Question 1

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

Question 2

Other things the same, an increase in the U.S. real exchange rate makes U.S. goods more expensive relative to foreign goods.

Accepted Answer

A) True 
 B)False

Question 3

According to purchasing power parity, when a country's central bank decreases 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) None of the above
F) All of the above

Question 4

A U.S. firm buys cement mixers from China and pays for them with U.S. dollars.

Accepted Answer

A)   The purchase of the cement mixers increases U.S. net exports and the payment with dollars increases U.S. net capital outflow.
B)   The purchase of cement mixers increases U.S. net exports and the payment with dollars decreases U.S. net capital outflow.
C)   The purchase of cement mixers decreases U.S. net exports and the payment with dollars increases U.S. net capital outflow.
D)   The purchase of cement mixers decreases U.S. net exports and the payment with dollars decreases U.S. net capital outflow.E) All of the above
F) A) and C)

Question 5

A Canadian manufacturing company opens a factory the produces air conditioners in the United States. This is an example of Canadian

Accepted Answer

A)   foreign direct investment that increases Canadian net capital outflow.
B)   foreign direct investment that decreases Canadian net capital outflow.
C)   foreign portfolio investment that increases Canadian net capital outflow.
D)   foreign portfolio investment that decreases Canadian net capital outflow.E) C) and D)
F) B) and C)

Question 6

Why are net exports and net capital outflow always equal?

Accepted Answer

Net exports and net capital outflow are ...

Question 7

Which of the following is correct?

Accepted Answer

A)   U.S. exports as a percentage of GDP have more than doubled since 1950. The U.S. currently has a trade surplus.
B)   U.S. exports as a percentage of GDP have more than doubled since 1950. The U.S. currently has a trade deficit.
C)   U.S. exports as a percentage of GDP have increased, but have not nearly doubled since 1950. The U.S. currently has a trade surplus.
D)   U.S. exports as a percentage of GDP have increased, but have not nearly doubled since 1950. The U.S. currently has a trade deficit.E) C) and D)
F) A) and B)

Question 8

If a country had a trade deficit of $10 billion and then its exports rose by $20 billion and its imports rose by $10 billion, its net exports would now be

Accepted Answer

A)   $0
B)   $10 billion.
C)   -$10 billion.
D)   -$20 billion.E) A) and D)
F) None of the above

Question 9

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) All of the above
F) C) and D)

Question 10

If a country has negative net capital outflows, then its net exports are

Accepted Answer

A)   positive and its saving is larger than its domestic investment.
B)   positive and its saving is smaller than its domestic investment.
C)   negative and its saving is larger than its domestic investment.
D)   negative and its saving is smaller than its domestic investment.E) A) and C)
F) B) and D)

Question 11

When Microsoft establishes a distribution center in France, U.S. net capital outflow

Accepted Answer

A)   increases because Microsoft makes a portfolio investment in France.
B)   decreases because Microsoft makes a portfolio investment in France.
C)   increases because Microsoft makes a direct investment in capital in France.
D)   decreases because Microsoft makes a direct investment in capital France.E) A) and B)
F) A) and C)

Question 12

An American farm equipment dealer sells dollars to obtain euros. It then uses the euros to buy farm equipment from a German company. This exchange

Accepted Answer

A)   increases U.S. net capital outflow because Germans obtain U.S. assets.
B)   decreases U.S. net capital outflow because Germans obtain U.S. assets.
C)   increases U.S. net capital outflow because the U.S. buys capital goods.
D)   decreases U.S. net capital outflow because the U.S. buys capital goods.E) B) and C)
F) A) and C)

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) B) and D)
F) A) and D)

Question 14

The nominal exchange rate is 2 Barbados dollars per U.S. dollar. If the price of a good in Barbados is 3 Barbados dollars and the price in the U.S. is 2 U.S. dollars, what is the real exchange rate to the nearest 100th?

Accepted Answer

A)   3 Barbados goods per U.S. good
B)   1.33 Barbados goods per U.S. good
C)   .75 Barbados goods per U.S. good
D)   none of the above is correctE) B) and D)
F) All of the above

Question 15

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

Question 16

If a U.S. textbook publishing company sells texts overseas, 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) B) and D)
F) B) and C)

Question 17

Net capital outflow equals

Accepted Answer

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

Question 18

Table 13-1
 
-Refer to Table 13-1. What are Bolivia's imports?

Accepted Answer

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

Question 19

Oceania buys $40 of wine from Escudia and Escudia buys $100 of wool from Oceania. Supposing this is the only trade that these countries do. What are the net exports of Oceania and Escudia in that order?

Accepted Answer

A)   $140 and $140
B)   $100 and $40
C)   $60 and -$60
D)   None of the above is correct.E) A) and C)
F) A) and B)

Question 20

Which of the following is an example of U.S. foreign direct investment?

Accepted Answer

A)   A Polish company opens a shipbuilding plant in the United States.
B)   A Bolivian bank buys U.S. corporate bonds.
C)   A U.S. bank buys Bolivian corporate bonds.
D)   A U.S. furniture maker opens a plant in Mexico.E) All of the above
F) A) and B)

Exam 13: Open-Economy Macroeconomic Models

A U.S. firm buys cement mixers from China and pays for them with U.S. dollars.

Correct AnswerverifiedShow Answer

Which of the following is correct?

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An American farm equipment dealer sells dollars to obtain euros. It then uses the euros to buy farm equipment from a German company. This exchange

Correct AnswerverifiedShow Answer

In which of the following situations must national saving rise?

Correct AnswerverifiedShow Answer

If a country has negative net capital outflows, then its net exports are

Correct AnswerverifiedShow Answer

According to purchasing power parity, when a country's central bank decreases the money supply, a unit of money

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

If a country had a trade deficit of $10 billion and then its exports rose by $20 billion and its imports rose by $10 billion, its net exports would now be

Correct AnswerverifiedShow Answer

Which of the following is an example of U.S. foreign direct investment?

Correct AnswerverifiedShow Answer

Table 13-1 -Refer to Table 13-1. What are Bolivia's imports?

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

Correct AnswerverifiedShow Answer

Oceania buys $40 of wine from Escudia and Escudia buys $100 of wool from Oceania. Supposing this is the only trade that these countries do. What are the net exports of Oceania and Escudia in that order?

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If a U.S. textbook publishing company sells texts overseas, U.S. net exports

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Net capital outflow equals

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Why are net exports and net capital outflow always equal?

Correct AnswerverifiedNet exports and net capital outflow are ...View AnswerShow Answer

The nominal exchange rate is 2 Barbados dollars per U.S. dollar. If the price of a good in Barbados is 3 Barbados dollars and the price in the U.S. is 2 U.S. dollars, what is the real exchange rate to the nearest 100th?

Correct AnswerverifiedShow Answer

A Canadian manufacturing company opens a factory the produces air conditioners in the United States. This is an example of Canadian

Correct AnswerverifiedShow Answer

When Microsoft establishes a distribution center in France, U.S. net capital outflow

Correct AnswerverifiedShow Answer

Which of the following equations is correct?

Correct AnswerverifiedShow Answer

Other things the same, an increase in the U.S. real exchange rate makes U.S. goods more expensive relative to foreign goods.

Correct AnswerverifiedShow Answer

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Net exports and net capital outflow are ...
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