Question 1

A country has $1.5 billion dollars of domestic investment and net exports of $2 billion.What is its saving?

Accepted Answer

A)   -$.5 billion
B)   $5 billion
C)   $1.5 billion
D)   $3.5 billionE) None of the above
F) C) and D)

Question 2

If a country has a trade deficit then

Accepted Answer

A) S > I and Y > C + I + G. B) S > I and Y C) S C + I + G. D) S < I and Y < C + I + G.E) A) and C) F) All of the above

Question 3

If P = domestic prices,P* = foreign prices,and e is the nominal exchange rate,which of the following is implied by purchasing-power parity?

Accepted Answer

A)   P = e/P*
B)   1 = e/P*
C)   e = P*/P
D)   None of the above is correct.E) A) and D)
F) B) and D)

Question 4

Last year residents of Country A purchased $600 billion of foreign assets.Foreigners purchased $425 billion dollars of assets and $375 billion of goods and services from country A.What was the value of Country A's imports?

Accepted Answer

The value of Country...

Question 5

The nominal exchange rate is .80 euros per dollar and the real exchange rate is 4/3.Which of the following prices for a particular good are consistent with these exchange rates?

Accepted Answer

A)   $4 in the U.S.and 3 euros in Italy.
B)   $4 in the U.S.and 3.75 euros in Italy.
C)   $5 in the U.S.and 3 euros in Italy.
D)   $6 in the U.S.and 2.50 euros in Italy.E) A) and D)
F) B) and D)

Question 6

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 C)
F) A) and D)

Question 7

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.The...

Question 8

If the real exchange rate is 5/4 pounds of Chilean beef per pound of U.S.beef,a pound of U.S.beef costs $2 and the nominal exchange rate is 500 Chilean pesos per dollar,then Chilean beef costs

Accepted Answer

A)   1,250 pesos per pound.
B)   800 pesos per pound
C)   250 pesos per pound.
D)   None of the above is correct.E) A) and B)
F) C) and D)

Question 9

A U.S.citizen buys bonds issued by an automobile manufacturer in Japan.Her expenditures are U.S.

Accepted Answer

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

Question 10

If there is a trade deficit,then

Accepted Answer

A)   saving is greater than domestic investment and Y > C + I + G.
B)   saving is greater than domestic investment and Y 
C)   saving is less than domestic investment and Y > C +I + G.
D)   saving is less than domestic investment and Y < C + I + G.E) All of the above
F) None of the above

Question 11

A British grocery chain uses previously obtained U.S.dollars to purchase apples from the United States.This transaction

Accepted Answer

A)   increases British net capital outflow,and increases U.S.net exports.
B)   increases British net capital outflow,and decreases U.S.net exports.
C)   decreases British net capital outflow,and increases U.S.net exports.
D)   decreases British net capital outflow,and decreases U.S.net exports.E) None of the above
F) All of the above

Question 12

A Big Mac in Japan costs 320 yen while it costs $3.60 in the U.S..The nominal exchange rate is 80 yen per dollar.Which of the following would both make the real exchange rate move towards purchasing-power parity?

Accepted Answer

A)   the price of Big Macs in the U.S.falls,the nominal exchange rate falls
B)   the price of Big Macs in the U.S.falls,the nominal exchange rate rises
C)   the price of Big Macs in the U.S.rises,the nominal exchange rate falls
D)   the price of Big Macs in the U.S.rises,the nominal exchange rate risesE) None of the above
F) A) and B)

Question 13

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

Accepted Answer

A)   Peru's foreign portfolio investment.
B)   Peru's foreign direct investment.
C)   Peru's net exports.
D)   Peru's net imports.E) C) and D)
F) All of the above

Question 14

Domestic saving must equal domestic investment in

Accepted Answer

A)   both closed and open economies.
B)   closed,but not open economies.
C)   open,but not closed economies.
D)   neither closed nor open economies.E) A) and B)
F) All of the above

Question 15

If the United States had negative net exports last year,then it

Accepted Answer

A)   sold more abroad than it purchased abroad and had a trade surplus.
B)   sold more abroad than it purchased abroad and had a trade deficit.
C)   bought more abroad than it sold abroad and had a trade surplus.
D)   bought more abroad than it sold abroad and had a trade deficit.E) All of the above
F) A) and C)

Question 16

A country has $50 million of domestic investment and net capital outflow of $15 million.What is saving?

Accepted Answer

A)   $65 million.
B)   -$65 million.
C)   $35 million.
D)   -$35 million.E) B) and D)
F) C) and D)

Question 17

All saving in the U.S.economy shows up as

Accepted Answer

A)   investment in the U.S.economy.
B)   U.S.net capital outflow.
C)   either investment in the U.S.economy or U.S.net capital outflow.
D)   None of the above is correct.E) None of the above
F) B) and C)

Question 18

Which of the following does purchasing-power parity conclude should equal 1?

Accepted Answer

A)   both the nominal and the real exchange rate.
B)   the nominal exchange rate but not the real exchange rate
C)   the real exchange rate but not the nominal exchange rate
D)   neither the nominal exchange rate nor the real exchange rateE) A) and B)
F) All of the above

Question 19

In Ireland,a pint of beer costs 3 euros.In Australia,a pint of beer costs 4 Australian dollars.If the exchange rate is .8 euros per Australian dollar,what is the real exchange rate?

Accepted Answer

A)   4/2.4 pints of Irish beer per pint of Australian beer
B)   3/3.2 pint of Irish beer per pint of Australian beer
C)   3.2/3 pints of Irish beer per pint of Australian beer
D)   2.4/4 pints of Irish beer per pint of Australian beerE) C) and D)
F) B) and D)

Question 20

According to purchasing power parity,if two countries have the same price level because they have the same prices for all goods and services,then which of the following would equal 1?

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) None of the above
F) B) and D)

Exam 31: Open-Economy Macroeconomic Models

If a country has a trade deficit then

Correct AnswerverifiedShow Answer

The nominal exchange rate is .80 euros per dollar and the real exchange rate is 4/3.Which of the following prices for a particular good are consistent with these exchange rates?

Correct AnswerverifiedShow Answer

Which of the following does purchasing-power parity conclude should equal 1?

Correct AnswerverifiedShow Answer

A country has $1.5 billion dollars of domestic investment and net exports of $2 billion.What is its saving?

Correct AnswerverifiedShow Answer

A Big Mac in Japan costs 320 yen while it costs $3.60 in the U.S..The nominal exchange rate is 80 yen per dollar.Which of the following would both make the real exchange rate move towards purchasing-power parity?

Correct AnswerverifiedShow Answer

A British grocery chain uses previously obtained U.S.dollars to purchase apples from the United States.This transaction

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In Ireland,a pint of beer costs 3 euros.In Australia,a pint of beer costs 4 Australian dollars.If the exchange rate is .8 euros per Australian dollar,what is the real exchange rate?

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Last year residents of Country A purchased $600 billion of foreign assets.Foreigners purchased $425 billion dollars of assets and $375 billion of goods and services from country A.What was the value of Country A's imports?

Correct AnswerverifiedThe value of Country...View AnswerShow Answer

If the real exchange rate is 5/4 pounds of Chilean beef per pound of U.S.beef,a pound of U.S.beef costs $2 and the nominal exchange rate is 500 Chilean pesos per dollar,then Chilean beef costs

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A country has $50 million of domestic investment and net capital outflow of $15 million.What is saving?

Correct AnswerverifiedShow Answer

If P = domestic prices,P* = foreign prices,and e is the nominal exchange rate,which of the following is implied by purchasing-power parity?

Correct AnswerverifiedShow Answer

If there is a trade deficit,then

Correct AnswerverifiedShow Answer

All saving in the U.S.economy shows up as

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.The...View AnswerShow Answer

Domestic saving must equal domestic investment in

Correct AnswerverifiedShow Answer

If the United States had negative net exports last year,then it

Correct AnswerverifiedShow Answer

A U.S.citizen buys bonds issued by an automobile manufacturer in Japan.Her expenditures are U.S.

Correct AnswerverifiedShow Answer

According to purchasing power parity,if two countries have the same price level because they have the same prices for all goods and services,then which of the following would equal 1?

Correct AnswerverifiedShow Answer

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The value of Country...
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This is possible for an open economy.The...
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