Question 1

Citizens in India buy music from the U.S. To do so they use Indian rupees to purchase U.S. dollars. If U.S. citizens hold these rupees rather than spending them, what happens to U.S. net exports and U.S. net capital outflows?

Accepted Answer

A)   both U.S. net exports and U.S. net capital outflow rise
B)   both U.S. net exports and U.S. net capital outflow fall
C)   U.S. net exports rise and U.S. net capital outflow fall
D)   U.S. net exports fall and U.S. net capital outflow riseE) A) and D)
F) A) and C)

Question 2

What does purchasing-power parity imply about the real exchange rate? Explain what this means.

Accepted Answer

That it is equal to one. The n...

Question 3

According to purchasing-power parity, if it took 58 Indian rupees to buy a dollar today, but it took 55 to buy it a year ago, then the dollar has

Accepted Answer

A)   appreciated, indicating inflation was higher in the U.S. than in India.
B)   appreciated, indicating inflation was lower in the U.S. than in India.
C)   depreciated, indicating inflation was higher in the U.S. than in India.
D)   depreciated, indicating inflation was lower in the U.S. than in India.E) A) and B)
F) A) and C)

Question 4

During some year a country had exports of $50 billion, imports of $70 billion, and domestic investment of $100 billion. What was its saving during the year?

Accepted Answer

A)   $80 billion
B)   $100 billion
C)   $120 billion
D)   $150 billionE) B) and C)
F) None of the above

Question 5

Net exports measures the difference between a country's

Accepted Answer

A)   income and expenditures.
B)   sale of goods and services abroad and purchase of foreign goods and services.
C)   sale of domestic assets abroad and purchase of foreign assets.
D)   All of the above are correct.E) All of the above
F) A) and B)

Question 6

International trade

Accepted Answer

A)   raises the standard of living in all trading countries.
B)   lowers the standard of living in all trading countries.
C)   leaves the standard of living unchanged.
D)   raises the standard of living for importing countries and lowers it for exporting countries.E) A) and B)
F) B) and C)

Question 7

It is possible for a country to have domestic investment that exceeds national saving.

Accepted Answer

A) True 
 B)False

Question 8

A country recently had GDP of $1,200 billion. Its consumption expenditures were $700 billion, its government spent $200 billion, and it had domestic investment of $175 billion. What was the value of this country's net capital outflow?
Show your work.

Accepted Answer

Y = C + I + G + NX
$1,200 bill...

Question 9

When Ghana sells chocolate to the United States, 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) None of the above
F) B) and C)

Question 10

If P = domestic prices, P* = foreign prices, and e is the nominal exchange rate, which of the following is implied by purchasing-power parity?

Accepted Answer

A)   P = e/P*
B)   1 = e/P*
C)   e = P*/P
D)   None of the above is correct.E) C) and D)
F) B) and D)

Question 11

Which of the following is an example of U.S. foreign direct investment and by itself increases U.S. net capital outflow?

Accepted Answer

A)   A U.S. electronics company opens and operates a new factory in India.
B)   A Swiss bank buys bonds issued by a U.S. company.
C)   A U.S. pension fund buys bonds issued by the Japanese government.
D)   A French restaurant opens and operates a restaurant in New York.E) A) and C)
F) A) and B)

Question 12

If saving is less than domestic investment, then

Accepted Answer

A)   there is a trade deficit and Y > C + I + G.
B)   there is a trade deficit and Y 
C)   there is a trade surplus and Y > C + I + G.
D)   there is a trade surplus and Y < C + I + G.E) C) and D)
F) B) and D)

Question 13

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 14

A U.S. firm buys apples from New Zealand with New Zealand dollars it got in exchange for U.S. dollars. New Zealand residents then use these dollars to purchase oranges from the U.S. Which of the following increases?

Accepted Answer

A)   New Zealand's net capital outflow and New Zealand's net exports
B)   only New Zealand's net exports
C)   only New Zealand's net capital outflow
D)   neither New Zealand's net exports nor New Zealand's capital outflowE) A) and B)
F) A) and C)

Question 15

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

Accepted Answer

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

Question 16

If the Canadian nominal exchange rate does not change, but prices rise faster abroad than in Canada, then the Canadian real exchange rate

Accepted Answer

A)   does not change.
B)   rises.
C)   declines.
D)   None of the above is necessarily correct.E) None of the above
F) All of the above

Question 17

Suppose a bottle of wine costs 20 euros in France and 25 dollars in the United States. If the exchange rate is .80 euros per dollar, what is the real exchange rate?

Accepted Answer

The real exchange rate = nomin...

Question 18

While vacationing in Turkey you see a rug you consider purchasing. The seller tells you the rug costs 1,200 Turkish lire.
A. If the exchange rate is .60 lira per dollar, how many dollars does the rug cost?
B. If the dollar depreciates against the lira, will it take more or fewer dollars to buy the rug? Explain.

Accepted Answer

A. 1200 lire = $x times .60 li...

Question 19

According to the doctrine of purchasing-power parity, which of the following should depreciate if over the next year the inflation rate is higher in the U.S. than in the Euro area?

Accepted Answer

A)   both the U.S. real exchange rate and the U.S. nominal exchange rate
B)   the U.S. real exchange rate, but not the U.S. nominal exchange rate
C)   the U.S. nominal exchange rate, but not the U.S. real exchange rate
D)   neither the U.S. nominal exchange rate nor the U.S. real exchange rateE) A) and D)
F) None of the above

Question 20

You hold currency from a foreign country. If that country has a higher rate of inflation than the United States, then over time the foreign currency will buy

Accepted Answer

A)   more goods in that country and buy more dollars.
B)   more goods in that country but buy fewer dollars.
C)   fewer goods in that country but buy more dollars.
D)   fewer goods in that country and buy fewer dollars.E) B) and C)
F) A) and B)

Exam 31: Open-Economy Macroeconomics: Basic Concepts

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

Correct Answer
verified

International trade

Correct Answer
verified

What does purchasing-power parity imply about the real exchange rate? Explain what this means.

Correct Answer
verified
That it is equal to one. The n...
View Answer

Suppose a bottle of wine costs 20 euros in France and 25 dollars in the United States. If the exchange rate is .80 euros per dollar, what is the real exchange rate?

Correct Answer
verified
The real exchange rate = nomin...
View Answer

It is possible for a country to have domestic investment that exceeds national saving.

Correct Answer
verified

Which of the following is an example of U.S. foreign direct investment and by itself increases U.S. net capital outflow?

Correct Answer
verified

During some year a country had exports of $50 billion, imports of $70 billion, and domestic investment of $100 billion. What was its saving during the year?

Correct Answer
verified

If the Canadian nominal exchange rate does not change, but prices rise faster abroad than in Canada, then the Canadian real exchange rate

Correct Answer
verified

A U.S. firm buys apples from New Zealand with New Zealand dollars it got in exchange for U.S. dollars. New Zealand residents then use these dollars to purchase oranges from the U.S. Which of the following increases?

Correct Answer
verified

Citizens in India buy music from the U.S. To do so they use Indian rupees to purchase U.S. dollars. If U.S. citizens hold these rupees rather than spending them, what happens to U.S. net exports and U.S. net capital outflows?

Correct Answer
verified

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 Answer
verified
The real exchange rate = 8 x 4...
View Answer

If saving is less than domestic investment, then

Correct Answer
verified

When Ghana sells chocolate to the United States, U.S. net exports

Correct Answer
verified

If P = domestic prices, P* = foreign prices, and e is the nominal exchange rate, which of the following is implied by purchasing-power parity?

Correct Answer
verified

A country recently had GDP of $1,200 billion. Its consumption expenditures were $700 billion, its government spent $200 billion, and it had domestic investment of $175 billion. What was the value of this country's net capital outflow? Show your work.

Correct Answer
verified
Y = C + I + G + NX
$1,200 bill...
View Answer

According to purchasing-power parity, if it took 58 Indian rupees to buy a dollar today, but it took 55 to buy it a year ago, then the dollar has

Correct Answer
verified

According to the doctrine of purchasing-power parity, which of the following should depreciate if over the next year the inflation rate is higher in the U.S. than in the Euro area?

Correct Answer
verified

You hold currency from a foreign country. If that country has a higher rate of inflation than the United States, then over time the foreign currency will buy

Correct Answer
verified

Correct Answer
verified
A. 1200 lire = $x times .60 li...
View Answer

Net exports measures the difference between a country's

Correct Answer
verified

Exam 31: Open-Economy Macroeconomics: Basic Concepts

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

Correct AnswerverifiedShow Answer

International trade

Correct AnswerverifiedShow Answer

What does purchasing-power parity imply about the real exchange rate? Explain what this means.

Correct AnswerverifiedThat it is equal to one. The n...View AnswerShow Answer

Suppose a bottle of wine costs 20 euros in France and 25 dollars in the United States. If the exchange rate is .80 euros per dollar, what is the real exchange rate?

Correct AnswerverifiedThe real exchange rate = nomin...View AnswerShow Answer

It is possible for a country to have domestic investment that exceeds national saving.

Correct AnswerverifiedShow Answer

Which of the following is an example of U.S. foreign direct investment and by itself increases U.S. net capital outflow?

Correct AnswerverifiedShow Answer

During some year a country had exports of $50 billion, imports of $70 billion, and domestic investment of $100 billion. What was its saving during the year?

Correct AnswerverifiedShow Answer

If the Canadian nominal exchange rate does not change, but prices rise faster abroad than in Canada, then the Canadian real exchange rate

Correct AnswerverifiedShow Answer

A U.S. firm buys apples from New Zealand with New Zealand dollars it got in exchange for U.S. dollars. New Zealand residents then use these dollars to purchase oranges from the U.S. Which of the following increases?

Correct AnswerverifiedShow Answer

Citizens in India buy music from the U.S. To do so they use Indian rupees to purchase U.S. dollars. If U.S. citizens hold these rupees rather than spending them, what happens to U.S. net exports and U.S. net capital outflows?

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

If saving is less than domestic investment, then

Correct AnswerverifiedShow Answer

When Ghana sells chocolate to the United States, U.S. net exports

Correct AnswerverifiedShow Answer

If P = domestic prices, P* = foreign prices, and e is the nominal exchange rate, which of the following is implied by purchasing-power parity?

Correct AnswerverifiedShow Answer

A country recently had GDP of $1,200 billion. Its consumption expenditures were $700 billion, its government spent $200 billion, and it had domestic investment of $175 billion. What was the value of this country's net capital outflow? Show your work.

Correct AnswerverifiedY = C + I + G + NX$1,200 bill...View AnswerShow Answer

According to purchasing-power parity, if it took 58 Indian rupees to buy a dollar today, but it took 55 to buy it a year ago, then the dollar has

Correct AnswerverifiedShow Answer

According to the doctrine of purchasing-power parity, which of the following should depreciate if over the next year the inflation rate is higher in the U.S. than in the Euro area?

Correct AnswerverifiedShow Answer

You hold currency from a foreign country. If that country has a higher rate of inflation than the United States, then over time the foreign currency will buy

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA. 1200 lire = $x times .60 li...View AnswerShow Answer

Net exports measures the difference between a country's

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
That it is equal to one. The n...
View Answer

Correct Answer
verified
The real exchange rate = nomin...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The real exchange rate = 8 x 4...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Y = C + I + G + NX
$1,200 bill...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A. 1200 lire = $x times .60 li...
View Answer

Correct Answer
verified