Question 1

If a Dutch 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 2

The increase in international trade in the United States is partly due to

Accepted Answer

A)   improvements in transportation.
B)   advances in telecommunications.
C)   increased trade of goods with a high value per pound.
D)   All of the above are correct.E) None of the above
F) A) and D)

Question 3

The price level in Country A is 250.The price level in Country B is 300.If purchasing power parity holds,what is the nominal value of Country A's currency in the market for foreign exchange with Country B? Show your work.

Accepted Answer

The answer of The price level in Country A is...

Question 4

A country has $60 million of saving and domestic investment of $40 million.Net exports are

Accepted Answer

A)   $20 million.
B)   -$20 million.
C)   $100 million.
D)   -$100 million.E) A) and B)
F) All of the above

Question 5

Which of the following is inconsistent with the others?

Accepted Answer

A)   Y - C - G > I
B)   this country had a trade surplus
C)   the purchase of foreign assets by this country's residents exceed foreigner's purchases of this country's assets
D)   this country's investment exceeded its domestic savingE) None of the above
F) A) and D)

Question 6

According to purchasing-power parity,which of the following necessarily equals the ratio of the foreign price level divided by the domestic price level?

Accepted Answer

A)   the real exchange rate,but not the nominal exchange rate
B)   the nominal exchange rate,but not the real exchange rate
C)   the real exchange rate and the nominal exchange rate
D)   neither the real exchange rate nor the nominal exchange rateE) A) and C)
F) A) and D)

Question 7

Suppose that the real exchange rate between the United States and Kenya is defined in terms of baskets of goods.Other things the same,which of the following will increase the real exchange rate (that is increase the number of baskets of Kenyan goods a basket of U.S.goods buys) ?

Accepted Answer

A)   an increase in the number of Kenyan shillings that can be purchased with a dollar
B)   an increase in the price of U.S.baskets of goods
C)   a decrease in the price in Kenyan shillings of Kenyan goods
D)   All of the above are correct.E) A) and C)
F) C) and D)

Question 8

By itself,if a U.S.firm builds a new factroy overseas,U.S.net captial outflow rises.

Accepted Answer

A) True 
 B)False

Question 9

Stacey,a U.S.citizen,buys a bond issued by an Italian pasta manufacturer.

Accepted Answer

A)   This purchase is foreign direct investment.By itself it increases U.S.net capital outflow.
B)   This purchase is foreign direct investment.By itself it decreases U.S.net capital outflow.
C)   This purchase is foreign portfolio investment.By itself it increases U.S.net capital outflow.
D)   This purchase is foreign portfolio investment.By itself it decreases U.S.net capital outflow.E) B) and D)
F) All of the above

Question 10

One year a country has positive net exports.The next year it still has positive but larger net exports

Accepted Answer

A)   its trade surplus fell.
B)   its trade surplus rose.
C)   its trade deficit fell.
D)   its trade deficit roseE) All of the above
F) A) and C)

Question 11

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 C)
F) B) and D)

Question 12

Which of the following equations is correct?

Accepted Answer

A)   S = I + C
B)   S = I - NX
C)   S = I + NCO
D)   S = NX - NCO.E) B) and D)
F) All of the above

Question 13

Other things the same,which of the following would both make foreigners more willing to engage in U.S.portfolio investment?

Accepted Answer

A)   U.S.interest rates rise,the default risk of U.S.assets rise
B)   U.S.interest rates rise,the default risk of U.S.assets fall
C)   U.S.interest rates fall,the default risk of U.S.assets rise
D)   U.S.interest rates fall,the default risk of U.S.assets fallE) None of the above
F) B) and D)

Question 14

During a hyperinflation the real domestic value of a country's currency

Accepted Answer

A)   falls and its nominal exchange rate depreciates.
B)   falls and its nominal exchange rate appreciates.
C)   rises and its nominal exchange rate depreciates.
D)   rises and its nominal exchange rate appreciates.E) A) and B)
F) A) and C)

Question 15

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.E) None of the above
F) B) and C)

Question 16

In which of the following situations must national saving rise?

Accepted Answer

A)   Both domestic investment and net capital outflow increase.
B)   Domestic investment increases and net capital outflow decreases.
C)   Domestic investment decreases and net capital outflow increases.
D)   Both domestic investment and net capital outflow decrease.E) C) and D)
F) None of the above

Question 17

If the Mexican nominal exchange rate does not change,but prices rise faster abroad than in Mexico,then the Mexican real exchange rate

Accepted Answer

A)   does not change.
B)   rises.
C)   declines.
D)   None of the above is necessarily correct.E) A) and D)
F) A) and C)

Question 18

A Ukrainian firm sells diesel locomotives to a U.S.railroad.Other things the same,these sales

Accepted Answer

A)   increase U.S.net exports and decrease Ukrainian net exports.
B)   decrease U.S.net exports and increase Ukrainian net exports.
C)   increase U.S.and Ukrainian net exports.
D)   decrease U.S.and Ukrainian net exports.E) None of the above
F) B) and C)

Question 19

From 1991-2000,U.S.net capital outflow as a percent of GDP became a

Accepted Answer

A)   larger positive number.
B)   smaller positive number.
C)   larger negative number.
D)   smaller negative number.E) A) and D)
F) None of the above

Question 20

To increase domestic investment,a country must increase its saving.

Accepted Answer

A) True 
 B)False

Exam 31: Open-Economy Macroeconomic Models

Which of the following is inconsistent with the others?

Correct AnswerverifiedShow Answer

In which of the following situations must national saving rise?

Correct AnswerverifiedShow Answer

During a hyperinflation the real domestic value of a country's currency

Correct AnswerverifiedShow Answer

If the Mexican nominal exchange rate does not change,but prices rise faster abroad than in Mexico,then the Mexican real exchange rate

Correct AnswerverifiedShow Answer

According to purchasing-power parity,which of the following necessarily equals the ratio of the foreign price level divided by the domestic price level?

Correct AnswerverifiedShow Answer

From 1991-2000,U.S.net capital outflow as a percent of GDP became a

Correct AnswerverifiedShow Answer

The price level in Country A is 250.The price level in Country B is 300.If purchasing power parity holds,what is the nominal value of Country A's currency in the market for foreign exchange with Country B? Show your work.

Correct AnswerverifiedShow Answer

To increase domestic investment,a country must increase its saving.

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

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

Correct AnswerverifiedShow Answer

Other things the same,which of the following would both make foreigners more willing to engage in U.S.portfolio investment?

Correct AnswerverifiedShow Answer

One year a country has positive net exports.The next year it still has positive but larger net exports

Correct AnswerverifiedShow Answer

If a Dutch 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

Suppose that the real exchange rate between the United States and Kenya is defined in terms of baskets of goods.Other things the same,which of the following will increase the real exchange rate (that is increase the number of baskets of Kenyan goods a basket of U.S.goods buys) ?

Correct AnswerverifiedShow Answer

Which of the following equations is correct?

Correct AnswerverifiedShow Answer

By itself,if a U.S.firm builds a new factroy overseas,U.S.net captial outflow rises.

Correct AnswerverifiedShow Answer

The increase in international trade in the United States is partly due to

Correct AnswerverifiedShow Answer

A Ukrainian firm sells diesel locomotives to a U.S.railroad.Other things the same,these sales

Correct AnswerverifiedShow Answer

A country has $60 million of saving and domestic investment of $40 million.Net exports are

Correct AnswerverifiedShow Answer

Stacey,a U.S.citizen,buys a bond issued by an Italian pasta manufacturer.

Correct AnswerverifiedShow Answer

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