Question 1

According to purchasing-power parity, inflation in the U.S. causes the dollar to

Accepted Answer

A)   depreciate relative to all other currencies.
B)   depreciate relative to currencies of countries that have lower inflation rates.
C)   appreciate relative to all other countries.
D)   appreciate relative to currencies of countries that have lower inflation rates.E) A) and D)
F) B) and C)

Question 2

Suppose that foreign citizens decide to purchase more U.S. pharmaceuticals and U.S. citizens decide to buy more stock in foreign corporations. Other things the same, these actions

Accepted Answer

A)   raise both U.S. net exports and U.S. net capital outflows.
B)   raise U.S. net exports and lower U.S. net capital outflows.
C)   lower both U.S. net exports and U.S. net capital outflows.
D)   lower U.S. net exports and raise U.S. net capital outflows.E) B) and C)
F) A) and B)

Question 3

Citizens in India buy music from the U.S. To do so they use Indian rupees to purchase U.S. dollars. If U.S. citizens hold these rupees rather than spending them, what happens to U.S. net exports and U.S. net capital outflows?

Accepted Answer

A)   both U.S. net exports and U.S. net capital outflow rise
B)   both U.S. net exports and U.S. net capital outflow fall
C)   U.S. net exports rise and U.S. net capital outflow fall
D)   U.S. net exports fall and U.S. net capital outflow riseE) All of the above
F) A) and B)

Question 4

If a German firm buys goods from a U.S. firm with dollars it obtains by exchanging euros for dollars, both U.S. net exports and U.S. net capital outflow increase.

Accepted Answer

A) True 
 B)False

Question 5

Nominal exchange rates

Accepted Answer

A)   vary little over time.
B)   vary substantially over time.
C)   appreciate over time for most countries.
D)   depreciate over time for most countries.E) B) and C)
F) A) and C)

Question 6

The value of Austria's exports minus the value of Austria's imports is called

Accepted Answer

A)   Austria's net exports.
B)   Austria's net imports.
C)   Austria's foreign portfolio investment
D)   Austria's foreign direct investment.E) B) and C)
F) B) and D)

Question 7

The ability to profit by purchasing wheat in the U.S. and selling it in China implies that the

Accepted Answer

A)   nominal exchange rate is less than 1.
B)   nominal exchange rate is greater than 1.
C)   real exchange rate is less than 1.
D)   real exchange rate is greater than 1.E) A) and B)
F) None of the above

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.E) A) and C)
F) A) and B)

Question 9

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.E) All of the above
F) B) and C)

Question 10

A country has $45 million of domestic investment and net capital outflow of -$60 million. What is its saving?

Accepted Answer

A)   $15 million
B)   -$15 million
C)   $105 million
D)   -$105 millionE) A) and B)
F) None of the above

Question 11

Net capital outflow equals

Accepted Answer

A)   the value of domestic assets purchased by foreigners.
B)   the value of foreign assets purchased by domestic residents.
C)   the value of domestic assets purchased by foreigners - the value of foreign assets purchased by domestic residents.
D)   the value of foreign assets purchased by domestic residents - the value of domestic assets purchased by foreigners.E) A) and D)
F) B) and C)

Question 12

According to purchasing-power parity, if a basket of goods costs $100 in the U.S. and the same basket costs 800 pesos in Argentina, then what is the nominal exchange rate?

Accepted Answer

A)   8 pesos per dollar
B)   1 peso per dollar
C)   1/8 peso per dollar
D)   none of the above is correctE) B) and D)
F) A) and C)

Question 13

A U.S. citizen buys bonds issued by a construction equipment manufacturer in Poland. Her expenditures are U.S.

Accepted Answer

A)   foreign portfolio investment that increase U.S. net capital outflow.
B)   foreign portfolio investment that decrease U.S. net capital outflow.
C)   foreign direct investment that increase U.S. net capital outflow.
D)   foreign direct investment that decrease U.S. net capital outflow.E) B) and D)
F) C) and D)

Question 14

The country of Sylvania has a GDP of $900, investment of $200, government purchases of $200, and net capital outflow of -$100. What is consumption?

Accepted Answer

A)   $700
B)   $600
C)   $500
D)   $300E) A) and C)
F) A) and B)

Question 15

Suppose that a country has $120 billion of national saving, and $80 billion of domestic investment. Is this possible? Where did the other $40 billion of national savings go?

Accepted Answer

This is possible for an open economy. Th...

Question 16

The country of Elbia has a GDP of $2,000, consumption of $1,300, and government purchases of $400. Which of the following is equal to $300?

Accepted Answer

A)   domestic investment
B)   domestic investment plus net capital outflow
C)   domestic investment minus net capital outflow
D)   None of the above is correct.E) B) and C)
F) A) and B)

Question 17

If purchases of French assets by foreigners are less than French purchases of foreign assets, then France has a

Accepted Answer

A)   positive net capital outflow and a trade surplus.
B)   positive net capital outflow and a trade deficit.
C)   negative net capital outflow and a trade surplus.
D)   negative net capital outflow and a trade deficit.E) B) and D)
F) A) and C)

Question 18

If purchasing-power parity holds, then the value of the

Accepted Answer

A)   real exchange rate is equal to one.
B)   nominal exchange rate is equal to one.
C)   real exchange rate is equal to the nominal exchange rate.
D)   real exchange rate is equal to the difference in inflation rates between the two countries.E) None of the above
F) B) and C)

Question 19

Last month a country sold more goods and services to residents of foreign countries than it purchased from them. What does this imply about this country's trade balance?

Accepted Answer

This count...

Question 20

If Chileans buy more U.S. stocks and bonds and U.S. residents buy more Chilean wine, then

Accepted Answer

A)   both U.S. net exports and U.S. net capital outflows rise.
B)   U.S. net exports rise and U.S. net capital outflows fall.
C)   U.S. net exports fall and U.S. net capital outflows rise.
D)   both U.S. net exports and U.S. net capital outflows fall.E) B) and C)
F) All of the above

Exam 18: Open-Economy Macroeconomics: Basic Concepts

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

Correct AnswerverifiedShow Answer

Net capital outflow equals

Correct AnswerverifiedShow Answer

The ability to profit by purchasing wheat in the U.S. and selling it in China implies that the

Correct AnswerverifiedShow Answer

Suppose that a country has $120 billion of national saving, and $80 billion of domestic investment. Is this possible? Where did the other $40 billion of national savings go?

Correct AnswerverifiedThis is possible for an open economy. Th...View AnswerShow Answer

Last month a country sold more goods and services to residents of foreign countries than it purchased from them. What does this imply about this country's trade balance?

Correct AnswerverifiedThis count...View AnswerShow Answer

A country has $45 million of domestic investment and net capital outflow of -$60 million. What is its saving?

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Suppose that foreign citizens decide to purchase more U.S. pharmaceuticals and U.S. citizens decide to buy more stock in foreign corporations. Other things the same, these actions

Correct AnswerverifiedShow Answer

According to purchasing-power parity, if a basket of goods costs $100 in the U.S. and the same basket costs 800 pesos in Argentina, then what is the nominal exchange rate?

Correct AnswerverifiedShow Answer

According to purchasing-power parity, inflation in the U.S. causes the dollar to

Correct AnswerverifiedShow Answer

The country of Elbia has a GDP of $2,000, consumption of $1,300, and government purchases of $400. Which of the following is equal to $300?

Correct AnswerverifiedShow Answer

The country of Sylvania has a GDP of $900, investment of $200, government purchases of $200, and net capital outflow of -$100. What is consumption?

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If a German firm buys goods from a U.S. firm with dollars it obtains by exchanging euros for dollars, both U.S. net exports and U.S. net capital outflow increase.

Correct AnswerverifiedShow Answer

If purchasing-power parity holds, then the value of the

Correct AnswerverifiedShow Answer

Citizens in India buy music from the U.S. To do so they use Indian rupees to purchase U.S. dollars. If U.S. citizens hold these rupees rather than spending them, what happens to U.S. net exports and U.S. net capital outflows?

Correct AnswerverifiedShow Answer

If Chileans buy more U.S. stocks and bonds and U.S. residents buy more Chilean wine, then

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The value of Austria's exports minus the value of Austria's imports is called

Correct AnswerverifiedShow Answer

Nominal exchange rates

Correct AnswerverifiedShow Answer

If purchases of French assets by foreigners are less than French purchases of foreign assets, then France has a

Correct AnswerverifiedShow Answer

A U.S. citizen buys bonds issued by a construction equipment manufacturer in Poland. Her expenditures are U.S.

Correct AnswerverifiedShow Answer

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This is possible for an open economy. Th...
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