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Exam 31: Open-Economy Macroeconomics: Basic Concepts

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Question 181

Multiple Choice

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Other things the same, a country could move from having a trade deficit to having a trade surplus if either

A) saving rose or domestic investment rose.
B) saving rose or domestic investment fell.
C) saving fell or domestic investment rose.
D) saving fell or domestic investment fell.

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

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Question 182

Multiple Choice

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A Japanese flour mill buys wheat from the United States and pays for it with yen. Other things the same, Japanese

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

E) A) and C)
F) None of the above

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Question 183

Multiple Choice

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In which of the following situations must national saving rise?

If the price of a good in the U.S. is $10, the exchange rate is 2 units of foreign currency per dollar, and the foreign price of the same good is 30 units of foreign currency, then the real exchange rate is 2/3.

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.

The nominal exchange rate is 90 Pakistani rupees per dollar. The price of a shirt in Pakistan is 1800 rupees. The same shirt sells for $25 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 C is yes, where would they buy and where would they sell?

If the nominal exchange rate e is foreign currency per dollar, the domestic price is P, and the foreign price is P*, then the real exchange rate is defined as

Goods that cost one dollar in the U.S. cost one euro in France, the real exchange rate would be computed as how many French goods per U.S. goods?

If a country's trade surplus falls, its net capital outflow rises.

Other things the same, which of the following would both make Americans more willing to buy Italian goods?

The price level in Country A is 250. The price level in Country B is 300. If purchasing-power parity holds, what is the nominal value of Country A's currency in the market for foreign exchange with Country B? Show your work.

If the real exchange rate between the U.S. and Japan is 1, the nominal exchange rate is 100 yen per U.S. dollar and the price of chicken in the U.S. is $2.50 per pound, what is the price of chicken in Japan?

A utilities company in the Netherlands buys wind generators made by a U.S. company. It pays from them with previously obtained dollars. By itself, this exchange

A country has $60 million of saving and domestic investment of $40 million. Net exports are

Peru has exports of $31.5 million and imports of $30 million. Peru

A U.S. mutual fund uses $1 million to buy yen from a Japanese bank. It then uses these yen to buy stocks in a Japanese electronics firm. The Japanese electronic firm then exchanges the $1 million dollars of yen for dollars from a U.S. bank. It uses these dollars to buy equipment manufactured by a company located in the U.S. As a result of these exchanges, by how much, if at all, and in which direction does: A. U.S. net exports change? B. U.S. net capital outflow change?

While on a study abroad program you see a McDonald's in Paris. A combo meal costs 8 euros. The same meal costs $6 in the U.S. and the exchange rate is .75 euros per dollar. A. Find the real exchange rate. Show your work. B. In terms of dollars where is the combo meal cheaper?

If over the next six months inflation is higher in the U.S. than in foreign countries, then according to purchasing- power parity

An Italian company exchanges euros for dollars from U.S. residents and then uses the dollars to buy U.S. products to sell in its stores in Rome. U.S. residents who exchanged their dollars for euros use the euros to buy bonds issued by French corporations. At this point

If the U.S. has exports of $1.5 trillion and imports of $2.2 trillion, then the U.S.