Question 1

In an open economy, national saving can be less than investment.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following equations is always correct in an open economy?

Accepted Answer

A)   NX = Y - C - G - I
B)   NX = S - I
C)   NX = NCO
D)   All of the above are correct.E) A) and B)
F) All of the above

Question 3

If U.S. consumers increase their demand for apples from New Zealand, then other things the same New Zealand's

Accepted Answer

A)   imports and net exports rise.
B)   imports rise and net exports fall.
C)   exports and net exports rise.
D)   exports rise and net exports fall.E) A) and B)
F) A) and C)

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

Question 5

A country's trade balance will fall if

Accepted Answer

A)   either investment or saving rise.
B)   either investment falls or saving rises.
C)   either saving falls or investment rises.
D)   either investment or saving fall.E) A) and B)
F) A) and C)

Question 6

Last year a country purchased $1.5 trillion worth of goods and services from foreign countries, sold $2 trillion worth of goods and services to foreign countries and had national saving of $1.25 trillion. What was the value of its domestic investment? Show your work.

Accepted Answer

Net capital outflow = Net expo...

Question 7

In which period was most of the change in U.S. net capital outflow due to an increase in investment in the U.S.?

Accepted Answer

A)   1980-1987
B)   1991-2000
C)   2000-2012
D)   None of the above are correct.E) A) and D)
F) All of the above

Question 8

A Guatemalan company exchanges quetzal (Guatemalan currency)  for dollars and then uses the dollars to purchase construction equipment from a U.S. company. These transactions

Accepted Answer

A)   increase Guatemalan net capital outflow, and increases U.S. net exports.
B)   increase Guatemalan capital outflow, and decreases U.S. net exports.
C)   decrease Guatemalan net capital outflow, and increases U.S. net exports.
D)   decrease Guatemalan net capital outflow, and decreases U.S. net exports.E) A) and D)
F) A) and C)

Question 9

On behalf of your firm, you make frequent trips to Tokyo. You notice that you always have to pay more dollars to get your hair cut than you pay in the U.S. This observation is

Accepted Answer

A)   consistent with purchasing-power parity if prices in Japan are rising more rapidly than prices in the United States.
B)   consistent with purchasing-power parity if prices in Japan are rising less rapidly than prices in the United States.
C)   inconsistent with purchasing-power parity, but might be explained by limited opportunities for arbitrage in haircuts across international borders.
D)   None of the above is correct.E) A) and D)
F) A) and B)

Question 10

If the exchange rate is 80 yen per dollar, then a hotel room in Tokyo that costs 25,000 yen costs $200.

Accepted Answer

A) True 
 B)False

Question 11

If purchasing-power parity holds, a dollar will buy

Accepted Answer

A)   more goods in foreign countries than in the United States.
B)   as many goods in foreign countries as it does in the United States.
C)   fewer goods in foreign countries than it does in the United States.
D)   None of the above is implied by purchasing-power parity.E) A) and B)
F) None of the above

Question 12

A country has $3 billion of domestic investment and net exports of $2 billion. What is its saving?

Accepted Answer

A)   $1 billion
B)   $2billion
C)   $3 billion
D)   $5 billionE) A) and B)
F) A) and C)

Question 13

A British grocery chain uses previously obtained U.S. dollars to purchase oranges from the United States. This transaction

Accepted Answer

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

Question 14

From 1991-2000, U.S. net capital outflow as a percent of GDP became a

Accepted Answer

A)   larger positive number.
B)   smaller positive number.
C)   larger negative number.
D)   smaller negative number.E) A) and B)
F) A) and C)

Question 15

A pair of hiking boots costs $120 in the U.S., if the real exchange rate is 6/5 and the nominal exchange rate is 2 Brazilian reais per dollar, what is the price of the same hiking boots in Brazil?
Show your work.

Accepted Answer

The real exchange rate 6/5 = $...

Question 16

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

Question 17

If a country changes its corporate tax laws so that foreign businesses build and manage more business in that country, then the net capital outflow of that country

Accepted Answer

A)   and the net capital outflow of other countries rise.
B)   rises and the net capital outflow of other countries fall.
C)   falls and the net capital outflow of other countries rise.
D)   None of the above are correct.E) All of the above
F) C) and D)

Question 18

Suppose that a country imports $90 million worth of goods and services and exports $80 million worth of goods and services. What is the value of net exports?

Accepted Answer

A)   $170 million
B)   $80 million
C)   $10 million
D)   -$10 millionE) None of the above
F) All of the above

Question 19

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

Question 20

A depreciation 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) A) and C)

Exam 31: Open-Economy Macroeconomics: Basic Concepts

From 1991-2000, U.S. net capital outflow as a percent of GDP became a

Correct AnswerverifiedShow Answer

A depreciation of the U.S. real exchange rate induces U.S. consumers to buy

Correct AnswerverifiedShow Answer

If purchasing-power parity holds, a dollar will buy

Correct AnswerverifiedShow Answer

A pair of hiking boots costs $120 in the U.S., if the real exchange rate is 6/5 and the nominal exchange rate is 2 Brazilian reais per dollar, what is the price of the same hiking boots in Brazil? Show your work.

Correct AnswerverifiedThe real exchange rate 6/5 = $...View AnswerShow 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

A Guatemalan company exchanges quetzal (Guatemalan currency) for dollars and then uses the dollars to purchase construction equipment from a U.S. company. These transactions

Correct AnswerverifiedShow Answer

In an open economy, national saving can be less than investment.

Correct AnswerverifiedShow Answer

If a country changes its corporate tax laws so that foreign businesses build and manage more business in that country, then the net capital outflow of that country

Correct AnswerverifiedShow Answer

If U.S. consumers increase their demand for apples from New Zealand, then other things the same New Zealand's

Correct AnswerverifiedShow Answer

A country's trade balance will fall if

Correct AnswerverifiedShow Answer

On behalf of your firm, you make frequent trips to Tokyo. You notice that you always have to pay more dollars to get your hair cut than you pay in the U.S. This observation is

Correct AnswerverifiedShow Answer

Last year a country purchased $1.5 trillion worth of goods and services from foreign countries, sold $2 trillion worth of goods and services to foreign countries and had national saving of $1.25 trillion. What was the value of its domestic investment? Show your work.

Correct AnswerverifiedNet capital outflow = Net expo...View AnswerShow Answer

If the exchange rate is 80 yen per dollar, then a hotel room in Tokyo that costs 25,000 yen costs $200.

Correct AnswerverifiedShow Answer

Net exports of a country are the value of

Correct AnswerverifiedShow Answer

Suppose that a country imports $90 million worth of goods and services and exports $80 million worth of goods and services. What is the value of net exports?

Correct AnswerverifiedShow Answer

In which period was most of the change in U.S. net capital outflow due to an increase in investment in the U.S.?

Correct AnswerverifiedShow Answer

A British grocery chain uses previously obtained U.S. dollars to purchase oranges from the United States. This transaction

Correct AnswerverifiedShow Answer

The dollar is said to depreciate against the euro if

Correct AnswerverifiedShow Answer

A country has $3 billion of domestic investment and net exports of $2 billion. What is its saving?

Correct AnswerverifiedShow Answer

Which of the following equations is always correct in an open economy?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The real exchange rate 6/5 = $...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Net capital outflow = Net expo...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified