Question 1

Most of the change from 2000 to 2006 in U.S. net capital outflow as a percent of GDP was due to a(n)

Accepted Answer

A)  decrease in U.S. investment.
B)  decrease in U.S. national saving.
C)  increase in U.S. investment.
D)  increase in U.S. national saving.E) B) and C)
F) A) and B)

Question 2

Which of the following equations is always correct in an open economy?

Accepted Answer

A)  I = Y - C
B)  I = S
C)  I = S - NCO
D)  I = S + NXE) C) and D)
F) All of the above

Question 3

How do the nominal exchange rate and the real exchange rate differ?

Accepted Answer

The nominal exchange rate is the rate at...

Question 4

If Ireland's domestic investment exceeds national saving, then Ireland has

Accepted Answer

A)  positive net capital outflows and negative net exports.
B)  positive net capital outflows and positive net exports.
C)  negative net capital outflows and negative net exports.
D)  negative net capital outflows and positive net exports.E) C) and D)
F) B) and C)

Question 5

Other things the same, if U.S. net capital outflow rises, so does U.S. saving.

Accepted Answer

A) True 
 B)False

Question 6

If a country has Y > C + I + G, then

Accepted Answer

A)  S > I and it has a trade surplus.
B)  S > I and it has a trade deficit.
C)  S 
D)  S < I and it has a trade deficit.E) B) and D)
F) None of the above

Question 7

The price of a basket of goods is $2000 in the U.S. If purchasing power parity holds, and the dollar buys two units of some country's currency, then how many units of foreign currency does the same basket of goods cost in that country?

Accepted Answer

A)  4000
B)  2000
C)  1000
D)  None of the above are correct.E) B) and D)
F) A) and D)

Question 8

Suppose that a country imports $75 million of goods and services and exports $100 million of goods and services. What is the value of net exports?

Accepted Answer

A)  $175 million
B)  $75 million
C)  $25 million
D)  -$25 millionE) A) and D)
F) All of the above

Question 9

Carl and Carly are American residents. Carl buys stock of a corporation in Austria. Carly opens a coffee shop in Austria. Whose purchase, by itself, decreases Austria's net capital outflow?

Accepted Answer

A)  Carl's
B)  Carly's
C)  both Carl's and Carly's
D)  neither Carl's nor Carly'sE) B) and C)
F) All of the above

Question 10

According to purchasing power parity, if it took 4 Israeli Shekels to buy a dollar this year, but it took 3.5 to buy it last year, then the dollar has

Accepted Answer

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

Question 11

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

Question 12

In an open economy, gross domestic product equals $1,850 billion, consumption expenditure equals $975 billion, government expenditure equals $225 billion, investment equals $500 billion, and net exports equals $150 billion. What is national savings?

Accepted Answer

A)  $0
B)  $500 billion
C)  $650 billion
D)  $975 billionE) All of the above
F) A) and B)

Question 13

A country must have a positive net outflow of capital if it has a trade deficit.

Accepted Answer

A) True 
 B)False

Question 14

If a country has net exports of $8 billion and sold $40 billion of goods and services abroad, then it has

Accepted Answer

A)  $48 billion of imports and $40 billion of exports.
B)  $48 billion of exports and $40 billion of imports.
C)  $40 billion of imports and $32 billion of exports.
D)  $40 billion of exports and $32 billion of imports.E) A) and D)
F) A) and C)

Question 15

When the Sykes Corporation (an American company)  buys shares of Audi stock (a German company)  for its pension fund, U.S. net capital outflow

Accepted Answer

A)  increases because an American company makes a portfolio investment in Germany.
B)  declines because an American company makes a portfolio investment in Germany.
C)  increases because an American company makes a direct investment in Germany.
D)  declines because an American company makes a direct investment in Germany.E) All of the above
F) B) and D)

Question 16

If the United States had negative 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 17

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

Accepted Answer

A)  e(P*/P) .
B)  e(P/P*) .
C)  e + P*/P.
D)  e - P/P*.E) None of the above
F) A) and D)

Question 18

If purchasing power parity holds, when a country's central bank decreases the money supply, its

Accepted Answer

A)  price level rises and its currency appreciates relative to other currencies in the world.
B)  price level falls and its currency appreciates relative to other currencies in the world.
C)  price level rises and its currency depreciates relative to other currencies in the world.
D)  price level falls and its currency depreciates relative to other currencies in the world.E) B) and D)
F) A) and D)

Question 19

If you go to the bank and notice that a dollar buys more Mexican pesos than it used to, then the dollar has

Accepted Answer

A)  appreciated. Other things the same, the appreciation would make Americans less likely to travel to Mexico.
B)  appreciated. Other things the same, the appreciation would make Americans more likely to travel to Mexico.
C)  depreciated. Other things the same, the depreciation would make Americans less likely to travel to Mexico.
D)  depreciated. Other things the same, the depreciation would make Americans more likely to travel to Mexico.E) C) and D)
F) None of the above

Question 20

If saving is greater 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) B) and C)
F) A) and D)

Exam 18: Open-Economy Macroeconomic Models

Other things the same, if U.S. net capital outflow rises, so does U.S. saving.

Correct AnswerverifiedShow Answer

If you go to the bank and notice that a dollar buys more Mexican pesos than it used to, then the dollar has

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The price of a basket of goods is $2000 in the U.S. If purchasing power parity holds, and the dollar buys two units of some country's currency, then how many units of foreign currency does the same basket of goods cost in that country?

Correct AnswerverifiedShow Answer

If a country has Y > C + I + G, then

Correct AnswerverifiedShow Answer

How do the nominal exchange rate and the real exchange rate differ?

Correct AnswerverifiedThe nominal exchange rate is the rate at...View AnswerShow Answer

Suppose that a country imports $75 million of goods and services and exports $100 million of goods and services. What is the value of net exports?

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

Carl and Carly are American residents. Carl buys stock of a corporation in Austria. Carly opens a coffee shop in Austria. Whose purchase, by itself, decreases Austria's net capital outflow?

Correct AnswerverifiedShow Answer

A country must have a positive net outflow of capital if it has a trade deficit.

Correct AnswerverifiedShow Answer

If Ireland's domestic investment exceeds national saving, then Ireland has

Correct AnswerverifiedShow Answer

In an open economy, gross domestic product equals $1,850 billion, consumption expenditure equals $975 billion, government expenditure equals $225 billion, investment equals $500 billion, and net exports equals $150 billion. What is national savings?

Correct AnswerverifiedShow Answer

If saving is greater than domestic investment, then

Correct AnswerverifiedShow Answer

Most of the change from 2000 to 2006 in U.S. net capital outflow as a percent of GDP was due to a(n)

Correct AnswerverifiedShow Answer

According to purchasing power parity, if it took 4 Israeli Shekels to buy a dollar this year, but it took 3.5 to buy it last year, then the dollar has

Correct AnswerverifiedShow Answer

Which of the following equations is always correct in an open economy?

Correct AnswerverifiedShow Answer

If purchasing power parity holds, when a country's central bank decreases the money supply, its

Correct AnswerverifiedShow Answer

If a country has net exports of $8 billion and sold $40 billion of goods and services abroad, then it has

Correct AnswerverifiedShow Answer

If the United States had negative net exports last year, then it

Correct AnswerverifiedShow Answer

When the Sykes Corporation (an American company) buys shares of Audi stock (a German company) for its pension fund, U.S. net capital outflow

Correct AnswerverifiedShow Answer

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The nominal exchange rate is the rate at...
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