Question 1

Good that cost one half dollar in the U.S. cost one euro in Germany, the real exchange rate would be computed as how many German goods per U.S. goods?

Accepted Answer

A)   one half
B)   one half the price of the U.S. goods
C)   one half the number of euros it takes to buy a U.S. dollar
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 2

Other things the same, which of the following could be a consequence of an appreciation of the U.S. real exchange rate?

Accepted Answer

A)   John, a French citizen, decides that Iowa pork is now relatively less expensive and orders more for his restaurant.
B)   Nick, a U.S. citizen, decides that the trip to Nepal he's been thinking about is now affordable.
C)   Roberta, a U.S. citizen, decides to import fewer windshield wipers for her auto parts company.
D)   All of the above are correct.E) A) and C)
F) A) and B)

Question 3

If prices in the U.S. rise faster than prices in the United Kingdom, then according to the doctrine of purchasing- power parity the U.S. nominal exchange rate should rise

Accepted Answer

A) True 
 B)False

Question 4

The dollar is said to depreciate against the euro if

Accepted Answer

A)   the exchange rate falls. Other things the same, it will cost fewer euros to buy U.S. goods.
B)   the exchange rate falls. Other things the same, it will cost more euros to buy U.S. goods.
C)   the exchange rate rises. Other things the same, it will cost fewer euros to buy U.S. goods.
D)   the exchange rate rises. Other things the same, it will cost more euros to buy U.S. goods.E) All of the above
F) B) and C)

Question 5

If a country's purchases of foreign assets exceeds foreign purchases of domestic assets, that country has

Accepted Answer

A)   positive net exports and positive net capital outflows.
B)   positive net exports and negative net capital outflows.
C)   negative net exports and positive net capital outflows.
D)   negative net exports and negative net capital outflows.E) All of the above
F) C) and D)

Question 6

Suppose the world had only two countries and domestic residents of country A purchased $50 billion of assets from country B and country B purchased $30 billion of assets from country A. What would the net capital outflows of both countries be?

Accepted Answer

A)   $50 billion for country A and $30 billion for country B
B)   $30 billion for country A and $50 billion for country B
C)   $20 billion for country A and -$20 billion for country B
D)   -$20 billion for country A and $20 billion for country BE) A) and B)
F) All of the above

Question 7

Purchasing-power parity says that the nominal exchange rate must equal the real exchange rate.

Accepted Answer

A) True 
 B)False

Question 8

A U.S. mutual fund buys stocks issued by a Columbian company. This purchase is an example of

Accepted Answer

A)   U.S. foreign direct investment. It increases Columbia's net capital outflow.
B)   U.S. foreign direct investment. It decreases Columbia's net capital outflow.
C)   U.S. foreign portfolio investment. It decreases Columbia's net capital outflow.
D)   U.S. foreign portfolio investment. It increases Columbia's net capital outflow.E) C) and D)
F) A) and C)

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) None of the above
F) All of the above

Question 10

Suppose that the real exchange rate between the United States and South Korea is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate that is increase the number of baskets of South Korean goods a basket of U.S goods buys) ?

Accepted Answer

A)   a decrease in the quantity of South Korean currency that can be purchased with a dollar
B)   a decrease in the price of U.S. baskets of goods
C)   a decrease in the price in South Korean currency of South Korean goods.
D)   None of the above is correct.E) A) and B)
F) A) and D)

Question 11

Lydia, a citizen of Italy, produces scarves and purses that she sells to department stores in the United States. Other things the same, these sales

Accepted Answer

A)   increase U.S. net exports and have no effect on Italian net exports.
B)   decrease U.S. net exports and have no effect on Italian net exports.
C)   increase U.S. net exports and decrease Italian net exports.
D)   decrease U.S. net exports and increase Italian net exports.E) B) and C)
F) B) and D)

Question 12

Which types)  of economies interact with other economies?

Accepted Answer

A)   only closed economies
B)   only open economies
C)   closed economies and open economies
D)   neither closed nor open economiesE) None of the above
F) A) and B)

Question 13

Table 31-2
 
-Refer to Table 31-2. In real terms, U.S. goods are more expensive than goods in which countryies) ?

Accepted Answer

A)   Britain
B)   Germany and Japan
C)   Japan
D)   Germany and VenezuelaE) C) and D)
F) B) and D)

Question 14

From 2000 to 2012 the U.S. had a 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) All of the above
F) A) and C)

Question 15

Last year a country had $700 billion of saving and $900 of investment. What was its net capital outflow? How is it possible for a country to have investment that exceeds saving?

Accepted Answer

Net capital outflow equals saving - dome...

Question 16

In the U.S. a television costs $400. In South Africa the same television costs 3000 rand the currency of South Africa). The nominal exchange rate is 8 rand per dollar.
A. Find the real exchange rate. Show your work.
B. In terms of dollars where is the television cheapest?

Accepted Answer

The real exchange rate = 8 x 4...

Question 17

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 C)

Question 18

A company in Panama pays for a U.S. architect to design a factory building. By itself this transaction

Accepted Answer

A)   increases U.S. exports and so increases the U.S. trade balance.
B)   increases U.S. exports and so decreases the U.S. trade balance.
C)   increases U.S. imports and so increases the U.S. trade balance.
D)   increases U.S. imports and so decreases the U.S. trade balance.E) C) and D)
F) None of the above

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Suppose the real exchange rate is 3/4 gallon of country A's gasoline per gallon of U.S. gasoline, a gallon of U.S. gasoline costs $3.00 U.S., and a gallon of gas in country A costs 6 units of their currency. What is the nominal exchange rate?

Accepted Answer

A)   3/8 of a unit of country A's currency per dollar.
B)   3/2 units of country A's currency per dollar.
C)   8/3 units of country A's currency per dollar.
D)   None of the above is correct.E) B) and D)
F) All of the above

Exam 18: Open-Economy Macroeconomics: Basic Concepts

Purchasing-power parity says that the nominal exchange rate must equal the real exchange rate.

Correct AnswerverifiedShow Answer

From 2000 to 2012 the U.S. had a trade

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Suppose the real exchange rate is 3/4 gallon of country A's gasoline per gallon of U.S. gasoline, a gallon of U.S. gasoline costs $3.00 U.S., and a gallon of gas in country A costs 6 units of their currency. What is the nominal exchange rate?

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Suppose the world had only two countries and domestic residents of country A purchased $50 billion of assets from country B and country B purchased $30 billion of assets from country A. What would the net capital outflows of both countries be?

Correct AnswerverifiedShow Answer

Last year a country had $700 billion of saving and $900 of investment. What was its net capital outflow? How is it possible for a country to have investment that exceeds saving?

Correct AnswerverifiedNet capital outflow equals saving - dome...View AnswerShow Answer

Lydia, a citizen of Italy, produces scarves and purses that she sells to department stores in the United States. Other things the same, these sales

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the U.S. a television costs $400. In South Africa the same television costs 3000 rand the currency of South Africa). The nominal exchange rate is 8 rand per dollar. A. Find the real exchange rate. Show your work. B. In terms of dollars where is the television cheapest?

Correct AnswerverifiedThe real exchange rate = 8 x 4...View AnswerShow Answer

A U.S. mutual fund buys stocks issued by a Columbian company. This purchase is an example of

Correct AnswerverifiedShow Answer

Table 31-2 -Refer to Table 31-2. In real terms, U.S. goods are more expensive than goods in which countryies) ?

Correct AnswerverifiedShow Answer

The dollar is said to depreciate against the euro if

Correct AnswerverifiedShow Answer

Which types) of economies interact with other economies?

Correct AnswerverifiedShow Answer

Suppose that the real exchange rate between the United States and South Korea is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate that is increase the number of baskets of South Korean goods a basket of U.S goods buys) ?

Correct AnswerverifiedShow Answer

Other things the same, which of the following could be a consequence of an appreciation of the U.S. real exchange rate?

Correct AnswerverifiedShow Answer

If a country's purchases of foreign assets exceeds foreign purchases of domestic assets, that country has

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If prices in the U.S. rise faster than prices in the United Kingdom, then according to the doctrine of purchasing- power parity the U.S. nominal exchange rate should rise

Correct AnswerverifiedShow Answer

A company in Panama pays for a U.S. architect to design a factory building. By itself this transaction

Correct AnswerverifiedShow Answer

A country's trade balance

Correct AnswerverifiedShow Answer

Good that cost one half dollar in the U.S. cost one euro in Germany, the real exchange rate would be computed as how many German goods per U.S. goods?

Correct AnswerverifiedShow Answer

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Net capital outflow equals saving - dome...
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The real exchange rate = 8 x 4...
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