Question 1

In late 2000,you could purchase about 400 drachma for a dollar.In late 2005 you could purchase about 280 drachma for a dollar.These exchange rates are given in

Accepted Answer

A)  real terms and over this period the dollar appreciated.
B)  real terms and over this period the dollar depreciated.
C)  nominal terms and over this period the dollar appreciated.
D)  nominal terms and over this period the dollar depreciated.E) All of the above
F) A) and B)

Question 2

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

Accepted Answer

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

Question 3

Which of the following is correct?

Accepted Answer

A)  NCO + C = NX
B)  NCO = NX
C)  NX - NCO = C
D)  NX + NCO = CE) A) and B)
F) C) and D)

Question 4

Which of the following would be U.S.foreign direct investment?

Accepted Answer

A)  A Polish company opens a shipbuilding plant in the United States.
B)  A Bolivian bank buys U.S.corporate bonds.
C)  A U.S.bank buys Bolivian corporate bonds.
D)  A U.S.furniture maker opens a plant in Mexico.E) A) and D)
F) C) and D)

Question 5

From 1960 to about 1975 in the United States,net capital outflow was

Accepted Answer

A)  small but always positive.
B)  small and sometimes negative and sometimes positive.
C)  large and positive.
D)  large but sometimes negative and sometimes positive.E) A) and B)
F) C) and D)

Question 6

Suppose that the exchange rate is 66 Bangladesh taka per dollar,that a bushel of rice costs 186 taka in Bangladesh and $3 in the United States.Then the real exchange rate is

Accepted Answer

A)  greater than one and arbitrageurs could profit by buying rice in the United States and selling it in Bangladesh.
B)  greater than one and arbitrageurs could profit by buying rice in Bangladesh and selling it in the United States.
C)  less than one and arbitrageurs could profit by buying rice in the United States and selling it in Bangladesh.
D)  less than one and arbitrageurs could profit by buying rice in Bangladesh and selling it in the United States.E) A) and D)
F) All of the above

Question 7

Assuming all other things equal,what would happen to the U.S.dollar real exchange rate under each of the following circumstances?
a.The U.S.nominal exchange rate depreciates.
b.U.S.domestic prices increase.
c.Prices in the rest of the world rise.

Accepted Answer

a. The U.S.dollar real exchang...

Question 8

In an open economy,gross domestic product equals $2,450 billion,consumption expenditure equals $1,390 billion,government expenditure equals $325 billion,investment equals $510 and net capital outflow equals $225 billion.What is national saving?

Accepted Answer

A)  $225 billion
B)  $510 billion
C)  $735 billion
D)  $1,390 billionE) B) and D)
F) C) and D)

Question 9

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

Question 10

If people in the United States buy MP3 players made in Japan,both U.S.net exports and U.S.net capital outflow decrease.

Accepted Answer

A) True 
 B)False

Question 11

Why are net exports and net capital outflow always equal?

Accepted Answer

Net exports and net capital outflow are ...

Question 12

If the U.S.price level is increasing by 3 percent annually and the Swiss price level is increasing by 5 percent annually,by what percent would the dollar price of francs need to change according to purchasing power parity?

Accepted Answer

A)  decrease by 5 percent
B)  decrease by 2 percent
C)  increase by 5 percent
D)  increase by 2 percentE) B) and D)
F) All of the above

Question 13

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.E) A) and C)
F) C) and D)

Question 14

You are staying in London over the summer and you have a number of dollars with you.If the dollar appreciated relative to the British pound then,other things the same,

Accepted Answer

A)  the dollar would buy more pounds.The appreciation would discourage you from buying as many British goods and services.
B)  the dollar would buy more pounds.The appreciation would encourage you to buy more British goods and services.
C)  the dollar would buy fewer pounds.The appreciation would discourage you from buying as many British goods and services.
D)  the dollar would buy fewer pounds.The appreciation would encourage you to buy more British goods and services.E) A) and B)
F) B) and C)

Question 15

Mike,a U.S.citizen,buys $1,000 worth of cheese from France.His action alone

Accepted Answer

A)  increases U.S.imports by $1,000 and increases U.S.net exports by $1,000.
B)  increases U.S.imports by $1,000 and decreases U.S.net exports by $1,000.
C)  increases U.S.exports by $1,000 and increases U.S.net exports by $1,000.
D)  increases U.S.exports by $1,000 and decreases U.S.net exports by $1,000.E) All of the above
F) None of the above

Question 16

A U.S.firm buys apples from New Zealand with U.S.currency.The New Zealand firm than uses this money to buy packaging equipment from a U.S.firm.Which of the following increases?

Accepted Answer

A)  New Zealand net capital outflow and New Zealand net exports
B)  only New Zealand net exports
C)  only New Zealand net capital outflow
D)  neither New Zealand net exports nor New Zealand capital outflowE) A) and D)
F) None of the above

Question 17

Which of the following statements is correct for an open economy with a trade surplus?

Accepted Answer

A)  The trade surplus cannot last for very many years.
B)  The trade surplus must be offset by negative net capital outflow.
C)  The trade surplus implies that the country's national saving is greater than domestic investment.
D)  None of the above is correct.E) None of the above
F) B) and C)

Question 18

In the U.S.a candy bar costs 50 cents.The nominal exchange rate is 6 Chinese yuan per dollar.If the real exchange rate is .60,what is the price of a candy bar in China?

Accepted Answer

A)  7.2 yuan
B)  6 yuan
C)  5 yuan
D)  3.6 yuanE) A) and B)
F) B) and D)

Question 19

Suppose that the real return from operating factories in Ghana rises relative to the real rate of return in the United States.Other things the same,

Accepted Answer

A)  this will increases U.S.net capital outflow and decrease Ghanan net capital outflow.
B)  this will decreases U.S.net capital outflow and increase Ghanan net capital outflow.
C)  this will only increase U.S.net capital outflow.
D)  this will only increase Ghanan net capital outflow.E) None of the above
F) B) and C)

Question 20

A Mexican flour mill buys wheat from the United States and pays for it with pesos.Other things the same,Mexican

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

Exam 31: Open-Economy Macroeconomics: Basic Concepts

In late 2000,you could purchase about 400 drachma for a dollar.In late 2005 you could purchase about 280 drachma for a dollar.These exchange rates are given in

Correct AnswerverifiedShow Answer

Which of the following statements is correct for an open economy with a trade surplus?

Correct AnswerverifiedShow Answer

If the U.S.price level is increasing by 3 percent annually and the Swiss price level is increasing by 5 percent annually,by what percent would the dollar price of francs need to change according to purchasing power parity?

Correct AnswerverifiedShow Answer

You are staying in London over the summer and you have a number of dollars with you.If the dollar appreciated relative to the British pound then,other things the same,

Correct AnswerverifiedShow Answer

Suppose that the real return from operating factories in Ghana rises relative to the real rate of return in the United States.Other things the same,

Correct AnswerverifiedShow Answer

Which of the following does purchasing-power parity imply?

Correct AnswerverifiedShow Answer

In the U.S.a candy bar costs 50 cents.The nominal exchange rate is 6 Chinese yuan per dollar.If the real exchange rate is .60,what is the price of a candy bar in China?

Correct AnswerverifiedShow Answer

Suppose that the exchange rate is 66 Bangladesh taka per dollar,that a bushel of rice costs 186 taka in Bangladesh and $3 in the United States.Then the real exchange rate is

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

From 1960 to about 1975 in the United States,net capital outflow was

Correct AnswerverifiedShow Answer

If people in the United States buy MP3 players made in Japan,both U.S.net exports and U.S.net capital outflow decrease.

Correct AnswerverifiedShow Answer

In an open economy,gross domestic product equals $2,450 billion,consumption expenditure equals $1,390 billion,government expenditure equals $325 billion,investment equals $510 and net capital outflow equals $225 billion.What is national saving?

Correct AnswerverifiedShow Answer

Assuming all other things equal,what would happen to the U.S.dollar real exchange rate under each of the following circumstances? a.The U.S.nominal exchange rate depreciates. b.U.S.domestic prices increase. c.Prices in the rest of the world rise.

Correct Answerverifieda. The U.S.dollar real exchang...View AnswerShow Answer

From 1970 to 1998 the U.S.dollar

Correct AnswerverifiedShow Answer

Which of the following would be U.S.foreign direct investment?

Correct AnswerverifiedShow Answer

Why are net exports and net capital outflow always equal?

Correct AnswerverifiedNet exports and net capital outflow are ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Mike,a U.S.citizen,buys $1,000 worth of cheese from France.His action alone

Correct AnswerverifiedShow Answer

A Mexican flour mill buys wheat from the United States and pays for it with pesos.Other things the same,Mexican

Correct AnswerverifiedShow Answer

A U.S.firm buys apples from New Zealand with U.S.currency.The New Zealand firm than uses this money to buy packaging equipment from a U.S.firm.Which of the following increases?

Correct AnswerverifiedShow Answer

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a. The U.S.dollar real exchang...
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Net exports and net capital outflow are ...
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