Question 1

If purchasing power parity holds, the price level in the U.S. is 120, and the price level in Canada is 140, which of the following is true?

Accepted Answer

A)  the real exchange rate is 120/140.
B)  the real exchange rate is 140/120.
C)  the nominal exchange rate is 120/140
D)  the nominal exchange rate is 140/120E) B) and C)
F) C) and D)

Question 2

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

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) C) and D)

Question 3

A Starbucks Grande Latte costs $3.75 in the U.S. and 28 yuan in China. The nominal exchange rate is 6.75 yuan per dollar. The real exchange rate is

Accepted Answer

A)  1.106. If purchasing power partiy held the nominal exchange rate would be higher.
B)  1.106. If purchasing power parity held the nominal exchange rate would be lower.
C)  .904. If purchasing power partiy held the nominal exchange rate would be higher.
D)  .904. If purchasing power parity held the nominal exchange rate would be lower.E) A) and C)
F) A) and B)

Question 4

Why are net exports and net capital outflow always equal?

Accepted Answer

Net exports and net capital outflow are ...

Question 5

Use the (hypothetical)  information in the following table to answer the following questions.Table 18-2
   Country  Currency  Currency per  U.S. Dollar  U.S. Price  Index  Country Price  Index  Bolivia  boloviano 8.002001600 Japan  yen 80.0020020,000 Morocco  dinar 10.002002,000 Norwegian  kroner 6.52001,500 Thailand  baht 40.002007,000\begin{array}{|l|l|c|l|c}\hline 	ext { Country } & 	ext { Currency } & \begin{array}{l}	ext { Currency per } \	ext { U.S. Dollar }\end{array} & \begin{array}{l}	ext { U.S. Price } \	ext { Index }\end{array} & \begin{array}{l}	ext { Country Price } \	ext { Index }\end{array} \\hline 	ext { Bolivia } & 	ext { boloviano } & 8.00 & 200 & 1600 \\hline 	ext { Japan } & 	ext { yen } & 80.00 & 200 & 20,000 \\hline 	ext { Morocco } & 	ext { dinar } & 10.00 & 200 & 2,000 \\hline 	ext { Norwegian } & 	ext { kroner } & 6.5 & 200 & 1,500 \\hline 	ext { Thailand } & 	ext { baht } & 40.00 & 200 & 7,000 \\hline\end{array} Country  Bolivia  Japan  Morocco  Norwegian  Thailand ​ Currency  boloviano  yen  dinar  kroner  baht ​ Currency per  U.S. Dollar ​8.0080.0010.006.540.00​ U.S. Price  Index ​200200200200200​ Country Price  Index ​160020,0002,0001,5007,000​​

-Refer to Table 18-2. Which currency(ies)  is(are)  less valuable than predicted by the doctrine of purchasing-power parity?

Accepted Answer

A)  boloviano and dinar
B)  yen and kroner
C)  baht and kroner
D)  baht E) A) and B)
F) B) and C)

Question 6

A haircut costs 200 pesos in Mexico and $20 in the U.S. The exchange rate is 12.5 pesos per dollar. The real exchange rate is

Accepted Answer

A)  less than one. Haircuts in Mexico are cheaper than in the U.S.
B)  less than one. Haircuts in Mexico are more expensive than in the U.S.
C)  greater than one. Haircuts in Mexico are cheaper than in the U.S.
D)  greater than one. Haircuts in Mexico are more expensive than in the U.S.E) A) and D)
F) B) and D)

Question 7

If a country has a trade surplus 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 B) F) A) and D)

Question 8

Table 18-1
 
-Refer to Table 18-1. What are Bolivia's imports?

Accepted Answer

A)  $60 billion
B)  $35 billion
C)  $40 billion
D)  None of the above are correct.E) A) and B)
F) All of the above

Question 9

If the U.S. real exchange rate appreciates, U.S. exports to Europe

Accepted Answer

A)  and European exports to the U.S. both rise.
B)  and European exports to the U.S. both fall.
C)  rise, and European exports to the U.S. fall.
D)  fall, and European exports to the U.S. rise.E) B) and C)
F) None of the above

Question 10

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) B) and C)
F) B) and D)

Question 11

Net exports of a country are the value of

Accepted Answer

A)  goods and services imported minus the value of goods and services exported.
B)  goods and services exported minus the value of goods and services imported.
C)  goods exported minus the value of goods imported.
D)  goods imported minus the value of goods exported.E) None of the above
F) B) and D)

Question 12

A U.S. firm buys sardines from Morocco and pays for them with U.S. dollars. Other things the same, U.S. net exports

Accepted Answer

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

Question 13

If purchasing power parity holds, when a country's central bank increases the money supply, a unit of money

Accepted Answer

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

Question 14

A country with negative net exports has a trade surplus.

Accepted Answer

A) True 
 B)False

Question 15

The real exchange rate is the nominal exchange rate, defined as foreign currency per dollar, times

Accepted Answer

A)  U.S. prices minus foreign prices.
B)  prices in the United States divided by foreign prices.
C)  foreign prices divided by U.S. prices.
D)  None of the above is correct.E) None of the above
F) A) and B)

Question 16

An appreciation 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) All of the above

Question 17

The nominal exchange rate is about 2 Aruban florin per dollar. If a basket of goods in the United States costs $40, how many florins must a basket of goods in Aruba cost for purchasing power parity to hold?

Accepted Answer

A)  20 florin
B)  40 florin
C)  60 florin
D)  80 florinE) None of the above
F) C) and D)

Question 18

Other things the same, an increase in domestic prices raises the real exchange rate.

Accepted Answer

A) True 
 B)False

Question 19

Other things the same, the real exchange rate between U.S. and Belgian goods would be higher if

Accepted Answer

A)  prices in the U.S. were higher, or the number of euro the dollar purchased were higher.
B)  prices in the U.S. were higher, or the number of euro the dollar purchased were lower.
C)  prices in the U.S. were lower, or the number of euro the dollar purchased were higher.
D)  prices in the U.S. were lower, or the number of euro the dollar purchased were lower.E) A) and B)
F) A) and C)

Question 20

A nation's domestic investment is greater than its savings. Which of the following is correct?

Accepted Answer

A)  This nation has a negative net capital outflow.
B)  This nation has a trade surplus.
C)  Purchases of foreign assets by domestic residents exceed purchases of domestic assets by foreigners.
D)  All of the above are correct.E) C) and D)
F) B) and C)

Exam 18: Open-Economy Macroeconomic Models

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

Correct Answer
verified

Correct Answer
verified

Table 18-1 -Refer to Table 18-1. What are Bolivia's imports?

Correct Answer
verified

If the U.S. real exchange rate appreciates, U.S. exports to Europe

Correct Answer
verified

If purchasing power parity holds, the price level in the U.S. is 120, and the price level in Canada is 140, which of the following is true?

Correct Answer
verified

If a country has a trade surplus then

Correct Answer
verified

A U.S. firm buys sardines from Morocco and pays for them with U.S. dollars. Other things the same, U.S. net exports

Correct Answer
verified

The real exchange rate is the nominal exchange rate, defined as foreign currency per dollar, times

Correct Answer
verified

A nation's domestic investment is greater than its savings. Which of the following is correct?

Correct Answer
verified

If purchasing power parity holds, when a country's central bank increases the money supply, a unit of money

Correct Answer
verified

Other things the same, the real exchange rate between U.S. and Belgian goods would be higher if

Correct Answer
verified

Why are net exports and net capital outflow always equal?

Correct Answer
verified
Net exports and net capital outflow are ...
View Answer

A Starbucks Grande Latte costs $3.75 in the U.S. and 28 yuan in China. The nominal exchange rate is 6.75 yuan per dollar. The real exchange rate is

Correct Answer
verified

Other things the same, an increase in domestic prices raises the real exchange rate.

Correct Answer
verified

The nominal exchange rate is about 2 Aruban florin per dollar. If a basket of goods in the United States costs $40, how many florins must a basket of goods in Aruba cost for purchasing power parity to hold?

Correct Answer
verified

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

Correct Answer
verified

A haircut costs 200 pesos in Mexico and $20 in the U.S. The exchange rate is 12.5 pesos per dollar. The real exchange rate is

Correct Answer
verified

A country with negative net exports has a trade surplus.

Correct Answer
verified

An appreciation of the U.S. real exchange rate induces U.S. consumers to buy

Correct Answer
verified

Net exports of a country are the value of

Correct Answer
verified

Exam 18: Open-Economy Macroeconomic Models

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Table 18-1 -Refer to Table 18-1. What are Bolivia's imports?

Correct AnswerverifiedShow Answer

If the U.S. real exchange rate appreciates, U.S. exports to Europe

Correct AnswerverifiedShow Answer

If purchasing power parity holds, the price level in the U.S. is 120, and the price level in Canada is 140, which of the following is true?

Correct AnswerverifiedShow Answer

If a country has a trade surplus then

Correct AnswerverifiedShow Answer

A U.S. firm buys sardines from Morocco and pays for them with U.S. dollars. Other things the same, U.S. net exports

Correct AnswerverifiedShow Answer

The real exchange rate is the nominal exchange rate, defined as foreign currency per dollar, times

Correct AnswerverifiedShow Answer

A nation's domestic investment is greater than its savings. Which of the following is correct?

Correct AnswerverifiedShow Answer

If purchasing power parity holds, when a country's central bank increases the money supply, a unit of money

Correct AnswerverifiedShow Answer

Other things the same, the real exchange rate between U.S. and Belgian goods would be higher if

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 Starbucks Grande Latte costs $3.75 in the U.S. and 28 yuan in China. The nominal exchange rate is 6.75 yuan per dollar. The real exchange rate is

Correct AnswerverifiedShow Answer

Other things the same, an increase in domestic prices raises the real exchange rate.

Correct AnswerverifiedShow Answer

The nominal exchange rate is about 2 Aruban florin per dollar. If a basket of goods in the United States costs $40, how many florins must a basket of goods in Aruba cost for purchasing power parity to hold?

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

A haircut costs 200 pesos in Mexico and $20 in the U.S. The exchange rate is 12.5 pesos per dollar. The real exchange rate is

Correct AnswerverifiedShow Answer

A country with negative net exports has a trade surplus.

Correct AnswerverifiedShow Answer

An appreciation of the U.S. real exchange rate induces U.S. consumers to buy

Correct AnswerverifiedShow Answer

Net exports of a country are the value of

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Net exports and net capital outflow are ...
View Answer

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