Question 1

Other things the same,if the exchange rate changes from 41 Thai bhat per dollar to 35 Thai bhat per dollar,the dollar has

Accepted Answer

A)  appreciated and so buys more Thai goods.
B)  appreciated and so buys fewer Thai goods.
C)  depreciated and so buys more Thai goods.
D)  depreciated and so buys fewer Thai goods.E) B) and D)
F) C) and D)

Question 2

How do we find the real exchange rate from the nominal exchange rate?

Accepted Answer

Real Exchange Rate =...

Question 3

A paperback book in the U.S.costs $6.In Chile it costs 4 pesos.If the nominal exchange rate is 1/2 peso per dollar,what is the real exchange rate?

Accepted Answer

A)  2/3
B)  3/4
C)  4/3
D)  2/5E) B) and C)
F) A) and B)

Question 4

If a Starbucks tall-latte cost $2.80 in the United States and 2.93 euros in the Euro area,then purchasing-power parity implies the nominal exchange rate is how many euros per dollar?

Accepted Answer

A)  .956 If the exchange rate is less than this, it costs more dollars to buy a tall-latte in the U.S.than in the Euro area.
B)  .956 If the exchange rate is less than this, it costs fewer dollars to buy a tall-latte in the U.S.then in the Euro area.
C)  1.046 If the exchange rate is less than this, it costs more dollars to buy a tall-latte in the U.S.than in the Euro area.
D)  1.046 If the exchange rate is less than this, it costs fewer dollars to buy a tall-latte in the U.S.than in the Euro area.E) None of the above
F) B) and D)

Question 5

Greg,a U.S.citizen,opens an ice cream store in Bermuda.His expenditures are U.S.

Accepted Answer

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

Question 6

Many economists believe that the theory of purchasing-power parity describes the forces that determine exchange rates in the long run.

Accepted Answer

A) True 
 B)False

Question 7

If a McDonald's Big Mac cost $3.06 in the United States and 3.21 euros in the Euro area,then purchasing-power parity implies the nominal exchange rate is how many euros per dollar?

Accepted Answer

A)  1.05 If the value is less than this, it costs more dollars to buy a Big Mac in the U.S.than in the Euro area.
B)  1.05 If the value is less than this, it costs fewer dollars to buy a Big Mac in the U.S.then in the Euro area.
C)  .95 If the value is less than this, it costs more dollars to buy a Big Mac in the U.S.than in the Euro area.
D)  .95 If the value is less than this, it costs fewer dollars to buy a Big Mac in the U.S.than in the Euro area.E) All of the above
F) B) and D)

Question 8

Use the (hypothetical)  information in the following table to answer the following questions.
Table 31-1
 
-Refer to Table 31-1.For which country(ies) in the table does purchasing-power parity hold?

Accepted Answer

A)  Bolivia and Japan
B)  Bolivia and Morocco
C)  Japan and Morocco
D)  Norway and ThailandE) All of the above
F) C) and D)

Question 9

About what percentage of GDP are U.S.imports?

Accepted Answer

A)  less than 1 percent
B)  about 4 percent
C)  about 7 percent
D)  over 10 percentE) A) and C)
F) None of the above

Question 10

Suppose that money supply growth continues to be higher in Turkey than it is in the United States.What does purchasing-power parity imply will happen to the real and to the nominal exchange rate?

Accepted Answer

Higher money growth leads to higher pric...

Question 11

If there is a trade surplus 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) None of the above
F) B) and C)

Question 12

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 C)
F) A) and C)

Question 13

If a Swiss watchmaker opens a factory in the United States,this is an example of Swiss

Accepted Answer

A)  exports.
B)  imports.
C)  foreign portfolio investment.
D)  foreign direct investment.E) C) and D)
F) None of the above

Question 14

According to the theory of purchasing-power parity,the real exchange rate defined as foreign goods per unit of U.S.goods will equal the exchange rate defined as units of foreign currency per dollar times the domestic price level divided by the foreign price level.

Accepted Answer

A) True 
 B)False

Question 15

If it took as many dollars to buy goods in the United States as it did to buy enough currency to buy the same goods in India,the real exchange rate would be computed as how many Indian goods per U.S.goods?

Accepted Answer

A)  one
B)  the number of dollars needed to buy U.S.goods divided by the number of rupees needed to buy Indian goods
C)  the number of rupees needed to buy Indian goods divided by the number of dollars needed to buy U.S.goods
D)  None of the above is correct.E) B) and C)
F) A) and B)

Question 16

When the central bank of some country prints large quantities of money,that county's currency loses value both in terms of the goods and services it buys and in terms of the amount of foreign currencies it can buy.

Accepted Answer

A) True 
 B)False

Question 17

From 1970 to 1998 the U.S.dollar

Accepted Answer

A)  gained value compared to the German mark because inflation was higher in Germany.
B)  gained value compared to the German mark because inflation was lower in Germany.
C)  lost value compared to the German mark because inflation was higher in Germany.
D)  lost value compared to the German mark because inflation was lower in Germany.E) B) and D)
F) A) and B)

Question 18

According to purchasing-power parity,what is the relationship between changes in price levels between two countries and changes in nominal exchange rates?

Accepted Answer

Purchasing-power parity asserts that the...

Question 19

When a country's central bank decreases the money supply,its

Accepted Answer

A)  price level rises and its currency appreciates relative to other currencies in the world.
B)  price level falls and its currency appreciates relative to other currencies in the world.
C)  price level rises and its currency depreciates relative to other currencies in the world.
D)  price level falls and its currency depreciates relative to other currencies in the world.E) A) and C)
F) A) and D)

Question 20

In 2004 the U.S.had a large trade

Accepted Answer

A)  surplus and a large net capital inflow.
B)  surplus and a large net capital outflow.
C)  deficit and a large net capital inflow.
D)  deficit and a large net capital outflow.E) C) and D)
F) All of the above

Exam 31: Open-Economy Macroeconomics: Basic Concepts

Other things the same,if the exchange rate changes from 41 Thai bhat per dollar to 35 Thai bhat per dollar,the dollar has

Correct AnswerverifiedShow Answer

If a McDonald's Big Mac cost $3.06 in the United States and 3.21 euros in the Euro area,then purchasing-power parity implies the nominal exchange rate is how many euros per dollar?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When the central bank of some country prints large quantities of money,that county's currency loses value both in terms of the goods and services it buys and in terms of the amount of foreign currencies it can buy.

Correct AnswerverifiedShow Answer

A paperback book in the U.S.costs $6.In Chile it costs 4 pesos.If the nominal exchange rate is 1/2 peso per dollar,what is the real exchange rate?

Correct AnswerverifiedShow Answer

According to purchasing-power parity,what is the relationship between changes in price levels between two countries and changes in nominal exchange rates?

Correct AnswerverifiedPurchasing-power parity asserts that the...View AnswerShow Answer

If a Starbucks tall-latte cost $2.80 in the United States and 2.93 euros in the Euro area,then purchasing-power parity implies the nominal exchange rate is how many euros per dollar?

Correct AnswerverifiedShow Answer

If it took as many dollars to buy goods in the United States as it did to buy enough currency to buy the same goods in India,the real exchange rate would be computed as how many Indian goods per U.S.goods?

Correct AnswerverifiedShow Answer

Greg,a U.S.citizen,opens an ice cream store in Bermuda.His expenditures are U.S.

Correct AnswerverifiedShow Answer

In 2004 the U.S.had a large trade

Correct AnswerverifiedShow Answer

If a Swiss watchmaker opens a factory in the United States,this is an example of Swiss

Correct AnswerverifiedShow Answer

If there is a trade surplus then

Correct AnswerverifiedShow Answer

How do we find the real exchange rate from the nominal exchange rate?

Correct AnswerverifiedReal Exchange Rate =...View AnswerShow Answer

Suppose that money supply growth continues to be higher in Turkey than it is in the United States.What does purchasing-power parity imply will happen to the real and to the nominal exchange rate?

Correct AnswerverifiedHigher money growth leads to higher pric...View AnswerShow Answer

According to the theory of purchasing-power parity,the real exchange rate defined as foreign goods per unit of U.S.goods will equal the exchange rate defined as units of foreign currency per dollar times the domestic price level divided by the foreign price level.

Correct AnswerverifiedShow Answer

From 1970 to 1998 the U.S.dollar

Correct AnswerverifiedShow Answer

Use the (hypothetical) information in the following table to answer the following questions. Table 31-1 -Refer to Table 31-1.For which country(ies) in the table does purchasing-power parity hold?

Correct AnswerverifiedShow Answer

Many economists believe that the theory of purchasing-power parity describes the forces that determine exchange rates in the long run.

Correct AnswerverifiedShow Answer

When a country's central bank decreases the money supply,its

Correct AnswerverifiedShow Answer

About what percentage of GDP are U.S.imports?

Correct AnswerverifiedShow Answer

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Purchasing-power parity asserts that the...
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Real Exchange Rate =...
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Higher money growth leads to higher pric...
View Answer

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