Question 1

When interest rates in the U.S. increase, we can expect NCO to:

Accepted Answer

A)   decrease, because capital inflow is increasing.
B)   increase, because capital inflow is increasing.
C)   decrease, because capital outflow is increasing.
D)   increase, because capital outflow is increasing.E) None of the above
F) All of the above

Question 2

When interest rates in the U.S. decrease, we can expect NCO to:

Accepted Answer

A)   decrease, because capital inflow is increasing.
B)   increase, because capital inflow is decreasing.
C)   decrease, because capital inflow is decreasing.
D)   increase, because capital inflow is increasing.E) C) and D)
F) None of the above

Question 3

The trade in goods, services, and capital around the world comprises:

Accepted Answer

A)   trillions of dollars.
B)   billions of dollars.
C)   a small amount in dollar value.
D)   millions of dollars.E) None of the above
F) B) and D)

Question 4

Countries that have a trade surplus have a:

Accepted Answer

A)   positive net capital outflow.
B)   positive net capital inflow.
C)   negative net capital outflow.
D)   positive foreign direct investment.E) A) and D)
F) C) and D)

Question 5

The nominal exchange rate:

Accepted Answer

A)   expresses the value of goods in one country in terms of the same goods in another country.
B)   is the stated rate at which one country's currency can be traded for another country's goods and services.
C)   is the stated rate at which one country's currency can be traded for another country's currency.
D)   expresses the value of goods in one country in terms of another country's currency.E) A) and C)
F) B) and C)

Question 6

In the market for loanable funds in an open economy, the demand for loanable funds:

Accepted Answer

A)   can be demanded for domestic investment or international investment.
B)   is equal to national income.
C)   is equal to private investment.
D)   is equal to public investment.E) C) and D)
F) B) and C)

Question 7

One reason that we might observe a rise in net capital outflow could be interest rates in the:

Accepted Answer

A)   rest of the world are declining, relative to the U.S.
B)   U.S. are declining, relative to the rest of the world.
C)   U.S. and the world are all declining.
D)   U.S. and the world are all increasing.E) All of the above
F) A) and C)

Question 8

When people choose to invest at home it is called ________, and when they invest abroad it is called _______.

Accepted Answer

A)   investment; foreign savings
B)   investment; net capital outflow
C)   savings; net capital outflow
D)   savings; net direct investmentE) A) and D)
F) B) and C)

Question 9

If Allan lives in Boston and decides to buy a pair of hockey skates from Canada for $100, and the Canadian he bought them from buys a baseball hat and jersey for $100 from Boston, then the U.S. next exports:

Accepted Answer

A)   and net capital outflow are both zero.
B)   and net capital outflow both equal −$100.
C)   is zero and net capital outflow is −$100.
D)   equals −$100 and net capital outflow is zero.E) A) and B)
F) A) and C)

Question 10

Foreign investment can be economically beneficial for all of the following reasons except:

Accepted Answer

A)   increases the GDP of the host country by giving it access to additional resources.
B)   increases the GDP of the investing country by providing it with ways to earn higher returns on its capital.
C)   makes the world a more efficient place by moving capital from places with low returns to places with high returns.
D)   it always leads to a higher interest rate.E) None of the above
F) C) and D)

Question 11

Apple is an American company, but its iPhones are assembled in China. The sale of each iPhone then is counted in China's GDP as:

Accepted Answer

A)   consumption.
B)   investment.
C)   an import.
D)   an export.E) A) and D)
F) None of the above

Question 12

When Natalie in New York buys stock in Hyundai in Korea, NCO:

Accepted Answer

A)   decreases.
B)   is unaffected.
C)   increases.
D)   is zero.E) A) and C)
F) None of the above

Question 13

The Argentinian crisis of 2001 was characterized by:

Accepted Answer

A)   international investors losing confidence and shifting the demand for loanable funds to the right.
B)   government debt becoming more expensive, shifting savings to the left.
C)   increasing interest rates.
D)   All of these statements are true.E) A) and B)
F) A) and C)

Question 14

One of the largest foreign portfolio investments in the U.S. comes from:

Accepted Answer

A)   U.S. purchases of Chinese consumption goods.
B)   U.S. purchases of Chinese government debt.
C)   Chinese purchases of U.S. government debt.
D)   Chinese purchases of U.S. capital goods.E) C) and D)
F) None of the above

Question 15

When we demand Mexican pesos, the price we pay for those pesos is the:

Accepted Answer

A)   exchange rate.
B)   interest rate.
C)   savings rate.
D)   prime rate.E) B) and D)
F) A) and B)

Question 16

If people have a sudden increase in confidence in the open economy of the U.S. and want to invest there, the:

Accepted Answer

A)   demand for loanable funds curve would shift left.
B)   demand for loanable funds curve would shift right.
C)   supply of loanable funds curve would shift left.
D)   supply of loanable funds curve would shift right.E) A) and D)
F) C) and D)

Question 17

If Rhoda in Hungary buys candy from Matt in Maine for $20, and Matt buys foodin his favorite goulash restaurant in Hungary for $20, then the U.S. net exports:

Accepted Answer

A)   and net capital outflow are both zero.
B)   and net capital outflow both equal $20.
C)   is zero and net capital outflow is $20.
D)   equals $20 and net capital outflow is zero.E) B) and C)
F) A) and D)

Question 18

Foreign portfolio investment is sometimes called hot money because:

Accepted Answer

A)   it can be withdrawn from a country very quickly.
B)   it is very difficult to trace.
C)   it is often invested in the assets which yield the highest returns in the world.
D)   earnings often go untaxed by the home government.E) C) and D)
F) None of the above

Question 19

When the value of a currency decreases relative to other currencies, we say that a currency experiences:

Accepted Answer

A)   exchange-rate appreciation.
B)   exchange-rate depreciation.
C)   interest-rate appreciation.
D)   interest-rate depreciation.E) B) and C)
F) A) and C)

Question 20

If China were to adopt a floating exchange-rate regime, it would:

Accepted Answer

A)   cause the Chinese trade balance to fall.
B)   cause the U.S. trade balance with China to fall.
C)   force the U.S. to adopt a fixed exchange rate to maintain the balance of trade.
D)   de-stabilize the entire world economy.E) C) and D)
F) None of the above

Exam 18: Open-Market Macroeconomics

The Argentinian crisis of 2001 was characterized by:

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Apple is an American company, but its iPhones are assembled in China. The sale of each iPhone then is counted in China's GDP as:

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Foreign investment can be economically beneficial for all of the following reasons except:

Correct AnswerverifiedShow Answer

If China were to adopt a floating exchange-rate regime, it would:

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If people have a sudden increase in confidence in the open economy of the U.S. and want to invest there, the:

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The trade in goods, services, and capital around the world comprises:

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One reason that we might observe a rise in net capital outflow could be interest rates in the:

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When interest rates in the U.S. increase, we can expect NCO to:

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Countries that have a trade surplus have a:

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One of the largest foreign portfolio investments in the U.S. comes from:

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The nominal exchange rate:

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When Natalie in New York buys stock in Hyundai in Korea, NCO:

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When interest rates in the U.S. decrease, we can expect NCO to:

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If Allan lives in Boston and decides to buy a pair of hockey skates from Canada for $100, and the Canadian he bought them from buys a baseball hat and jersey for $100 from Boston, then the U.S. next exports:

Correct AnswerverifiedShow Answer

In the market for loanable funds in an open economy, the demand for loanable funds:

Correct AnswerverifiedShow Answer

If Rhoda in Hungary buys candy from Matt in Maine for $20, and Matt buys foodin his favorite goulash restaurant in Hungary for $20, then the U.S. net exports:

Correct AnswerverifiedShow Answer

When people choose to invest at home it is called ________, and when they invest abroad it is called _______.

Correct AnswerverifiedShow Answer

When we demand Mexican pesos, the price we pay for those pesos is the:

Correct AnswerverifiedShow Answer

When the value of a currency decreases relative to other currencies, we say that a currency experiences:

Correct AnswerverifiedShow Answer

Foreign portfolio investment is sometimes called hot money because:

Correct AnswerverifiedShow Answer

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When people choose to invest at home it is called __, and when they invest abroad it is called _.

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