Question 1

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 C)
F) None of the above

Question 2

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

1.71.066)/...

Question 3

If saving is less 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) B) and D)

Question 4

Other things the same, if a country has a trade deficit and saving rises,

Accepted Answer

A)   net capital outflow rises, so the trade deficit increases.
B)   net capital outflow rises, so the trade deficit decreases.
C)   net capital outflow falls, so the trade deficit increases.
D)   net capital outflow falls, so the trade deficit decreases.E) A) and B)
F) A) and C)

Question 5

Net capital outflow measures the imbalance between the amount of

Accepted Answer

A)   foreign assets held by domestic residents and domestic assets held by foreign residents.
B)   foreign assets bought by domestic residents and the amount of domestic assets bought by foreigners.
C)   foreign assets bought by domestic residents and the amount of domestic goods and services sold to foreigners.
D)   None of the above is correct.E) C) and D)
F) B) and D)

Question 6

According to purchasing-power parity, if prices in the United States increase by a larger percentage than prices in the United Kingdom, then the

Accepted Answer

A)   real exchange rate rises.
B)   nominal exchange rate rises.
C)   real exchange rate falls.
D)   nominal exchange rate falls.E) C) and D)
F) None of the above

Question 7

During some year a country had exports of $50 billion, imports of $70 billion, and domestic investment of $100 billion. What was its saving during the year?

Accepted Answer

A)   $80 billion
B)   $100 billion
C)   $120 billion
D)   $150 billionE) All of the above
F) B) and C)

Question 8

When Microsoft establishes a distribution center in France, U.S. net capital outflow

Accepted Answer

A)   increases because Microsoft makes a portfolio investment in France.
B)   decreases because Microsoft makes a portfolio investment in France.
C)   increases because Microsoft makes a direct investment in capital in France.
D)   decreases because Microsoft makes a direct investment in capital France.E) A) and D)
F) None of the above

Question 9

Other things the same, according to purchasing-power parity, if over the next few years Mexico has a higher money supply growth rate than the U.S., then

Accepted Answer

A)   prices in Mexico will rise by a larger percentage than in the U.S. So, the dollar will appreciate against the Mexican peso.
B)   prices in Mexico will rise by larger percentage than in the U.S. So, the dollar will depreciate against the Mexican peso.
C)   prices in Mexico will rise by a smaller percentage than in the U.S. So, the dollar will appreciate against the Mexican peso.
D)   prices in Mexico will rise by a smaller percentage than in the U.S. So, the dollar will depreciate against the Mexican peso.E) B) and D)
F) B) and C)

Question 10

Last year residents of Country A purchased $600 billion of foreign assets. Foreigners purchased $425 billion dollars of assets and $375 billion of goods and services from country A. What was the value of Country A's imports?

Accepted Answer

The value of Country...

Question 11

Which of the following statements is correct for an open economy with a trade surplus?

Accepted Answer

A)   The trade surplus cannot last for very many years.
B)   The trade surplus must be offset by negative net capital outflow.
C)   The trade surplus implies that the country's national saving is greater than domestic investment.
D)   None of the above is correct.E) None of the above
F) B) and C)

Question 12

If purchasing-power parity holds, a dollar will buy

Accepted Answer

A)   one unit of each foreign currency.
B)   foreign currency equal to the U.S. price level divided by the foreign country's price level.
C)   enough foreign currency to buy as many goods as it does in the United States.
D)   None of the above is implied by purchasing-power parity.E) None of the above
F) A) and C)

Question 13

You are the CEO of a U.S. firm considering building a factory in Chile. If the dollar appreciates relative to the Chilean peso, then other things the same

Accepted Answer

A)   it takes fewer dollars to build the factory. By itself building the factory increases U.S. net capital outflow.
B)   it takes fewer dollars to build the factory. By itself building the factory decreases U.S. net capital outflow.
C)   it takes more dollars to build the factory. By itself building the factory increases U.S. net capital outflow.
D)   it takes more dollars to build the factory. By itself building the factory decreases U.S. net capital outflow.E) B) and C)
F) B) and D)

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

The dollar is said to appreciate against the euro if

Accepted Answer

A)   the exchange rate falls. Other things the same, it will cost fewer euros to buy U.S. goods.
B)   the exchange rate falls. Other things the same, it will cost more euros to buy U.S. goods.
C)   the exchange rate rises. Other things the same, it will cost fewer euros to buy U.S. goods.
D)   the exchange rate rises. Other things the same, it will cost more euros to buy U.S. goods.E) B) and D)
F) A) and B)

Question 16

As measured by the amount of trade it does, has the U.S. economy become more internationalized? Provide two reasons for this change.

Accepted Answer

Yes.
reduced transportation co...

Question 17

Suppose that a country imports $90 million worth of goods and services and exports $80 million worth of goods and services. What is the value of net exports?

Accepted Answer

A)   $170 million
B)   $80 million
C)   $10 million
D)   -$10 millionE) B) and D)
F) None of the above

Question 18

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) A) and B)
F) B) and C)

Question 19

Last year country A's residents purchased $700 billion of goods and services from and sold $500 billion of goods and services to residents of foreign countries. Its domestic investment was $1,100. What was country A's saving? Show your work.

Accepted Answer

net capital outflow = net expo...

Question 20

From 1970 to 1998 the U.S. dollar

Accepted Answer

A)   gained value compared to the Italian lira because inflation was higher in Italy.
B)   gained value compared to the Italian lira because inflation was lower in Italy.
C)   lost value compared to the Italian lira because inflation was higher in Italy.
D)   lost value compared to the Italian lira because inflation was lower in Italy.E) None of the above
F) B) and D)

Exam 18: Open-Economy Macroeconomics: Basic Concepts

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

Correct Answer
verified

The dollar is said to appreciate against the euro if

Correct Answer
verified

Other things the same, if a country has a trade deficit and saving rises,

Correct Answer
verified

You are the CEO of a U.S. firm considering building a factory in Chile. If the dollar appreciates relative to the Chilean peso, then other things the same

Correct Answer
verified

From 1970 to 1998 the U.S. dollar

Correct Answer
verified

Last year residents of Country A purchased $600 billion of foreign assets. Foreigners purchased $425 billion dollars of assets and $375 billion of goods and services from country A. What was the value of Country A's imports?

Correct Answer
verified
The value of Country...
View Answer

If saving is less than domestic investment, then

Correct Answer
verified

Correct Answer
verified
1.71.066)/...
View Answer

Other things the same, according to purchasing-power parity, if over the next few years Mexico has a higher money supply growth rate than the U.S., then

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

According to purchasing-power parity, if prices in the United States increase by a larger percentage than prices in the United Kingdom, then the

Correct Answer
verified

Suppose that a country imports $90 million worth of goods and services and exports $80 million worth of goods and services. What is the value of net exports?

Correct Answer
verified

As measured by the amount of trade it does, has the U.S. economy become more internationalized? Provide two reasons for this change.

Correct Answer
verified
Yes.
reduced transportation co...
View Answer

Net capital outflow measures the imbalance between the amount of

Correct Answer
verified

Last year country A's residents purchased $700 billion of goods and services from and sold $500 billion of goods and services to residents of foreign countries. Its domestic investment was $1,100. What was country A's saving? Show your work.

Correct Answer
verified
net capital outflow = net expo...
View Answer

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

Correct Answer
verified

If purchasing-power parity holds, a dollar will buy

Correct Answer
verified

Which of the following statements is correct for an open economy with a trade surplus?

Correct Answer
verified

When Microsoft establishes a distribution center in France, U.S. net capital outflow

Correct Answer
verified

During some year a country had exports of $50 billion, imports of $70 billion, and domestic investment of $100 billion. What was its saving during the year?

Correct Answer
verified

Exam 18: Open-Economy Macroeconomics: Basic Concepts

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

Correct AnswerverifiedShow Answer

The dollar is said to appreciate against the euro if

Correct AnswerverifiedShow Answer

Other things the same, if a country has a trade deficit and saving rises,

Correct AnswerverifiedShow Answer

You are the CEO of a U.S. firm considering building a factory in Chile. If the dollar appreciates relative to the Chilean peso, then other things the same

Correct AnswerverifiedShow Answer

From 1970 to 1998 the U.S. dollar

Correct AnswerverifiedShow Answer

Last year residents of Country A purchased $600 billion of foreign assets. Foreigners purchased $425 billion dollars of assets and $375 billion of goods and services from country A. What was the value of Country A's imports?

Correct AnswerverifiedThe value of Country...View AnswerShow Answer

If saving is less than domestic investment, then

Correct AnswerverifiedShow Answer

Correct Answerverified1.71.066)/...View AnswerShow Answer

Other things the same, according to purchasing-power parity, if over the next few years Mexico has a higher money supply growth rate than the U.S., then

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

According to purchasing-power parity, if prices in the United States increase by a larger percentage than prices in the United Kingdom, then the

Correct AnswerverifiedShow Answer

Suppose that a country imports $90 million worth of goods and services and exports $80 million worth of goods and services. What is the value of net exports?

Correct AnswerverifiedShow Answer

As measured by the amount of trade it does, has the U.S. economy become more internationalized? Provide two reasons for this change.

Correct AnswerverifiedYes.reduced transportation co...View AnswerShow Answer

Net capital outflow measures the imbalance between the amount of

Correct AnswerverifiedShow Answer

Last year country A's residents purchased $700 billion of goods and services from and sold $500 billion of goods and services to residents of foreign countries. Its domestic investment was $1,100. What was country A's saving? Show your work.

Correct Answerverifiednet capital outflow = net expo...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

If purchasing-power parity holds, a dollar will buy

Correct AnswerverifiedShow Answer

Which of the following statements is correct for an open economy with a trade surplus?

Correct AnswerverifiedShow Answer

When Microsoft establishes a distribution center in France, U.S. net capital outflow

Correct AnswerverifiedShow Answer

During some year a country had exports of $50 billion, imports of $70 billion, and domestic investment of $100 billion. What was its saving during the year?

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
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Correct Answer
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verified
The value of Country...
View Answer

Correct Answer
verified

Correct Answer
verified
1.71.066)/...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Yes.
reduced transportation co...
View Answer

Correct Answer
verified

Correct Answer
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net capital outflow = net expo...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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