Question 1

U.S.exports make up less than 20 percent of GDP.

Accepted Answer

A) True 
 B)False

Question 2

Both foreign direct investment and foreign portfolio investment by U.S.residents increase U.S.net capital outflow.

Accepted Answer

A) True 
 B)False

Question 3

A country with negative net exports has a trade surplus.

Accepted Answer

A) True 
 B)False

Question 4

Table 31-2
 
-Refer to Table 31-2.In real terms,U.S.goods are less expensive than goods in which country(ies) ?

Accepted Answer

A)   Bolivia and Morocco
B)   Japan,Norway,and Thailand
C)   Japan and Norway
D)   ThailandE) A) and B)
F) B) and C)

Question 5

When a French vineyard establishes a distribution center in the U.S. ,U.S.net capital outflow

Accepted Answer

A)   increases because the foreign company makes a portfolio investment in the U.S.
B)   declines because the foreign company makes a portfolio investment in the U.S.
C)   increases because the foreign company makes a direct investment in capital in the U.S.
D)   declines because the foreign company makes a direct investment in capital in the U.S.E) B) and C)
F) A) and B)

Question 6

If the exchange rate is 125 yen per dollar,then a hotel room in Tokyo that costs 25,000 yen costs $200.

Accepted Answer

A) True 
 B)False

Question 7

Other things the same,if a country saves less,then

Accepted Answer

A)   net capital outflow rises,so net exports rise.
B)   net capital outflow rises,so net exports fall.
C)   net capital outflow falls,so net exports rise.
D)   net capital outflow falls,so net exports fall.E) A) and B)
F) B) and C)

Question 8

Tony,a U.S.citizen,uses some previously obtained euros to purchase a bond issued by a Portuguese company.This transaction

Accepted Answer

A)   increases U.S.net capital outflow by more than the value of the bond.
B)   increases U.S.net capital outflow by the value of the bond.
C)   does not change U.S.net capital outflow.
D)   decreases U.S.net capital outflow.E) All of the above
F) C) and D)

Question 9

From 1980-1987,U.S.net capital outflow as a percent of GDP became a

Accepted Answer

A)   larger positive number.
B)   smaller positive number.
C)   larger negative number.
D)   smaller negative number.E) A) and B)
F) A) and C)

Question 10

What does purchasing-power parity imply about the real exchange rate?

Accepted Answer

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

Question 11

A country has $1.5 billion dollars of domestic investment and net exports of $2 billion.What is its saving?

Accepted Answer

A)   -$.5 billion
B)   $5 billion
C)   $1.5 billion
D)   $3.5 billionE) B) and D)
F) None of the above

Question 12

Suppose a McDonalds Big Mac cost $4.00 in the United States and 3.20 euros in the euro area and 5.20 Australian dollars in Australia.If exchange rates are .75 euros per dollar and 1.3 Australian dollars per dollar,where does purchasing power parity hold?

Accepted Answer

A)   Both the euro area and Australia.
B)   Neither the euro area or Australia.
C)   The euro area but not Australia.
D)   Australia but not the euro area.E) B) and C)
F) A) and D)

Question 13

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

Question 14

Other things the same,the real exchange rate between American and British goods would be higher if

Accepted Answer

A)   prices of British goods were higher,or the number of pounds a dollar purchased was higher.
B)   prices of British goods were higher,or the number of pounds a dollar purchased was lower.
C)   prices of British goods were lower,or the number of pounds a dollar purchased was higher.
D)   prices of British goods were lower,or the number of pounds a dollar purchased was lower.E) B) and C)
F) None of the above

Question 15

On behalf of your firm,you make frequent trips to Singapore.You notice that you always have to pay more dollars to get enough local currency to get your nails manicured than you have to pay to get manicured in the United States.This is

Accepted Answer

A)   inconsistent with purchasing-power parity,but might be explained by limited opportunities for arbitrage in manicuring across international borders.
B)   consistent with purchasing-power parity if prices in Hong Kong are rising more rapidly than prices in the United States.
C)   consistent with purchasing-power parity if prices in Hong Kong are rising less rapidly than prices in the United States.
D)   None of the above is correct.E) A) and D)
F) None of the above

Question 16

Suppose that foreign citizens decide to purchase more U.S.pharmaceuticals and U.S.citizens decide to buy more stock in foreign 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 C)
F) A) and B)

Question 17

When a country's central bank increases the money supply,a unit of money

Accepted Answer

A)   gains value both in terms of the domestic goods and services it can buy and in terms of the foreign currency it can buy.
B)   gains value in terms of the domestic goods and services it can buy,but loses value in terms of the foreign currency it can buy.
C)   loses value in terms of the domestic goods and services it can buy,but gains value in terms of the foreign currency it can buy.
D)   loses value both in terms of the domestic goods and services it can buy and in terms of the foreign currency it can buy.E) C) and D)
F) B) and D)

Question 18

If a country's imports exceed its exports it has a trade surplus.

Accepted Answer

A) True 
 B)False

Question 19

Table 31-2
 
-Refer to Table 31-2.For which country(ies) in the table does purchasing-power parity hold?

Accepted Answer

A)   Bolivia and Japan
B)   Bolivia and Morocco
C)   Japan and Morocco
D)   Norway and ThailandE) B) and C)
F) A) and D)

Question 20

U.S.international trade has

Accepted Answer

A)   decreased because of a decrease in the trade of goods with a high value per pound.
B)   decreased because of an increase in the trade of goods with a high value per pound.
C)   increased because of a decrease in trade of goods with a high value per pound.
D)   increased because of an increase in trade of goods with a high value per pound.E) B) and C)
F) None of the above

Exam 31: Open-Economy Macroeconomics: Basic Concepts

Suppose a McDonalds Big Mac cost $4.00 in the United States and 3.20 euros in the euro area and 5.20 Australian dollars in Australia.If exchange rates are .75 euros per dollar and 1.3 Australian dollars per dollar,where does purchasing power parity hold?

Correct AnswerverifiedShow Answer

Table 31-2 -Refer to Table 31-2.In real terms,U.S.goods are less expensive than goods in which country(ies) ?

Correct AnswerverifiedShow Answer

Table 31-2 -Refer to Table 31-2.For which country(ies) in the table does purchasing-power parity hold?

Correct AnswerverifiedShow Answer

If the exchange rate is 125 yen per dollar,then a hotel room in Tokyo that costs 25,000 yen costs $200.

Correct AnswerverifiedShow Answer

A country has $1.5 billion dollars of domestic investment and net exports of $2 billion.What is its saving?

Correct AnswerverifiedShow Answer

Other things the same,the real exchange rate between American and British goods would be higher if

Correct AnswerverifiedShow Answer

When a French vineyard establishes a distribution center in the U.S. ,U.S.net capital outflow

Correct AnswerverifiedShow Answer

U.S.exports make up less than 20 percent of GDP.

Correct AnswerverifiedShow Answer

A country with negative net exports has a trade surplus.

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

U.S.international trade has

Correct AnswerverifiedShow Answer

Suppose that foreign citizens decide to purchase more U.S.pharmaceuticals and U.S.citizens decide to buy more stock in foreign corporations.Other things the same,these actions

Correct AnswerverifiedShow Answer

What does purchasing-power parity imply about the real exchange rate?

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

Both foreign direct investment and foreign portfolio investment by U.S.residents increase U.S.net capital outflow.

Correct AnswerverifiedShow Answer

From 1980-1987,U.S.net capital outflow as a percent of GDP became a

Correct AnswerverifiedShow Answer

Tony,a U.S.citizen,uses some previously obtained euros to purchase a bond issued by a Portuguese company.This transaction

Correct AnswerverifiedShow Answer

If a country's imports exceed its exports it has a trade surplus.

Correct AnswerverifiedShow Answer

When a country's central bank increases the money supply,a unit of money

Correct AnswerverifiedShow Answer

Other things the same,if a country saves less,then

Correct AnswerverifiedShow Answer

On behalf of your firm,you make frequent trips to Singapore.You notice that you always have to pay more dollars to get enough local currency to get your nails manicured than you have to pay to get manicured in the United States.This is

Correct AnswerverifiedShow Answer

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