflow as a percent of GDP was due to a(n)

A quality men's suit in the U.S. costs $400. The same suit costs 300 British pounds in the U.K. The nominal exchange rate is .60 pounds per dollar. A. Find the real exchange rate. Show your work. B. In terms of dollars where is the suit cheaper?

If purchasing-power parity holds, a bushel of rice costs $10 in the U.S., and the nominal exchange rate is 25 Thai baht per dollar, what is the price of rice in Thailand?

If Canada's national saving exceeds its domestic investment, then Canada has

How do the nominal exchange rate and the real exchange rate differ?

A basket of goods costs $800 in the U.S. In Belgium the basket of goods costs 640 euros and the exchange rate is .80 euros per U.S. dollar. In Japan the basket of goods costs 90,000 yen and the exchange rate is 90 yen per dollar. Which country has purchasing-power parity with the U.S.?

Sam, a U.S. citizen, buys bonds issued by a Greek company that bottles olives. Sam's purchase is

If a country has saving of $2 trillion and investment of $1.5 trillion, then it has

If the exchange rate is 60 Indian rupees per dollar and a bushel of rice costs 200 rupees in India and $3 in the U.S., then the real exchange rate is

According to purchasing-power parity, if over the course of a year the price level in the U.S. rises more than in Canada, then which of the following rises?

If business opportunities in a country become relatively less attractive relative to those of other countries, then

If a country has Y > C + I + G, then

If over the next few years inflation is higher in Mexico than in the U.S., then according to purchasing-power parity which of the following should rise?

In the U.S. a digital camera costs $200. The same camera in London sells for 90 pounds. If the exchange rate were .50 pounds per dollar, then which of the following would be correct?

A Chinese company exchanges yuan (Chinese currency) for dollars. It uses these dollars to purchase scrap metal from a U.S. company. As a result of these transactions, Chinese

The real exchange rate is the nominal exchange rate, defined as foreign currency per dollar, times

If a country's net exports fall, then its net capital outflow falls by the same amount.

According to purchasing-power parity, if the price of a basket of goods in the U.S. rose from $1,500 to $2,000 and the price of the same basket of goods rose from 600 units of some other country's currency to 1,000 units of that country's currency, then the

The theory of purchasing­power parity states that a unit of a country's currency should be able to buy the same quantity of goods in foreign countries as it does in the domestic economy.

The theory of purchasingpower parity states that a unit of a country's currency should be able to buy the same quantity of goods in foreign countries as it does in the domestic economy.