Question 1

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

Question 2

Last year a country had $700 billion of saving and $900 of investment. This year it had $1000 billion of saving and $800 billion of investment. By how much did net capital outflow change? By how much did net exports change? How is it possible for a country to have saving that is greater than investment?

Accepted Answer

Both net capital outflows and net export...

Question 3

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 B)
F) None of the above

Question 4

According to purchasing-power parity, if a basket of goods costs $100 in the U.S. and the same basket costs 800 pesos in Argentina, then what is the nominal exchange rate?

Accepted Answer

A)   8 pesos per dollar
B)   1 peso per dollar
C)   1/8 peso per dollar
D)   none of the above is correctE) A) and B)
F) C) and D)

Question 5

The nominal exchange rate is 3 Malaysian ringgits per dollar. The real exchange rate is 8/5. If a Big Mac costs 7.5 ringgits in Malaysia, how much does a Big Mac cost in the U.S.? Show your work.

Accepted Answer

The real exchange rate = 8/5 =...

Question 6

If the U.S. price level is increasing by 3 percent annually and the Japanese price level is increasing by 1 percent annually, then according to purchasing-power parity, by about what percent would the nominal exchange rate be changing?

Accepted Answer

A)   decreasing by 4 percent
B)   decreasing by 2 percent
C)   increasing by 4 percent
D)   increasing by 2 percentE) A) and B)
F) None of the above

Question 7

The value of Austria's exports minus the value of Austria's imports is called

Accepted Answer

A)   Austria's net exports.
B)   Austria's net imports.
C)   Austria's foreign portfolio investment
D)   Austria's foreign direct investment.E) A) and B)
F) A) and C)

Question 8

If the U.S. has a trade deficit and the nominal exchange rate depreciates, then other things the same

Accepted Answer

A)   the trade deficit rises and net capital outflow rises.
B)   the trade deficit rises and net capital outflow falls.
C)   the trade deficit falls and net capital outflows rise.
D)   the trade deficit falls and net capital outflows fall.E) B) and C)
F) A) and B)

Question 9

The country of Sylvania has a GDP of $900, investment of $200, government purchases of $200, and net capital outflow of -$100. What is consumption?

Accepted Answer

A)   $700
B)   $600
C)   $500
D)   $300E) A) and C)
F) B) and C)

Question 10

A U.S. bank loaned a Canadian oil company 1 million U.S. dollars. The Canadian company then used the entire loan to buy mining equipment from a U.S. company.
As a result of these transactions, by how much and in which direction did:
A. U.S. net exports change?
B. U.S. net capital outflow change?

Accepted Answer

A. U.S. net exports increased by $1 million
D. U.S. net capital outflows increased by $1 million

Question 11

Which of the following is correct?

Accepted Answer

A)   NCO + C = NX
B)   NCO = NX
C)   NX - NCO = S
D)   NX + NCO = CE) A) and B)
F) A) and D)

Question 12

The nominal exchange rate is 32 Russian rubles per dollar. The price of a bushel of wheat is 260 rubles in Russia and $7 in the U.S.
A. What is the real exchange rate? Show your work.
B. Can arbitragers make a profit?
C. If your answer to B is yes, where would arbitragers buy and where would they sell.

Accepted Answer

A. The real exchange rate = $7...

Question 13

Prices in both the U.S. and India rise, but prices in India increase by a smaller percentage. According to purchasing- power parity the U.S. dollar

Accepted Answer

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

Question 14

Paul, a Canadian citizen, purchases oranges grown in Florida. This purchase is an example of

Accepted Answer

A)   a U.S. import and a Canadian export
B)   a U.S. export and a Canadian import
C)   an export for both the U.S. and Canada
D)   an import for both Canada and the U.S.E) All of the above
F) A) and B)

Question 15

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 millionE) None of the above
F) C) and D)

Question 16

A Texas ranch sells beef to a U.S. company that sells it to a grocery chain in Japan. These sales

Accepted Answer

A)   decrease U.S. exports but increase U.S. net exports.
B)   decrease both U.S. exports and U.S. net exports.
C)   increase both U.S. exports and U.S. net exports.
D)   increase U.S. exports but decrease U.S. net exports.E) All of the above
F) A) and B)

Question 17

If purchases of foreign assets by U.S. residents exceed purchases of U.S. assets by foreign residents, then U.S. net capital outflow is positive.

Accepted Answer

A) True 
 B)False

Question 18

A country's saving is greater than its domestic investment. This difference means that its

Accepted Answer

A)   net capital outflow and net exports are positive.
B)   net capital outflow and net exports are negative.
C)   net capital outflow is positive and net exports are negative.
D)   net capital outflow is negative and net exports are positive.E) A) and B)
F) A) and C)

Question 19

Colonial America had little industry and so had mostly raw materials to export. At the same time, there were many opportunities to purchase capital goods and earn a high rate of return because there was little existing capital so that the marginal product of capital was relatively high. What does this suggest about net exports and net capital outflow in colonial America?

Accepted Answer

Net exports were negative because the va...

Question 20

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

Accepted Answer

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

Exam 31: Open-Economy Macroeconomics: Basic Concepts

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 Answer
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Correct Answer
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Both net capital outflows and net export...
View Answer

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

Correct Answer
verified

According to purchasing-power parity, if a basket of goods costs $100 in the U.S. and the same basket costs 800 pesos in Argentina, then what is the nominal exchange rate?

Correct Answer
verified

The nominal exchange rate is 3 Malaysian ringgits per dollar. The real exchange rate is 8/5. If a Big Mac costs 7.5 ringgits in Malaysia, how much does a Big Mac cost in the U.S.? Show your work.

Correct Answer
verified
The real exchange rate = 8/5 =...
View Answer

If the U.S. price level is increasing by 3 percent annually and the Japanese price level is increasing by 1 percent annually, then according to purchasing-power parity, by about what percent would the nominal exchange rate be changing?

Correct Answer
verified

The value of Austria's exports minus the value of Austria's imports is called

Correct Answer
verified

If the U.S. has a trade deficit and the nominal exchange rate depreciates, then other things the same

Correct Answer
verified

The country of Sylvania has a GDP of $900, investment of $200, government purchases of $200, and net capital outflow of -$100. What is consumption?

Correct Answer
verified

A U.S. bank loaned a Canadian oil company 1 million U.S. dollars. The Canadian company then used the entire loan to buy mining equipment from a U.S. company. As a result of these transactions, by how much and in which direction did: A. U.S. net exports change? B. U.S. net capital outflow change?

Correct Answer
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A. U.S. net exports increased by $1 million D. U.S. net capital outflows increased by $1 million

Which of the following is correct?

Correct Answer
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Correct Answer
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A. The real exchange rate = $7...
View Answer

Prices in both the U.S. and India rise, but prices in India increase by a smaller percentage. According to purchasing- power parity the U.S. dollar

Correct Answer
verified
D

Paul, a Canadian citizen, purchases oranges grown in Florida. This purchase is an example of

Correct Answer
verified

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

Correct Answer
verified

A Texas ranch sells beef to a U.S. company that sells it to a grocery chain in Japan. These sales

Correct Answer
verified

If purchases of foreign assets by U.S. residents exceed purchases of U.S. assets by foreign residents, then U.S. net capital outflow is positive.

Correct Answer
verified

A country's saving is greater than its domestic investment. This difference means that its

Correct Answer
verified

Correct Answer
verified
Net exports were negative because the va...
View Answer

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

Correct Answer
verified
B

Exam 31: Open-Economy Macroeconomics: Basic Concepts

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

Correct AnswerverifiedBoth net capital outflows and net export...View AnswerShow 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

According to purchasing-power parity, if a basket of goods costs $100 in the U.S. and the same basket costs 800 pesos in Argentina, then what is the nominal exchange rate?

Correct AnswerverifiedShow Answer

The nominal exchange rate is 3 Malaysian ringgits per dollar. The real exchange rate is 8/5. If a Big Mac costs 7.5 ringgits in Malaysia, how much does a Big Mac cost in the U.S.? Show your work.

Correct AnswerverifiedThe real exchange rate = 8/5 =...View AnswerShow Answer

If the U.S. price level is increasing by 3 percent annually and the Japanese price level is increasing by 1 percent annually, then according to purchasing-power parity, by about what percent would the nominal exchange rate be changing?

Correct AnswerverifiedShow Answer

The value of Austria's exports minus the value of Austria's imports is called

Correct AnswerverifiedShow Answer

If the U.S. has a trade deficit and the nominal exchange rate depreciates, then other things the same

Correct AnswerverifiedShow Answer

The country of Sylvania has a GDP of $900, investment of $200, government purchases of $200, and net capital outflow of -$100. What is consumption?

Correct AnswerverifiedShow Answer

A U.S. bank loaned a Canadian oil company 1 million U.S. dollars. The Canadian company then used the entire loan to buy mining equipment from a U.S. company. As a result of these transactions, by how much and in which direction did: A. U.S. net exports change? B. U.S. net capital outflow change?

Correct AnswerverifiedA. U.S. net exports increased by $1 million D. U.S. net capital outflows increased by $1 million

Which of the following is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA. The real exchange rate = $7...View AnswerShow Answer

Prices in both the U.S. and India rise, but prices in India increase by a smaller percentage. According to purchasing- power parity the U.S. dollar

Correct AnswerverifiedD

Paul, a Canadian citizen, purchases oranges grown in Florida. This purchase is an example of

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A Texas ranch sells beef to a U.S. company that sells it to a grocery chain in Japan. These sales

Correct AnswerverifiedShow Answer

If purchases of foreign assets by U.S. residents exceed purchases of U.S. assets by foreign residents, then U.S. net capital outflow is positive.

Correct AnswerverifiedShow Answer

A country's saving is greater than its domestic investment. This difference means that its

Correct AnswerverifiedShow Answer

Correct AnswerverifiedNet exports were negative because the va...View AnswerShow Answer

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

Correct AnswerverifiedB

Correct Answer
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Correct Answer
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Both net capital outflows and net export...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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The real exchange rate = 8/5 =...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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A. U.S. net exports increased by $1 million D. U.S. net capital outflows increased by $1 million

Correct Answer
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Correct Answer
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A. The real exchange rate = $7...
View Answer

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D

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Correct Answer
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Correct Answer
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Correct Answer
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Net exports were negative because the va...
View Answer

Correct Answer
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B