Question 1

Ann, a U.S. citizen, uses some previously obtained euros to purchase a bond issued by a Spanish company. This transaction

Accepted Answer

A)   increases U.S. net capital outflow by more than the value of the bond.
B)   increases U.S. net capital outflow by the value of the bond.
C)   does not change U.S. net capital outflow.
D)   decreases U.S. net capital outflow.E) B) and C)
F) None of the above

Question 2

If U.S. consumers decrease their demand for cell phones from Finland, then other things the same Finland's

Accepted Answer

A)   exports and net exports fall.
B)   exports fall and net exports rise.
C)   imports and net exports fall.
D)   imports fall and net exports rise.E) All of the above
F) A) and B)

Question 3

A country has a trade deficit. Its

Accepted Answer

A)   net capital outflow must be positive, and saving is larger than investment.
B)   net capital outflow must be positive and saving is smaller than investment.
C)   net capital outflow must be negative and saving is larger than investment.
D)   net capital outflow must be negative and saving is smaller than investment.E) B) and C)
F) None of the above

Question 4

The theory of purchasing-power parity primarily explains

Accepted Answer

A)   why trade deficits tend to move to zero over time.
B)   how foreign prices affect domestic prices.
C)   the determination of the real exchange rate.
D)   why a change in the real exchange rate changes a country's net exports.E) A) and B)
F) A) and C)

Question 5

According to the doctrine of purchasing-power parity, which of the following should depreciate if over the next year the inflation rate is higher in the U.S. than in the Euro area?

Accepted Answer

A)   both the U.S. real exchange rate and the U.S. nominal exchange rate
B)   the U.S. real exchange rate, but not the U.S. nominal exchange rate
C)   the U.S. nominal exchange rate, but not the U.S. real exchange rate
D)   neither the U.S. nominal exchange rate nor the U.S. real exchange rateE) B) and C)
F) A) and D)

Question 6

If Germany purchased more goods and services abroad than it sold abroad last year, then it had

Accepted Answer

A)   positive net exports which is a trade surplus.
B)   positive net exports which is a trade deficit.
C)   negative net exports which is a trade surplus.
D)   negative net exports which is a trade deficit.E) A) and B)
F) C) and D)

Question 7

The law of one price states that

Accepted Answer

A)   a good must sell at the price fixed by law.
B)   a good must sell at the same price at all locations.
C)   a good cannot sell for a price greater than the legal price ceiling.
D)   nominal exchange rates will not vary.E) A) and B)
F) All of the above

Question 8

While vacationing in Italy, you see an interesting meal on a menu. The price is 24 euros.
A. If the exchange rate is .80 euros per dollar, how many dollars would you have to give up to buy the meal?
B. If the dollar appreciated against the euro, but the price of the meal remained 24 euro, would the meal cost more or fewer dollars? Explain.

Accepted Answer

A. 24 euros = $x times .80 eur...

Question 9

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) A) and C)

Question 10

Table 31-2
 
-Refer to Table 31-2. Which currencies’ is/are have a nominal exchange rate less than that predicted by the doctrine of purchasing-power parity?

Accepted Answer

A)   the euro and the riyal
B)   the pound and the yen
C)   the bolivar
D)   the yenE) A) and C)
F) B) and C)

Question 11

From 1970 to 1998 the U.S. dollar

Accepted Answer

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

Question 12

A good in the U.S. costs $20. The same good costs 150 pesos in Mexico. If the nominal exchange rate is 10 pesos per dollar, what is the real exchange rate?

Accepted Answer

A)   4/3 so the good is more expensive in the U.S.
B)   4/3 so the good is more expensive in Mexico
C)   3/4 so the good is more expensive in the U.S.
D)   3/4 so the good is more expensive in MexicoE) A) and D)
F) A) and C)

Question 13

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

Question 14

A country has net capital outflow of $40 billion. Which of the following is consistent with this net capital outflow?

Accepted Answer

A)   It has -$40 billion of net exports.
B)   Purchases of foreign assets by domestic residents exceed purchases of domestic assets by foreign residents by $40 billion.
C)   Its saving is $35 billion and its domestic investment is $5 billion.
D)   All of the above are consistent with a net capital outflow of $40 billion.E) A) and B)
F) C) and D)

Question 15

Suppose a lobster supper in Maine costs fewer dollars than a Lobster supper in Paris, France. Explain why this is inconsistent with purchasing-power parity and explain why the inconsistency may exist.

Accepted Answer

According to purchasing-power parity, a ...

Question 16

According to purchasing-power parity, if over the course of a year the price level in the U.S. rises more than in Canada, then which of the following rises?

Accepted Answer

A)   the U.S. real exchange rate, but not the U.S. nominal exchange rate
B)   the U.S. nominal exchange rate, but not the U.S. real exchange rate
C)   the U.S. nominal exchange rate and the U.S. real exchange rate
D)   neither the real exchange rate nor the nominal exchange rateE) C) and D)
F) A) and D)

Question 17

A U.S. citizen buys bonds issued by a construction equipment manufacturer in Poland. Her 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) None of the above

Question 18

One year a country has positive net exports. The next year it still has positive but larger net exports

Accepted Answer

A)   its trade surplus fell.
B)   its trade surplus rose.
C)   its trade deficit fell.
D)   its trade deficit roseE) A) and C)
F) A) and D)

Question 19

A U.S. mutual fund buys stock issued by a corporation in Colombia. A U.S. grocery store chain builds and manages a new warehouse in Honduras. Which ones) of these is foreign direct investment? Which ones) would be taken into account when computing U.S. net capital outflows?

Accepted Answer

The building of the ...

Question 20

Suppose that the nominal exchange rate is 80 yen 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 Japan is 50,000 yen. Suppose that these values change to 100 yen per dollar, $600, and 70,000 yen. 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) A) and D)
F) A) and C)

Exam 13: Open-Economy Macroeconomics: Basic Concepts

A country has net capital outflow of $40 billion. Which of the following is consistent with this net capital outflow?

Correct Answer
verified

The theory of purchasing-power parity primarily explains

Correct Answer
verified

If U.S. consumers decrease their demand for cell phones from Finland, then other things the same Finland's

Correct Answer
verified

The law of one price states that

Correct Answer
verified

According to the doctrine of purchasing-power parity, which of the following should depreciate if over the next year the inflation rate is higher in the U.S. than in the Euro area?

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

According to purchasing-power parity, if over the course of a year the price level in the U.S. rises more than in Canada, then which of the following rises?

Correct Answer
verified

A good in the U.S. costs $20. The same good costs 150 pesos in Mexico. If the nominal exchange rate is 10 pesos per dollar, what is the real exchange rate?

Correct Answer
verified

A U.S. citizen buys bonds issued by a construction equipment manufacturer in Poland. Her expenditures are U.S.

Correct Answer
verified

A country has a trade deficit. Its

Correct Answer
verified

Suppose that the nominal exchange rate is 80 yen 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 Japan is 50,000 yen. Suppose that these values change to 100 yen per dollar, $600, and 70,000 yen. Then the real exchange rate would

Correct Answer
verified

Ann, a U.S. citizen, uses some previously obtained euros to purchase a bond issued by a Spanish company. This transaction

Correct Answer
verified

Table 31-2 -Refer to Table 31-2. Which currencies’ is/are have a nominal exchange rate less than that predicted by the doctrine of purchasing-power parity?

Correct Answer
verified

From 1970 to 1998 the U.S. dollar

Correct Answer
verified

If Germany purchased more goods and services abroad than it sold abroad last year, then it had

Correct Answer
verified

A U.S. mutual fund buys stock issued by a corporation in Colombia. A U.S. grocery store chain builds and manages a new warehouse in Honduras. Which ones) of these is foreign direct investment? Which ones) would be taken into account when computing U.S. net capital outflows?

Correct Answer
verified
The building of the ...
View Answer

Correct Answer
verified
A. 24 euros = $x times .80 eur...
View Answer

Suppose a lobster supper in Maine costs fewer dollars than a Lobster supper in Paris, France. Explain why this is inconsistent with purchasing-power parity and explain why the inconsistency may exist.

Correct Answer
verified
According to purchasing-power parity, a ...
View Answer

One year a country has positive net exports. The next year it still has positive but larger net exports

Correct Answer
verified

Exam 13: Open-Economy Macroeconomics: Basic Concepts

A country has net capital outflow of $40 billion. Which of the following is consistent with this net capital outflow?

Correct AnswerverifiedShow Answer

The theory of purchasing-power parity primarily explains

Correct AnswerverifiedShow Answer

If U.S. consumers decrease their demand for cell phones from Finland, then other things the same Finland's

Correct AnswerverifiedShow Answer

The law of one price states that

Correct AnswerverifiedShow Answer

According to the doctrine of purchasing-power parity, which of the following should depreciate if over the next year the inflation rate is higher in the U.S. than in the Euro area?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to purchasing-power parity, if over the course of a year the price level in the U.S. rises more than in Canada, then which of the following rises?

Correct AnswerverifiedShow Answer

A good in the U.S. costs $20. The same good costs 150 pesos in Mexico. If the nominal exchange rate is 10 pesos per dollar, what is the real exchange rate?

Correct AnswerverifiedShow Answer

A U.S. citizen buys bonds issued by a construction equipment manufacturer in Poland. Her expenditures are U.S.

Correct AnswerverifiedShow Answer

A country has a trade deficit. Its

Correct AnswerverifiedShow Answer

Suppose that the nominal exchange rate is 80 yen 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 Japan is 50,000 yen. Suppose that these values change to 100 yen per dollar, $600, and 70,000 yen. Then the real exchange rate would

Correct AnswerverifiedShow Answer

Ann, a U.S. citizen, uses some previously obtained euros to purchase a bond issued by a Spanish company. This transaction

Correct AnswerverifiedShow Answer

Table 31-2 -Refer to Table 31-2. Which currencies’ is/are have a nominal exchange rate less than that predicted by the doctrine of purchasing-power parity?

Correct AnswerverifiedShow Answer

From 1970 to 1998 the U.S. dollar

Correct AnswerverifiedShow Answer

If Germany purchased more goods and services abroad than it sold abroad last year, then it had

Correct AnswerverifiedShow Answer

A U.S. mutual fund buys stock issued by a corporation in Colombia. A U.S. grocery store chain builds and manages a new warehouse in Honduras. Which ones) of these is foreign direct investment? Which ones) would be taken into account when computing U.S. net capital outflows?

Correct AnswerverifiedThe building of the ...View AnswerShow Answer

Correct AnswerverifiedA. 24 euros = $x times .80 eur...View AnswerShow Answer

Suppose a lobster supper in Maine costs fewer dollars than a Lobster supper in Paris, France. Explain why this is inconsistent with purchasing-power parity and explain why the inconsistency may exist.

Correct AnswerverifiedAccording to purchasing-power parity, a ...View AnswerShow Answer

One year a country has positive net exports. The next year it still has positive but larger net exports

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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verified
The building of the ...
View Answer

Correct Answer
verified
A. 24 euros = $x times .80 eur...
View Answer

Correct Answer
verified
According to purchasing-power parity, a ...
View Answer

Correct Answer
verified