Question 1

A country has $100 million of net exports and $170 million of saving. Net capital outflow is

Accepted Answer

A)   $70 million and domestic investment is $170 million.
B)   $70 million and domestic investment is $270 million.
C)   $100 million and domestic investment is $70 million.
D)   None of the above is correct.E) All of the above
F) A) and D)

Question 2

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) None of the above
F) B) and C)

Question 3

From 2008 to 2012 both U.S. saving and U.S. investment fell.

Accepted Answer

A) True 
 B)False

Question 4

Under what circumstances does purchasing-power parity explain how exchange rates are determined, and why is it not completely accurate?

Accepted Answer

Purchasing-power parity works well in he...

Question 5

What is the logic behind the theory of purchasing-power parity?

Accepted Answer

The logic behind purchasing-power parity...

Question 6

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 7

A Big Mac in Japan costs 400 yen while it costs $4.50 in the U.S.. The nominal exchange rate is 100 yen per dollar. Which of the following would both make the real exchange rate move towards purchasing-power parity?

Accepted Answer

A)   the price of Big Macs in the U.S. falls, the nominal exchange rate falls
B)   the price of Big Macs in the U.S. falls, the nominal exchange rate rises
C)   the price of Big Macs in the U.S. rises, the nominal exchange rate falls
D)   the price of Big Macs in the U.S. rises, the nominal exchange rate risesE) All of the above
F) None of the above

Question 8

If a dollar buys more rice in the China. than in the U.S., then

Accepted Answer

A)   the real exchange rate is greater than 1; a profit might be made by buying rice in the U.S. and selling it in China.
B)   the real exchange rate is greater than 1; a profit might be made by buying rice in China. and selling it in the U.S.
C)   the real exchange rate is less than 1; a profit might be made by buying rice in the U.S. and selling it in China.
D)   the real exchange rate is less than 1; a profit might be made by buying rice in China and selling it in the U.S.E) B) and C)
F) A) and D)

Question 9

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 D)
F) None of the above

Question 10

Suppose a country's net capital outflow does not change, but its investment rises by $250 billion.

Accepted Answer

A)   Its saving must have risen by $250 billion so its net exports have risen.
B)   Its saving must have risen by $250 billion, but its net exports are unchanged.
C)   Its saving must have fallen by $250 billion, so its net exports have fallen.
D)   Its saving must have fallen by $250 billion, but its net exports are unchanged.E) B) and D)
F) C) and D)

Question 11

When Jamie, a U.S. citizen, purchases a wool jacket made in Ireland, the purchase is

Accepted Answer

A)   both a U.S. and Irish import.
B)   a U.S. import and an Irish export.
C)   a U.S. export and an Irish import.
D)   neither an export nor an import for either country.E) B) and D)
F) All of the above

Question 12

If purchases of French assets by foreigners are less than French purchases of foreign assets, then France has a

Accepted Answer

A)   positive net capital outflow and a trade surplus.
B)   positive net capital outflow and a trade deficit.
C)   negative net capital outflow and a trade surplus.
D)   negative net capital outflow and a trade deficit.E) None of the above
F) A) and D)

Question 13

If a U.S. shirt maker purchases cotton from Egypt, U.S. net exports

Accepted Answer

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

Question 14

If the exchange rate changes from 148 Kazakhstan tenge per dollar to 155 Kazakhstan tenge per dollar, the dollar has

Accepted Answer

A)   appreciated. Other things the same, it now takes fewer dollars to buy Kazakhstani goods.
B)   appreciated. Other things the same, it now takes more dollars to buy Kazakhstani goods.
C)   depreciated. Other things the same, it now takes fewer dollars to buy Kazakhstani goods.
D)   depreciated. Other things the same, it now takes more dollars to buy Kazakhstani goods.E) B) and C)
F) All of the above

Question 15

While on vacation in Europe you notice that a tablet computer is selling for 600 euros in France and for 533 pounds in Britain. You also know that the exchange rates are .75 euros per dollar and .65 British pounds per dollar. Where is the number of dollars you would pay for the tablet lower? How many dollars would you have to pay to buy it there?

Accepted Answer

It costs less in France where ...

Question 16

A tall latte in China costs 30 yuan. The same latte in the U.S. costs 4 dollars. If the exchange rate is 6.5 yuan per dollar then, the real exchange rate is

Accepted Answer

A)   .867 so the good is more expensive in the U.S.
B)   .867 so the good is more expensive in China.
C)   1.154 so the god is more expensive in the U.S.
D)   1.154 so the good is more expensive in China.E) B) and D)
F) B) and C)

Question 17

A certain cell phone sells for 2400 yuan in China and for $300 in the U.S. The nominal exchange rate is 6.5 yuan per dollar.
A. Find the real exchange rate. Show your work.
B. In terms of dollars where is the cell phone cheaper?

Accepted Answer

The real exchange rate = $300 ...

Question 18

Net capital outflow is the purchase of domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.

Accepted Answer

A) True 
 B)False

Question 19

Mark, a U.S. citizen, buys stock in a British Shipping company. This purchase is an example of

Accepted Answer

A)   investment for Mark and U.S. foreign direct investment.
B)   investment for Mark and U.S. foreign portfolio investment.
C)   saving for Mark and U.S. foreign direct investment.
D)   saving for Mark and U.S. foreign portfolio investment.E) A) and B)
F) A) and C)

Question 20

Other things the same, which of the following could explain a rise in Sweden's net capital outflow?

Accepted Answer

A)   interest rates on Swedish bonds rise
B)   the probability of default on Swedish bonds rises
C)   Sweden enacts a law reducing taxes on income earned by foreign-owned businesses operating in Sweden
D)   None of the above are correct.E) A) and B)
F) B) and D)

Exam 31: Open-Economy Macroeconomics: Basic Concepts

Mark, a U.S. citizen, buys stock in a British Shipping company. This purchase is an example of

Correct Answer
verified

What is the logic behind the theory of purchasing-power parity?

Correct Answer
verified
The logic behind purchasing-power parity...
View Answer

A Big Mac in Japan costs 400 yen while it costs $4.50 in the U.S.. The nominal exchange rate is 100 yen per dollar. Which of the following would both make the real exchange rate move towards purchasing-power parity?

Correct Answer
verified

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

Correct Answer
verified

A certain cell phone sells for 2400 yuan in China and for $300 in the U.S. The nominal exchange rate is 6.5 yuan per dollar. A. Find the real exchange rate. Show your work. B. In terms of dollars where is the cell phone cheaper?

Correct Answer
verified
The real exchange rate = $300 ...
View Answer

Net capital outflow is the purchase of domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.

Correct Answer
verified

Suppose a country's net capital outflow does not change, but its investment rises by $250 billion.

Correct Answer
verified

Other things the same, which of the following could explain a rise in Sweden's net capital outflow?

Correct Answer
verified

When Jamie, a U.S. citizen, purchases a wool jacket made in Ireland, the purchase is

Correct Answer
verified

A country has $100 million of net exports and $170 million of saving. Net capital outflow is

Correct Answer
verified

If the exchange rate changes from 148 Kazakhstan tenge per dollar to 155 Kazakhstan tenge per dollar, the dollar has

Correct Answer
verified

If purchases of French assets by foreigners are less than French purchases of foreign assets, then France has a

Correct Answer
verified

If a U.S. shirt maker purchases cotton from Egypt, U.S. net exports

Correct Answer
verified

If a dollar buys more rice in the China. than in the U.S., then

Correct Answer
verified

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

A tall latte in China costs 30 yuan. The same latte in the U.S. costs 4 dollars. If the exchange rate is 6.5 yuan per dollar then, the real exchange rate is

Correct Answer
verified

Under what circumstances does purchasing-power parity explain how exchange rates are determined, and why is it not completely accurate?

Correct Answer
verified
Purchasing-power parity works well in he...
View Answer

From 2008 to 2012 both U.S. saving and U.S. investment fell.

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified
It costs less in France where ...
View Answer

Exam 31: Open-Economy Macroeconomics: Basic Concepts

Mark, a U.S. citizen, buys stock in a British Shipping company. This purchase is an example of

Correct AnswerverifiedShow Answer

What is the logic behind the theory of purchasing-power parity?

Correct AnswerverifiedThe logic behind purchasing-power parity...View AnswerShow Answer

A Big Mac in Japan costs 400 yen while it costs $4.50 in the U.S.. The nominal exchange rate is 100 yen per dollar. Which of the following would both make the real exchange rate move towards purchasing-power parity?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A certain cell phone sells for 2400 yuan in China and for $300 in the U.S. The nominal exchange rate is 6.5 yuan per dollar. A. Find the real exchange rate. Show your work. B. In terms of dollars where is the cell phone cheaper?

Correct AnswerverifiedThe real exchange rate = $300 ...View AnswerShow Answer

Net capital outflow is the purchase of domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.

Correct AnswerverifiedShow Answer

Suppose a country's net capital outflow does not change, but its investment rises by $250 billion.

Correct AnswerverifiedShow Answer

Other things the same, which of the following could explain a rise in Sweden's net capital outflow?

Correct AnswerverifiedShow Answer

When Jamie, a U.S. citizen, purchases a wool jacket made in Ireland, the purchase is

Correct AnswerverifiedShow Answer

A country has $100 million of net exports and $170 million of saving. Net capital outflow is

Correct AnswerverifiedShow Answer

If the exchange rate changes from 148 Kazakhstan tenge per dollar to 155 Kazakhstan tenge per dollar, the dollar has

Correct AnswerverifiedShow Answer

If purchases of French assets by foreigners are less than French purchases of foreign assets, then France has a

Correct AnswerverifiedShow Answer

If a U.S. shirt maker purchases cotton from Egypt, U.S. net exports

Correct AnswerverifiedShow Answer

If a dollar buys more rice in the China. than in the U.S., then

Correct AnswerverifiedShow Answer

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

A tall latte in China costs 30 yuan. The same latte in the U.S. costs 4 dollars. If the exchange rate is 6.5 yuan per dollar then, the real exchange rate is

Correct AnswerverifiedShow Answer

Under what circumstances does purchasing-power parity explain how exchange rates are determined, and why is it not completely accurate?

Correct AnswerverifiedPurchasing-power parity works well in he...View AnswerShow Answer

From 2008 to 2012 both U.S. saving and U.S. investment fell.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIt costs less in France where ...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified
The logic behind purchasing-power parity...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The real exchange rate = $300 ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified
Purchasing-power parity works well in he...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
It costs less in France where ...
View Answer