Question 1

Jason plans to buy shrimp in Florida and sell them in Manhattan, Kansas where the price is higher. Jason plans to engage in arbitrage.

Accepted Answer

A) True 
 B)False

Question 2

If the U.S. has exports of $1.5 trillion and imports of $2.2 trillion, then the U.S.

Accepted Answer

A)  sells more overseas then it buys from overseas; it has a trade deficit.
B)  sells more overseas then it buys from overseas; it has a trade surplus.
C)  buys more from overseas then it sells overseas; it has a trade deficit.
D)  buys more from overseas then it sells overseas; it has a trade surplus.E) A) and B)
F) A) and C)

Question 3

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) B) and C)
F) A) and B)

Question 4

If the nominal exchange rate e is foreign currency per dollar, the domestic price is P, and the foreign price is P*, then the real exchange rate is defined as

Accepted Answer

A)  e(P*/P) .
B)  e(P/P*) .
C)  e + P*/P.
D)  e - P/P*.E) None of the above
F) B) and C)

Question 5

A Guatemalan company exchanges quetzal (Guatemalan currency)  for dollars and then uses the dollars to purchase construction equipment from a U.S. company. These transactions

Accepted Answer

A)  increase Guatemalan net capital outflow, and increases U.S. net exports.
B)  increase Guatemalan capital outflow, and decreases U.S. net exports.
C)  decrease Guatemalan net capital outflow, and increases U.S. net exports.
D)  decrease Guatemalan net capital outflow, and decreases U.S. net exports.E) A) and C)
F) A) and B)

Question 6

If a country has $2.4 billion of net exports and purchases $4.8 billion of goods and services from foreign countries, then it has

Accepted Answer

A)  $7.2 billion of exports and $4.8 billion of imports.
B)  $7.2 billion of imports and $4.8 billion of exports.
C)  $4.8 billion of exports and $2.4 billion of imports.
D)  $4.8 billion of imports and $2.4 billion of exports.E) A) and B)
F) B) and C)

Question 7

The Norwegian government uses $500,000 of previously obtained U.S. dollars to buy $500,000 of police cars from a U.S. company.
As a result of this exchange, by how much, if at all, and in which direction did:
A. U.S. net exports change?
B. U.S. net capital outflow change?

Accepted Answer

A. U.S. net exports ...

Question 8

Reduced barriers to trade help explain an increase in U.S. exports and imports relative to GDP since 1950.

Accepted Answer

A) True 
 B)False

Question 9

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 10

A depreciation of the U.S. real exchange rate induces U.S. consumers to buy

Accepted Answer

A)  fewer domestic goods and fewer foreign goods.
B)  more domestic goods and fewer foreign goods.
C)  fewer domestic goods and more foreign goods.
D)  more domestic goods and more foreign goods.E) A) and B)
F) A) and C)

Question 11

If the exchange rate is .70 euro per dollar, the price of an MP3 player in Paris is 150 euros and the price of an MP3 player in the U.S. is $150, then what is the real exchange rate?

Accepted Answer

A)  1/.70 French MP3 players per U.S. MP3 player
B)  1 French MP3 players per U.S. MP3 player
C)  .70 French MP3 players per U.S. MP3 player.
D)  None of the above are correct.E) B) and D)
F) All of the above

Question 12

In the first quarter of 2015 the U.S. had a trade deficit. In the first quarter of 2016 exports fell and imports rose. According to these numbers what happened to net exports?

Accepted Answer

The answer of In the first quarter of 2015 the...

Question 13

U.S.-based John Deere sells machinery to residents of South Africa who pay with South African currency (the rand) .

Accepted Answer

A)  This increases U.S. net capital outflow because the U.S. acquires foreign assets.
B)  This decreases U.S. net capital outflow because the U.S. acquires foreign assets.
C)  This increases U.S. net capital outflow because the U.S. sells capital goods.
D)  This decreases U.S. net capital outflow because the U.S. sells capital goods.E) B) and D)
F) B) and C)

Question 14

Prices in both the U.S. and India rise, but prices in India increase by a smaller percentage. According to purchasing-power parity the U.S. dollar

Accepted Answer

A)  gains value both in terms of the domestic goods and services it can buy and in terms of the Indian currency it can buy.
B)  gains value in terms of the domestic goods and services it can buy, but loses value in terms of the Indian currency it can buy.
C)  loses value in terms of the domestic goods and services it can buy, but gains value in terms of the Indian currency it can buy.
D)  loses value both in terms of the domestic goods and services it can buy and in terms of the Indian currency it can buy.E) B) and D)
F) A) and D)

Question 15

Other things the same, if the exchange rate changes from 75 Algerian dinar per dollar to 72 Algerian dinar per dollar, the dollar has

Accepted Answer

A)  appreciated and so buys more Algerian goods.
B)  appreciated and so buys fewer Algerian goods.
C)  depreciated and so buys more Algerian goods.
D)  depreciated and so buys fewer Algerian goods.E) None of the above
F) A) and B)

Question 16

A country's trade balance

Accepted Answer

A)  must be zero.
B)  must be greater than zero.
C)  is greater than zero only if exports are greater than imports.
D)  is greater than zero only if imports are greater than exports.E) B) and C)
F) A) and D)

Question 17

Suppose that the nominal exchange rate is .80 euro per dollar, that the price of a basket of goods in the U.S. is $500 and the price of a basket of goods in Germany is 400 Euro. Suppose that these values change to .90 euro per dollar, $600, and 600 euro. Then the real exchange rate would

Accepted Answer

A)  appreciate which by itself would make U.S. net exports fall.
B)  appreciate which by itself would make U.S. net exports rise.
C)  depreciate which by itself would make U.S. net exports fall.
D)  depreciate which by itself would make U.S. net exports rise.E) None of the above
F) B) and C)

Question 18

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 19

Net capital outflow equals the purchase of

Accepted Answer

A)  foreign assets by domestic residents.
B)  domestic assets by foreign residents.
C)  domestic assets by foreign residents - the purchase of foreign assets by domestic residents
D)  foreign assets by domestic residents - the purchase of domestic assets by foreign residentsE) All of the above
F) A) and D)

Question 20

A country recently had saving of 250 billion euro and domestic investment of 400 billion euro. What was the value of this country's net exports? Show your work.

Accepted Answer

saving = investment + net capital outflo...

Exam 31: Open-Economy Macroeconomics: Basic Concepts

A Guatemalan company exchanges quetzal (Guatemalan currency) for dollars and then uses the dollars to purchase construction equipment from a U.S. company. These transactions

Correct AnswerverifiedShow Answer

Suppose that the nominal exchange rate is .80 euro per dollar, that the price of a basket of goods in the U.S. is $500 and the price of a basket of goods in Germany is 400 Euro. Suppose that these values change to .90 euro per dollar, $600, and 600 euro. Then the real exchange rate would

Correct AnswerverifiedShow Answer

If the U.S. has exports of $1.5 trillion and imports of $2.2 trillion, then the U.S.

Correct AnswerverifiedShow Answer

Domestic saving must equal domestic investment in

Correct AnswerverifiedShow Answer

A country recently had saving of 250 billion euro and domestic investment of 400 billion euro. What was the value of this country's net exports? Show your work.

Correct Answerverifiedsaving = investment + net capital outflo...View AnswerShow Answer

If the exchange rate is .70 euro per dollar, the price of an MP3 player in Paris is 150 euros and the price of an MP3 player in the U.S. is $150, then what is the real exchange rate?

Correct AnswerverifiedShow Answer

A depreciation of the U.S. real exchange rate induces U.S. consumers to buy

Correct AnswerverifiedShow Answer

If the nominal exchange rate e is foreign currency per dollar, the domestic price is P, and the foreign price is P*, then the real exchange rate is defined as

Correct AnswerverifiedShow Answer

If a country has $2.4 billion of net exports and purchases $4.8 billion of goods and services from foreign countries, then it has

Correct AnswerverifiedShow Answer

In the first quarter of 2015 the U.S. had a trade deficit. In the first quarter of 2016 exports fell and imports rose. According to these numbers what happened to net exports?

Correct AnswerverifiedShow Answer

U.S.-based John Deere sells machinery to residents of South Africa who pay with South African currency (the rand) .

Correct AnswerverifiedShow Answer

Reduced barriers to trade help explain an increase in U.S. exports and imports relative to GDP since 1950.

Correct AnswerverifiedShow Answer

The Norwegian government uses $500,000 of previously obtained U.S. dollars to buy $500,000 of police cars from a U.S. company. As a result of this exchange, by how much, if at all, and in which direction did: A. U.S. net exports change? B. U.S. net capital outflow change?

Correct AnswerverifiedA. U.S. net exports ...View AnswerShow Answer

Jason plans to buy shrimp in Florida and sell them in Manhattan, Kansas where the price is higher. Jason plans to engage in arbitrage.

Correct AnswerverifiedShow Answer

A country's trade balance

Correct AnswerverifiedShow Answer

Net capital outflow equals the purchase of

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

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

Prices in both the U.S. and India rise, but prices in India increase by a smaller percentage. According to purchasing-power parity the U.S. dollar

Correct AnswerverifiedShow Answer

Other things the same, if the exchange rate changes from 75 Algerian dinar per dollar to 72 Algerian dinar per dollar, the dollar has

Correct AnswerverifiedShow Answer

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saving = investment + net capital outflo...
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A. U.S. net exports ...
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a.The U.S. dollar real exchang...
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