Question 1

Bill, a U.S. citizen, pays a Spanish architect to design a metal casting factory. Which country's exports increase?

Accepted Answer

A)   Spain's
B)   the U.S.'s
C)   Spain's and the U.S.'s
D)   neither Spain's nor the U.S.'sE) A) and B)
F) B) and D)

Question 2

Why are net exports and net capital outflow always equal?

Accepted Answer

Net exports and net capital outflow are ...

Question 3

The value of the goods and services Australia purchases from the U.S. are less than the value of goods and services the U.S. purchases from Australia. The U.S. has

Accepted Answer

A)   positive net exports with Australia and a trade surplus with Australia.
B)   positive net exports with Australia and a trade deficit with Australia.
C)   negative net exports with Australia and a trade surplus with Australia.
D)   negative net exports with Australia and a trade deficit with Australia.E) B) and C)
F) None of the above

Question 4

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

Accepted Answer

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

Question 5

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 6

One year a country has negative net exports. The next year it still has negative net exports and imports have risen more than exports.

Accepted Answer

A)   its trade surplus fell.
B)   its trade surplus rose.
C)   its trade deficit fell.
D)   its trade deficit roseE) A) and B)
F) None of the above

Question 7

Other things the same, the real exchange rate between American and French goods would be lower if

Accepted Answer

A)   prices of French goods were higher, or the number of euros a dollar purchased was higher.
B)   prices of French goods were higher, or the number of euros a dollar purchased was lower.
C)   prices of French goods were lower, or the number of euros a dollar purchased was higher.
D)   prices of French goods were lower, or the number of euros a dollar purchased was lower.E) All of the above
F) A) and B)

Question 8

Other things the same, an increase in the U.S. real exchange rate makes U.S. goods more expensive relative to foreign goods.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is an example of U.S. foreign direct investment?

Accepted Answer

A)   A Swedish car manufacturer opens a plant in Tennessee.
B)   A Dutch citizen buys shares of stock in a U.S. company.
C)   A U.S. based restaurant chain opens new restaurants in India.
D)   A U.S. citizen buys stock in companies located in Japan.E) A) and B)
F) None of the above

Question 10

Suppose a Starbucks tall latte cost $4.00 in the United States, 5.00 euros in the euro area and $2.50 Australian dollars in Australia. Nominal exchange rates are .80 euros per dollar and 1.4 Australian dollars per U.S. dollar. Where does purchasing-power parity hold?

Accepted Answer

A)   both the euro area and Australia
B)   the euro area but not Australia
C)   Australia but not the euro area
D)   neither the euro area or AustraliaE) C) and D)
F) B) and C)

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

According to purchasing-power parity, if it took 1,100 Korean Won to buy a dollar this year, but it took 1,000 to buy it last year, then the dollar has

Accepted Answer

A)   appreciated, indicating inflation was higher in the U.S. than in Korea.
B)   appreciated indicating inflation was lower in the U.S. than in Korea.
C)   depreciated indicating inflation was higher in the U.S. than in Korea.
D)   depreciated indicating inflation was lower in the U.S. than in Korea.E) B) and C)
F) None of the above

Question 13

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

Question 14

A Finnish corporation builds a factory the produces ceiling fans in the United States. This is an example of Finish

Accepted Answer

A)   foreign direct investment that increases Finnish net capital outflow.
B)   foreign direct investment that decreases Finnish net capital outflow.
C)   foreign portfolio investment that increases Finnish net capital outflow.
D)   foreign portfolio investment that decreases Finnish net capital outflow.E) A) and B)
F) None of the above

Question 15

From 2000 to 2012 the U.S. had a trade

Accepted Answer

A)   surplus and a large net capital inflow.
B)   surplus and a large net capital outflow.
C)   deficit and a large net capital inflow.
D)   deficit and a large net capital outflow.E) A) and C)
F) C) and D)

Question 16

A U.S. firm exchanges dollars for yen and then uses them to buy Japanese goods. Overall as a result of these transactions

Accepted Answer

A)   both U.S. net capital outflow and U.S. net exports rise.
B)   both U.S. net capital outflow and U.S. net exports fall.
C)   U.S. net capital outflow rises and U.S. net exports fall.
D)   U.S. net capital outflow falls and U.S. net exports rise.E) B) and D)
F) A) and D)

Question 17

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) C) and D)

Question 18

If the real exchange rate between the U.S. and Argentina is 1, then

Accepted Answer

A)   purchasing-power parity holds, and 1 U.S. dollar buys 1 Argentinean bolivar.
B)   purchasing-power parity holds, and the amount of dollars needed to buy goods in the U.S. is the same as the amount needed to buy enough Argentinean bolivars to buy the same goods in Argentina.
C)   purchasing-power parity does not hold, but 1 U.S. dollar buys 1 Argentinean bolivar.
D)   purchasing-power parity does not hold, but the amount of dollars needed to buy goods in the U.S. is the same as the amount needed to buy enough Argentinean bolivars to buy the same goods in Argentina.E) A) and B)
F) B) and D)

Question 19

If a U.S. dollar purchases 4 Argentinean pesos, and a gallon of milk costs $3 in the U.S. and 6 pesos in Argentina what is the real exchange rate?

Accepted Answer

A)   2
B)   3/2
C)   2/3
D)   1/2E) C) and D)
F) A) and B)

Question 20

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)...

Exam 31: Open-Economy Macroeconomics: Basic Concepts

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

Correct Answer
verified

One year a country has negative net exports. The next year it still has negative net exports and imports have risen more than exports.

Correct Answer
verified

Which of the following is correct?

Correct Answer
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A U.S. firm exchanges dollars for yen and then uses them to buy Japanese goods. Overall as a result of these transactions

Correct Answer
verified

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

Correct Answer
verified

If the real exchange rate between the U.S. and Argentina is 1, then

Correct Answer
verified

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

Which of the following is an example of U.S. foreign direct investment?

Correct Answer
verified

The value of the goods and services Australia purchases from the U.S. are less than the value of goods and services the U.S. purchases from Australia. The U.S. has

Correct Answer
verified

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

Correct Answer
verified

From 2000 to 2012 the U.S. had a trade

Correct Answer
verified

Other things the same, the real exchange rate between American and French goods would be lower if

Correct Answer
verified

Bill, a U.S. citizen, pays a Spanish architect to design a metal casting factory. Which country's exports increase?

Correct Answer
verified

Suppose a Starbucks tall latte cost $4.00 in the United States, 5.00 euros in the euro area and $2.50 Australian dollars in Australia. Nominal exchange rates are .80 euros per dollar and 1.4 Australian dollars per U.S. dollar. Where does purchasing-power parity hold?

Correct Answer
verified

A Finnish corporation builds a factory the produces ceiling fans in the United States. This is an example of Finish

Correct Answer
verified

According to purchasing-power parity, if it took 1,100 Korean Won to buy a dollar this year, but it took 1,000 to buy it last year, then the dollar has

Correct Answer
verified

Why are net exports and net capital outflow always equal?

Correct Answer
verified
Net exports and net capital outflow are ...
View Answer

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

Other things the same, an increase in the U.S. real exchange rate makes U.S. goods more expensive relative to foreign goods.

Correct Answer
verified

If a U.S. dollar purchases 4 Argentinean pesos, and a gallon of milk costs $3 in the U.S. and 6 pesos in Argentina what is the real exchange rate?

Correct Answer
verified

Exam 31: Open-Economy Macroeconomics: Basic Concepts

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

Correct AnswerverifiedShow Answer

One year a country has negative net exports. The next year it still has negative net exports and imports have risen more than exports.

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

A U.S. firm exchanges dollars for yen and then uses them to buy Japanese goods. Overall as a result of these transactions

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the real exchange rate between the U.S. and Argentina is 1, then

Correct AnswerverifiedShow Answer

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

Which of the following is an example of U.S. foreign direct investment?

Correct AnswerverifiedShow Answer

The value of the goods and services Australia purchases from the U.S. are less than the value of goods and services the U.S. purchases from Australia. The U.S. has

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

From 2000 to 2012 the U.S. had a trade

Correct AnswerverifiedShow Answer

Other things the same, the real exchange rate between American and French goods would be lower if

Correct AnswerverifiedShow Answer

Bill, a U.S. citizen, pays a Spanish architect to design a metal casting factory. Which country's exports increase?

Correct AnswerverifiedShow Answer

Suppose a Starbucks tall latte cost $4.00 in the United States, 5.00 euros in the euro area and $2.50 Australian dollars in Australia. Nominal exchange rates are .80 euros per dollar and 1.4 Australian dollars per U.S. dollar. Where does purchasing-power parity hold?

Correct AnswerverifiedShow Answer

A Finnish corporation builds a factory the produces ceiling fans in the United States. This is an example of Finish

Correct AnswerverifiedShow Answer

According to purchasing-power parity, if it took 1,100 Korean Won to buy a dollar this year, but it took 1,000 to buy it last year, then the dollar has

Correct AnswerverifiedShow Answer

Why are net exports and net capital outflow always equal?

Correct AnswerverifiedNet exports and net capital outflow are ...View AnswerShow Answer

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

Other things the same, an increase in the U.S. real exchange rate makes U.S. goods more expensive relative to foreign goods.

Correct AnswerverifiedShow Answer

If a U.S. dollar purchases 4 Argentinean pesos, and a gallon of milk costs $3 in the U.S. and 6 pesos in Argentina what is the real exchange rate?

Correct AnswerverifiedShow Answer

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1.7(1.066)...
View Answer

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Correct Answer
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Net exports and net capital outflow are ...
View Answer

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

Correct Answer
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Correct Answer
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