Question 1

Table 18-2
 
-Refer to Table 18-2.Which currency(ies) is(are) more valuable than predicted by the doctrine of purchasing-power parity?

Accepted Answer

A)   boloviano and dinar
B)   yen,kroner,and baht
C)   yen and kroner
D)   bahtE) All of the above
F) A) and C)

Question 2

A nation's domestic investment is greater than its savings.Which of the following is correct?

Accepted Answer

A)   This nation has a negative net capital outflow.
B)   This nation has a trade surplus.
C)   Purchases of foreign assets by domestic residents exceed purchases of domestic assets by foreigners.
D)   All of the above are correct.E) B) and C)
F) None of the above

Question 3

If a country had a trade surplus of $100 billion and then its exports rose by $40 billion and its imports rose by $30 billion,its net exports would now be

Accepted Answer

A)   $110 billion
B)   $90 billion.
C)   $70 billion.
D)   $60 billion.E) A) and B)
F) A) and D)

Question 4

Many economists believe that the theory of purchasing-power parity describes the forces that determine exchange rates in the long run.

Accepted Answer

A) True 
 B)False

Question 5

A Japanese bank buys bonds sold by Minnesota Manufacturing.Minnesota Manufacturing then uses these funds to buy machinery from Canada.Which of the following decreases?

Accepted Answer

A)   U.S.net exports but not US net capital outflow
B)   U.S.net capital outflow but not U.S.net exports
C)   U.S.net exports and U.S.net capital outflow
D)   neither U.S.net exports nor U.S.net capital outflowE) A) and B)
F) A) and C)

Question 6

A pair of jeans cost $25 in the U.S.and 1600 dinar in Algeria.If the nominal exchange rate is 75 dinar per U.S.dollar,then the real exchange rate is

Accepted Answer

A)   more than 1,so a profit could be made by buying jeans in Algeria and selling them in the U.S.
B)   more than 1,so a profit could be made by buying jeans in the U.S.and selling them in Algeria.
C)   less than 1,so a profit could be made by buying jeans in Algeria and selling them in the U.S.
D)   less than 1,so a profit could be made by buying jeans in the U.S.and selling them in Algeria.E) A) and B)
F) None of the above

Question 7

If a McDonald's Big Mac cost $3.06 in the United States and 3.21 euros in the Euro area,then purchasing-power parity implies the nominal exchange rate is how many euros per dollar?

Accepted Answer

A)   1.05 If the value is less than this,it costs more dollars to buy a Big Mac in the U.S.than in the Euro area.
B)   1.05 If the value is less than this,it costs fewer dollars to buy a Big Mac in the U.S.then in the Euro area.
C)   .95 If the value is less than this,it costs more dollars to buy a Big Mac in the U.S.than in the Euro area.
D)   .95 If the value is less than this,it costs fewer dollars to buy a Big Mac in the U.S.than in the Euro area.E) None of the above
F) B) and C)

Question 8

If Saudi Arabia had positive net exports last year,then it

Accepted Answer

A)   sold more abroad than it purchased abroad and had a trade surplus.
B)   sold more abroad than it purchased abroad and had a trade deficit.
C)   bought more abroad than it sold abroad and had a trade surplus.
D)   bought more abroad than it sold abroad and had a trade deficit.E) A) and B)
F) A) and C)

Question 9

A Mexican firm exchanges Pesos for U.S.dollars and then uses these dollars to purchase corn from the U.S.This transaction

Accepted Answer

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

Question 10

Which of the following is correct? Over about the last fifty years

Accepted Answer

A)   U.S.exports and U.S.imports each about doubled.
B)   U.S.exports and U.S.imports each about tripled.
C)   U.S.exports about doubled and U.S.imports about tripled.
D)   U.S.exports about tripled and U.S.imports about doubled.E) A) and B)
F) None of the above

Question 11

According to purchasing power parity what should the nominal exchange rate between the U.S.and another country be equal to?

Accepted Answer

A)   1
B)   the real exchange rate between the U.S.and that country
C)   the price level in the U.S.divided by the price level in the other country
D)   the price level in the other country divided by the price level in the U.S.E) All of the above
F) B) and D)

Question 12

An MP3 player in Singapore costs 200 Singaporean dollars.In the U.S.it costs 100 US dollars.Which of the following is correct?

Accepted Answer

A)   if the nominal exchange rate is 2.0 Singaporean dollars per U.S.dollar,purchasing power parity holds.
B)   if the nominal exchange rate is 1 Singaporean dollars per U.S.dollar,purchasing power parity holds.
C)   if the nominal exchange rate is .50 Singaporean dollars per U.S.dollar,purchasing power parity holds.
D)   purchasing power parity does not hold at any of the above exchange rates.E) A) and B)
F) B) and D)

Question 13

It costs $80 for a dental appointment in the U.S.It costs 600 Egyptian pounds for the same appointment in Egypt.The nominal exchange rate is 7 pounds per dollar.The real exchange rate is

Accepted Answer

A)   less than one.Dental appointments in Egypt are cheaper than in the U.S.
B)   less than one.Dental appointments in Egypt are more expensive than in the U.S.
C)   greater than one.Dental appointments in Egypt are cheaper than in the U.S.
D)   greater than one.Dental appointments in Egypt are more expensive than in the U.S.E) A) and B)
F) None of the above

Question 14

A country purchases $3 billion of foreign-produced goods and services and sells $2 billion dollars of domestically produced goods and services to foreign countries.It has

Accepted Answer

A)   exports of $3 billion and a trade surplus of $1 billion.
B)   exports of $3 billion and a trade deficit of $1 billion.
C)   exports of $2 billion and a trade surplus of $1 billion.
D)   exports of $2 billion and a trade deficit of $1 billion.E) A) and C)
F) B) and C)

Question 15

If a country changes its corporate tax laws so that domestic businesses build and manage more business in other countries,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) C) and D)
F) A) and B)

Question 16

Other things the same,an increase in foreign prices raises the real exchange rate.

Accepted Answer

A) True 
 B)False

Question 17

Nominal exchange rates

Accepted Answer

A)   vary little over time.
B)   vary substantially over time.
C)   appreciate over time for most countries.
D)   depreciate over time for most countries.E) B) and C)
F) B) and D)

Question 18

Bolivia buys railroad engines from a U.S.firm and pays for them with Bolivianos (Bolivian currency) .By itself,this exchange

Accepted Answer

A)   increases both U.S.net exports and U.S.net capital outflow.
B)   decreases both U.S.net exports and U.S.net capital outflow.
C)   increases U.S.net exports and does not affect U.S.net capital outflow.
D)   None of the above is correct.E) C) and D)
F) A) and B) A

Question 19

When making investment decisions,investors

Accepted Answer

A)   compare the real interest rates offered on different bonds.
B)   compare the nominal,but not the real,interest rates offered on different bonds.
C)   purchase the highest-priced bond available.
D)   All of the above are correct.E) B) and D)
F) None of the above

Question 20

In 2011 the U.S.began with a trade deficit.During the year exports rose by more than imports.What should have happened to the U.S.trade deficit?

Accepted Answer

It should have decreased.

Exam 31: Open-Economy Macroeconomic Models

Table 18-2 -Refer to Table 18-2.Which currency(ies) is(are) more valuable than predicted by the doctrine of purchasing-power parity?

Correct AnswerverifiedShow Answer

A nation's domestic investment is greater than its savings.Which of the following is correct?

Correct AnswerverifiedShow Answer

If a country had a trade surplus of $100 billion and then its exports rose by $40 billion and its imports rose by $30 billion,its net exports would now be

Correct AnswerverifiedShow Answer

Many economists believe that the theory of purchasing-power parity describes the forces that determine exchange rates in the long run.

Correct AnswerverifiedShow Answer

A Japanese bank buys bonds sold by Minnesota Manufacturing.Minnesota Manufacturing then uses these funds to buy machinery from Canada.Which of the following decreases?

Correct AnswerverifiedShow Answer

A pair of jeans cost $25 in the U.S.and 1600 dinar in Algeria.If the nominal exchange rate is 75 dinar per U.S.dollar,then the real exchange rate is

Correct AnswerverifiedShow Answer

If a McDonald's Big Mac cost $3.06 in the United States and 3.21 euros in the Euro area,then purchasing-power parity implies the nominal exchange rate is how many euros per dollar?

Correct AnswerverifiedShow Answer

If Saudi Arabia had positive net exports last year,then it

Correct AnswerverifiedShow Answer

A Mexican firm exchanges Pesos for U.S.dollars and then uses these dollars to purchase corn from the U.S.This transaction

Correct AnswerverifiedC

Which of the following is correct? Over about the last fifty years

Correct AnswerverifiedShow Answer

According to purchasing power parity what should the nominal exchange rate between the U.S.and another country be equal to?

Correct AnswerverifiedShow Answer

An MP3 player in Singapore costs 200 Singaporean dollars.In the U.S.it costs 100 US dollars.Which of the following is correct?

Correct AnswerverifiedShow Answer

It costs $80 for a dental appointment in the U.S.It costs 600 Egyptian pounds for the same appointment in Egypt.The nominal exchange rate is 7 pounds per dollar.The real exchange rate is

Correct AnswerverifiedShow Answer

A country purchases $3 billion of foreign-produced goods and services and sells $2 billion dollars of domestically produced goods and services to foreign countries.It has

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Other things the same,an increase in foreign prices raises the real exchange rate.

Correct AnswerverifiedShow Answer

Nominal exchange rates

Correct AnswerverifiedShow Answer

Bolivia buys railroad engines from a U.S.firm and pays for them with Bolivianos (Bolivian currency) .By itself,this exchange

Correct AnswerverifiedA

When making investment decisions,investors

Correct AnswerverifiedShow Answer

In 2011 the U.S.began with a trade deficit.During the year exports rose by more than imports.What should have happened to the U.S.trade deficit?

Correct AnswerverifiedIt should have decreased.

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C

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It should have decreased.