Question 1

Which of the following statements is incorrect for an open economy?

Accepted Answer

A)  A country can have a trade deficit, trade surplus, or balanced trade.
B)  A country that has a trade deficit has positive net capital outflow.
C)  Net exports must equal net capital outflow.
D)  National saving equals domestic investment plus net capital outflow.E) B) and D)
F) None of the above

Question 2

Suppose the real exchange rate is 3/4 gallon of country A's gasoline per gallon of U.S. gasoline, a gallon of U.S. gasoline costs $3.00 U.S., and a gallon of gas in country A costs 6 units of their currency. What is the nominal exchange rate?

Accepted Answer

A)  3/8 of a unit of country A's currency per dollar.
B)  3/2 units of country A's currency per dollar.
C)  8/3 units of country A's currency per dollar.
D)  None of the above is correct.E) B) and D)
F) B) and C)

Question 3

Which of the following is correct?

Accepted Answer

A)  NCO = NX
B)  NCO + I = NX
C)  NX + NCO = Y
D)  Y = NCO - IE) A) and C)
F) B) and C)

Question 4

During 2011 the inflation rate in Brazil was about 6.6% while in the U.S. it was about 3.3%. At the start of 2011 the nominal exchange rate was about 1.7 Brazilian real per U.S. dollar.
If purchasing-power parity holds, about what should the nominal exchange rate have been at the end of 2011? Show your work.

Accepted Answer

1.7(1.066)...

Question 5

Sam, a U.S. citizen, buys bonds issued by a Greek company that bottles olives. Sam's purchase is

Accepted Answer

A)  foreign direct investment. By itself it increases U.S. net capital outflow.
B)  foreign direct investment. By itself it decreases U.S. net capital outflow.
C)  foreign portfolio investment. By itself it increases U.S. net capital outflow.
D)  foreign portfolio investment. By itself it decreases U.S. net capital outflow.E) None of the above
F) A) and B)

Question 6

Which type(s)  of economies interact with other economies?

Accepted Answer

A)  only closed economies
B)  only open economies
C)  closed economies and open economies
D)  neither closed nor open economiesE) A) and B)
F) B) and C)

Question 7

The nominal exchange rate is 2 Barbados dollars per U.S. dollar. If the price of a good in Barbados is 3 Barbados dollars and the price in the U.S. is 2 U.S. dollars, what is the real exchange rate to the nearest 100th?

Accepted Answer

A)  3 Barbados goods per U.S. good
B)  1.33 Barbados goods per U.S. good
C)  .75 Barbados goods per U.S. good
D)  none of the above is correctE) B) and C)
F) A) and C)

Question 8

According to purchasing-power parity which of the following would happen if a country raised its money supply growth rate?

Accepted Answer

A)  its nominal exchange rate would fall
B)  its real exchange rate would fall
C)  its real net exports would rise
D)  All of the above would happen.E) A) and C)
F) None of the above

Question 9

Use the (hypothetical)  information in the following table to answer the following questions.
Table 31-2 
-Refer to Table 31-2. For which country(ies)  in the table does purchasing-power parity with the U.S. hold?

Accepted Answer

A)  Germany and Japan
B)  Japan and Saudi Arabia
C)  Britain and Venezuela
D)  GermanyE) A) and C)
F) A) and B)

Question 10

A country recently had a trade deficit of 350 billion euros. Its residents also purchased 400 billion euros of foreign assets. What was the value of this country's assets purchased by foreigners?

Accepted Answer

Foreigners purchased...

Question 11

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) All of the above
F) A) and B)

Question 12

An MP3 player in Singapore costs 200 Singaporean dollars. In the U.S. it costs 100 US dollars. What is the nominal exchange rate if purchasing-power parity holds?

Accepted Answer

A)  2.0
B)  1.0
C)  .50
D)  None of the above is correct.E) B) and C)
F) A) and D)

Question 13

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) None of the above
F) All of the above

Question 14

If a bushel of wheat costs $6.40 in the United States, costs 40 pesos in Mexico, and the nominal exchange rate is 10 pesos per dollar, then the real exchange rate is

Accepted Answer

A)  1.60
B)  1.25
C)  .625
D)  None of the above is correct.E) A) and B)
F) A) and C)

Question 15

Suppose that U.S. citizens purchase more cars made in Korea, and Koreans purchase more bonds issued by U.S. corporations. Other things the same, these actions

Accepted Answer

A)  raise both U.S. net exports and U.S. net capital outflows.
B)  raise U.S. net exports and lower U.S. net capital outflows.
C)  lower both U.S. net exports and U.S. net capital outflows.
D)  lower U.S. net exports and raise U.S. net capital outflows.E) A) and B)
F) A) and C)

Question 16

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

Question 17

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

Question 18

If a U.S. textbook publishing company sells texts overseas, 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) B) and C)

Question 19

Suppose a Starbucks tall latte costs $4.00 in the United States and 3.20 euros in the Euro area. Also, suppose a McDonald's Big Mac costs $4.40 in the United States and 5.50 euros in Euro area. If the nominal exchange rate is .80 euros per dollar, the prices of which goods have prices that are consistent with purchasing-power parity?

Accepted Answer

A)  both the tall latte and the Big Mac
B)  the tall latte but not the Big Mac
C)  the Big Mac but not the tall latte
D)  neither the tall latte nor the Big MacE) B) and C)
F) None of the above

Question 20

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

Exam 31: Open-Economy Macroeconomics: Basic Concepts

Which type(s) of economies interact with other economies?

Correct Answer
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Use the (hypothetical) information in the following table to answer the following questions. Table 31-2 -Refer to Table 31-2. For which country(ies) in the table does purchasing-power parity with the U.S. hold?

Correct Answer
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Which of the following statements is incorrect for an open economy?

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

Correct Answer
verified

Correct Answer
verified
1.7(1.066)...
View Answer

Sam, a U.S. citizen, buys bonds issued by a Greek company that bottles olives. Sam's purchase is

Correct Answer
verified

According to purchasing-power parity which of the following would happen if a country raised its money supply growth rate?

Correct Answer
verified

If a bushel of wheat costs $6.40 in the United States, costs 40 pesos in Mexico, and the nominal exchange rate is 10 pesos per dollar, then the real exchange rate is

Correct Answer
verified

A country recently had a trade deficit of 350 billion euros. Its residents also purchased 400 billion euros of foreign assets. What was the value of this country's assets purchased by foreigners?

Correct Answer
verified
Foreigners purchased...
View Answer

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

If a U.S. textbook publishing company sells texts overseas, U.S. net exports

Correct Answer
verified

The nominal exchange rate is 2 Barbados dollars per U.S. dollar. If the price of a good in Barbados is 3 Barbados dollars and the price in the U.S. is 2 U.S. dollars, what is the real exchange rate to the nearest 100th?

Correct Answer
verified

An MP3 player in Singapore costs 200 Singaporean dollars. In the U.S. it costs 100 US dollars. What is the nominal exchange rate if purchasing-power parity holds?

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

Suppose the real exchange rate is 3/4 gallon of country A's gasoline per gallon of U.S. gasoline, a gallon of U.S. gasoline costs $3.00 U.S., and a gallon of gas in country A costs 6 units of their currency. What is the nominal exchange rate?

Correct Answer
verified

Nominal exchange rates

Correct Answer
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International trade

Correct Answer
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Which of the following is correct?

Correct Answer
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Suppose that U.S. citizens purchase more cars made in Korea, and Koreans purchase more bonds issued by U.S. corporations. Other things the same, these actions

Correct Answer
verified

Exam 31: Open-Economy Macroeconomics: Basic Concepts

Which type(s) of economies interact with other economies?

Correct AnswerverifiedShow Answer

Use the (hypothetical) information in the following table to answer the following questions. Table 31-2 -Refer to Table 31-2. For which country(ies) in the table does purchasing-power parity with the U.S. hold?

Correct AnswerverifiedShow Answer

Which of the following statements is incorrect for an open economy?

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

Correct Answerverified1.7(1.066)...View AnswerShow Answer

Sam, a U.S. citizen, buys bonds issued by a Greek company that bottles olives. Sam's purchase is

Correct AnswerverifiedShow Answer

According to purchasing-power parity which of the following would happen if a country raised its money supply growth rate?

Correct AnswerverifiedShow Answer

If a bushel of wheat costs $6.40 in the United States, costs 40 pesos in Mexico, and the nominal exchange rate is 10 pesos per dollar, then the real exchange rate is

Correct AnswerverifiedShow Answer

A country recently had a trade deficit of 350 billion euros. Its residents also purchased 400 billion euros of foreign assets. What was the value of this country's assets purchased by foreigners?

Correct AnswerverifiedForeigners purchased...View AnswerShow Answer

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

If a U.S. textbook publishing company sells texts overseas, U.S. net exports

Correct AnswerverifiedShow Answer

The nominal exchange rate is 2 Barbados dollars per U.S. dollar. If the price of a good in Barbados is 3 Barbados dollars and the price in the U.S. is 2 U.S. dollars, what is the real exchange rate to the nearest 100th?

Correct AnswerverifiedShow Answer

An MP3 player in Singapore costs 200 Singaporean dollars. In the U.S. it costs 100 US dollars. What is the nominal exchange rate if purchasing-power parity holds?

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

Suppose the real exchange rate is 3/4 gallon of country A's gasoline per gallon of U.S. gasoline, a gallon of U.S. gasoline costs $3.00 U.S., and a gallon of gas in country A costs 6 units of their currency. What is the nominal exchange rate?

Correct AnswerverifiedShow Answer

Nominal exchange rates

Correct AnswerverifiedShow Answer

International trade

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Suppose that U.S. citizens purchase more cars made in Korea, and Koreans purchase more bonds issued by U.S. corporations. Other things the same, these actions

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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1.7(1.066)...
View Answer

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Correct Answer
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Foreigners purchased...
View Answer

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