Question 1

Which of the following equations is correct?

Accepted Answer

A)   S = I + C
B)   S = I - NX
C)   S = I + NCO
D)   S = NX - NCO.E) None of the above
F) All of the above

Question 2

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 C)
F) None of the above

Question 3

A farm equipment retailer in Azerbaijan exchanges Azerbaijan manats the currency of Azerbaijan) for $300,000 a bank in Azerbaijan was holding. It uses the $300,000 to buy farm equipment from a U.S. company. The U.S. company deposits half of these funds in a U.S. bank and exchanges the other half for euros from a bank in London.
As a result of these transactions, by how much, if at all, and in which direction did:
A. U.S. net exports change?
B. U.S. net capital outflow change?

Accepted Answer

A. U.S. net exports ...

Question 4

Which of the following is correct?

Accepted Answer

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

Question 5

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

Question 6

A country's trade balance will fall if

Accepted Answer

A)   either investment or saving rise.
B)   either investment falls or saving rises.
C)   either saving falls or investment rises.
D)   either investment or saving fall.E) None of the above
F) All of the above

Question 7

The nominal exchange rate is about 2 Aruban florin per dollar. If a basket of goods in the United States costs $40, how many florins must a basket of goods in Aruba cost for purchasing-power parity to hold?

Accepted Answer

A)   20 florin
B)   40 florin
C)   60 florin
D)   80 florinE) All of the above
F) A) and D)

Question 8

A country recently had saving of 250 billion euro and domestic investment of 400 billion euro. What was the value of this country's net exports? Show your work.

Accepted Answer

saving = investment + net capital outflo...

Question 9

A tall latte in China costs 30 yuan. The same latte in the U.S. costs 4 dollars. If the exchange rate is 6.5 yuan per dollar then, the real exchange rate is

Accepted Answer

A)   .867 so the good is more expensive in the U.S.
B)   .867 so the good is more expensive in China.
C)   1.154 so the god is more expensive in the U.S.
D)   1.154 so the good is more expensive in China.E) A) and B)
F) C) and D)

Question 10

Other things the same, if the exchange rate changes from 30 Thai bhat per dollar to 25 Thai bhat per dollar, then the dollar has

Accepted Answer

A)   appreciated and so buys more Thai goods.
B)   appreciated and so buys fewer Thai goods.
C)   depreciated and so buys more Thai goods.
D)   depreciated and so buys fewer Thai goods.E) C) and D)
F) B) and D)

Question 11

Good that cost one half dollar in the U.S. cost one euro in Germany, the real exchange rate would be computed as how many German goods per U.S. goods?

Accepted Answer

A)   one half
B)   one half the price of the U.S. goods
C)   one half the number of euros it takes to buy a U.S. dollar
D)   None of the above is correct.E) None of the above
F) All of the above

Question 12

A company in Panama pays for a U.S. architect to design a factory building. By itself this transaction

Accepted Answer

A)   increases U.S. exports and so increases the U.S. trade balance.
B)   increases U.S. exports and so decreases the U.S. trade balance.
C)   increases U.S. imports and so increases the U.S. trade balance.
D)   increases U.S. imports and so decreases the U.S. trade balance.E) All of the above
F) A) and B)

Question 13

If the exchange rate is .60 British pounds = $1, a bottle of ale that costs 3 pounds costs

Accepted Answer

A)   $1.80.
B)   $4.80.
C)   $5.
D)   None of the above is correct.E) B) and C)
F) A) and D)

Question 14

The country of Sylvania has a GDP of $900, investment of $200, government purchases of $200, and net capital outflow of -$100. What is consumption?

Accepted Answer

A)   $700
B)   $600
C)   $500
D)   $300E) A) and D)
F) A) and C)

Question 15

U.S.-based John Deere sells machinery to residents of South Africa who pay with South African currency the rand) .

Accepted Answer

A)   This increases U.S. net capital outflow because the U.S. acquires foreign assets.
B)   This decreases U.S. net capital outflow because the U.S. acquires foreign assets.
C)   This increases U.S. net capital outflow because the U.S. sells capital goods.
D)   This decreases U.S. net capital outflow because the U.S. sells capital goods.E) All of the above
F) A) and C)

Question 16

A British grocery chain uses previously obtained U.S. dollars to purchase oranges from the United States. This transaction

Accepted Answer

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

Question 17

According to purchasing-power parity, if the same basket of goods costs $100 in the U.S. and 50 pounds in Britain, then what is the nominal exchange rate?

Accepted Answer

A)   2 pounds per dollar
B)   1 pound per dollar
C)   1/2 pound per dollar
D)   None of the above is correctE) A) and D)
F) A) and C)

Question 18

A bushel of apples costs $15.00 in the U.S. The same apples cost 1,600 yen in Japan. If the exchange rate is 80 yen per dollar, is there a possibility for arbitrage? Explain and defend your answer. As part of your defense, find the real exchange rate.

Accepted Answer

There is a possibility for profit by buy...

Question 19

A Japanese flour mill buys wheat from the United States and pays for it with yen. Other things the same, Japanese

Accepted Answer

A)   net exports increase, and U.S. net capital outflow increases.
B)   net exports increase, and U.S. net capital outflow decreases.
C)   net exports decrease, and U.S. net capital outflow increases.
D)   net exports decrease, and U.S. net capital outflow decreases.E) C) and D)
F) None of the above

Question 20

If domestic residents of other countries purchase $600 billion of U.S. assets and U.S residents purchase $500 billion of foreign assets, then U.S. net capital outflow is

Accepted Answer

A)   $100 billion and the U.S. has a trade surplus.
B)   $100 billion and the U.S has a trade deficit.
C)   -$100 billion and the U.S. has a trade surplus.
D)   -$100 billion and the U.S. has a trade deficit.E) A) and B)
F) All of the above

Exam 13: Open-Economy Macroeconomics: Basic Concepts

If the exchange rate is .60 British pounds = $1, a bottle of ale that costs 3 pounds costs

Correct Answer
verified

According to purchasing-power parity, if the same basket of goods costs $100 in the U.S. and 50 pounds in Britain, then what is the nominal exchange rate?

Correct Answer
verified

A British grocery chain uses previously obtained U.S. dollars to purchase oranges from the United States. This transaction

Correct Answer
verified

A country's trade balance will fall if

Correct Answer
verified

Which of the following equations is correct?

Correct Answer
verified

A bushel of apples costs $15.00 in the U.S. The same apples cost 1,600 yen in Japan. If the exchange rate is 80 yen per dollar, is there a possibility for arbitrage? Explain and defend your answer. As part of your defense, find the real exchange rate.

Correct Answer
verified
There is a possibility for profit by buy...
View 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 Answer
verified

A company in Panama pays for a U.S. architect to design a factory building. By itself this transaction

Correct Answer
verified

A Japanese flour mill buys wheat from the United States and pays for it with yen. Other things the same, Japanese

Correct Answer
verified

The country of Sylvania has a GDP of $900, investment of $200, government purchases of $200, and net capital outflow of -$100. What is consumption?

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

A tall latte in China costs 30 yuan. The same latte in the U.S. costs 4 dollars. If the exchange rate is 6.5 yuan per dollar then, the real exchange rate is

Correct Answer
verified

U.S.-based John Deere sells machinery to residents of South Africa who pay with South African currency the rand) .

Correct Answer
verified

Correct Answer
verified
A. U.S. net exports ...
View Answer

A country recently had saving of 250 billion euro and domestic investment of 400 billion euro. What was the value of this country's net exports? Show your work.

Correct Answer
verified
saving = investment + net capital outflo...
View Answer

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

Correct Answer
verified

Good that cost one half dollar in the U.S. cost one euro in Germany, the real exchange rate would be computed as how many German goods per U.S. goods?

Correct Answer
verified

If domestic residents of other countries purchase $600 billion of U.S. assets and U.S residents purchase $500 billion of foreign assets, then U.S. net capital outflow is

Correct Answer
verified

The nominal exchange rate is about 2 Aruban florin per dollar. If a basket of goods in the United States costs $40, how many florins must a basket of goods in Aruba cost for purchasing-power parity to hold?

Correct Answer
verified

Other things the same, if the exchange rate changes from 30 Thai bhat per dollar to 25 Thai bhat per dollar, then the dollar has

Correct Answer
verified

Exam 13: Open-Economy Macroeconomics: Basic Concepts

If the exchange rate is .60 British pounds = $1, a bottle of ale that costs 3 pounds costs

Correct AnswerverifiedShow Answer

According to purchasing-power parity, if the same basket of goods costs $100 in the U.S. and 50 pounds in Britain, then what is the nominal exchange rate?

Correct AnswerverifiedShow Answer

A British grocery chain uses previously obtained U.S. dollars to purchase oranges from the United States. This transaction

Correct AnswerverifiedShow Answer

A country's trade balance will fall if

Correct AnswerverifiedShow Answer

Which of the following equations is correct?

Correct AnswerverifiedShow Answer

A bushel of apples costs $15.00 in the U.S. The same apples cost 1,600 yen in Japan. If the exchange rate is 80 yen per dollar, is there a possibility for arbitrage? Explain and defend your answer. As part of your defense, find the real exchange rate.

Correct AnswerverifiedThere is a possibility for profit by buy...View AnswerShow 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

A company in Panama pays for a U.S. architect to design a factory building. By itself this transaction

Correct AnswerverifiedShow Answer

A Japanese flour mill buys wheat from the United States and pays for it with yen. Other things the same, Japanese

Correct AnswerverifiedShow Answer

The country of Sylvania has a GDP of $900, investment of $200, government purchases of $200, and net capital outflow of -$100. What is consumption?

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

A tall latte in China costs 30 yuan. The same latte in the U.S. costs 4 dollars. If the exchange rate is 6.5 yuan per dollar then, the real exchange rate is

Correct AnswerverifiedShow Answer

U.S.-based John Deere sells machinery to residents of South Africa who pay with South African currency the rand) .

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA. U.S. net exports ...View AnswerShow Answer

A country recently had saving of 250 billion euro and domestic investment of 400 billion euro. What was the value of this country's net exports? Show your work.

Correct Answerverifiedsaving = investment + net capital outflo...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Good that cost one half dollar in the U.S. cost one euro in Germany, the real exchange rate would be computed as how many German goods per U.S. goods?

Correct AnswerverifiedShow Answer

If domestic residents of other countries purchase $600 billion of U.S. assets and U.S residents purchase $500 billion of foreign assets, then U.S. net capital outflow is

Correct AnswerverifiedShow Answer

The nominal exchange rate is about 2 Aruban florin per dollar. If a basket of goods in the United States costs $40, how many florins must a basket of goods in Aruba cost for purchasing-power parity to hold?

Correct AnswerverifiedShow Answer

Other things the same, if the exchange rate changes from 30 Thai bhat per dollar to 25 Thai bhat per dollar, then the dollar has

Correct AnswerverifiedShow Answer

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There is a possibility for profit by buy...
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A. U.S. net exports ...
View Answer

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saving = investment + net capital outflo...
View Answer

Correct Answer
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Correct Answer
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