Question 1

Which statement best describes how the Canadian economy has evolved over the past five decades?

Accepted Answer

A)  It has become more closed. 
B)  It has become more open. 
C)  It has become less trade-oriented. 
D)  It has become more self-sufficient. 
A)  It has become more closed. 
B)  It has become more open. 
C)  It has become less trade-oriented. 
D)  It has become more self-sufficient.

Question 2

A country has $120 million of saving and domestic investment of $30 million. What are net exports?

Accepted Answer

A)  -$90 million 
B)  $90 million 
C)  $120 million 
D)  $150 million 
A)  -$90 million 
B)  $90 million 
C)  $120 million 
D)  $150 million

Question 3

Which unit of measurement would be appropriate for a real exchange rate?

Accepted Answer

A)  9 euros per dollar 
B)  15 euros per basket of Canadian goods 
C)  1/2 case of German beer per case of Canadian beer 
D)  1/2 case of German beer per dollar of Canadian beer 
A)  9 euros per dollar 
B)  15 euros per basket of Canadian goods 
C)  1/2 case of German beer per case of Canadian beer 
D)  1/2 case of German beer per dollar of Canadian beer

Question 4

Between 1981 and 1988, what happened to Canadian net capital outflow as a percent of GDP?

Accepted Answer

A)  It became a larger, positive number. 
B)  It became a smaller, positive number. 
C)  It became a larger, negative number. 
D)  It became a smaller, negative number. 
A)  It became a larger, positive number. 
B)  It became a smaller, positive number. 
C)  It became a larger, negative number. 
D)  It became a smaller, negative number.

Question 5

A firm in India sells spices to a Canadian chain of culinary stores. Which statement best identifies the effects of this transaction?

Accepted Answer

A)  It increases Canadian and Indian net exports. 
B)  It decreases Canadian and Indian net exports. 
C)  It increases Canadian net exports and decreases Indian net exports. 
D)  It decreases Canadian net exports and increases Indian net exports. 
A)  It increases Canadian and Indian net exports. 
B)  It decreases Canadian and Indian net exports. 
C)  It increases Canadian net exports and decreases Indian net exports. 
D)  It decreases Canadian net exports and increases Indian net exports.

Question 6

Suppose that the exchange rate is 50 Bangladesh taka per Canadian dollar, and that a bushel of rice costs 200 taka in Bangladesh and $3 in Canada. Which statement is consistent with these facts?

Accepted Answer

A)  The real exchange rate is greater than one, and arbitrageurs could profit by buying rice in Canada and selling it in Bangladesh. 
B)  The real exchange rate is greater than one, and arbitrageurs could profit by buying rice in Bangladesh and selling it in Canada. 
C)  The real exchange rate is less than one, and arbitrageurs could profit by buying rice in Canada and selling it in Bangladesh. 
D)  The real exchange rate is less than one, and arbitrageurs could profit by buying rice in Bangladesh and selling it in Canada. 
A)  The real exchange rate is greater than one, and arbitrageurs could profit by buying rice in Canada and selling it in Bangladesh. 
B)  The real exchange rate is greater than one, and arbitrageurs could profit by buying rice in Bangladesh and selling it in Canada. 
C)  The real exchange rate is less than one, and arbitrageurs could profit by buying rice in Canada and selling it in Bangladesh. 
D)  The real exchange rate is less than one, and arbitrageurs could profit by buying rice in Bangladesh and selling it in Canada.

Question 7

-Refer to Table 12-1. Assume that there are no transportation costs or trade restrictions. With which country can Canadian importers make a profit?

Accepted Answer

A)  Bolivia 
B)  Japan 
C)  Norway 
D)  Thailand 
A)  Bolivia 
B)  Japan 
C)  Norway 
D)  Thailand

Question 8

Why does purchasing-power parity theory NOT hold at all times?

Accepted Answer

A)  because countries use different currencies 
B)  because wages are higher in some countries and lower in others 
C)  because some goods and services cannot be traded 
D)  because prices are different across countries 
A)  because countries use different currencies 
B)  because wages are higher in some countries and lower in others 
C)  because some goods and services cannot be traded 
D)  because prices are different across countries

Question 9

If the exchange rate changes from 40 Thai baht per dollar to 25 Thai baht per dollar, what has happened to the dollar?

Accepted Answer

A)  It has appreciated and so buys more Thai goods. 
B)  It has appreciated and so buys fewer Thai goods. 
C)  It has depreciated and so buys more Thai goods. 
D)  It has depreciated and so buys fewer Thai goods. 
A)  It has appreciated and so buys more Thai goods. 
B)  It has appreciated and so buys fewer Thai goods. 
C)  It has depreciated and so buys more Thai goods. 
D)  It has depreciated and so buys fewer Thai goods.

Question 10

Under what circumstances does purchasing-power parity explain how exchange rates are determined and why is it not completely accurate?

Accepted Answer

Purchasing-power parity works well in he

Question 11

Which of the following would be a Canadian foreign portfolio investment?

Accepted Answer

A)  CAE, a Canadian company, builds a new factory near Rome, Italy. 
B)  A Canadian citizen buys shares of stock in companies located in Latvia. 
C)  A Dutch hotel chain opens a new hotel in Canada. 
D)  A citizen of Singapore buys a bond issued by a Canadian corporation. 
A)  CAE, a Canadian company, builds a new factory near Rome, Italy. 
B)  A Canadian citizen buys shares of stock in companies located in Latvia. 
C)  A Dutch hotel chain opens a new hotel in Canada. 
D)  A citizen of Singapore buys a bond issued by a Canadian corporation.

Question 12

A Canadian computer maker sells computers to a Czech Republic firm. This company uses all of the revenues from this sale to purchase stock in a Czech Republic company. What happens to Canadian net exports and net foreign investment due to these transactions?

Accepted Answer

A)  They will increase both Canadian net exports and Canadian net foreign investment. 
B)  They will decrease both Canadian net exports and Canadian net foreign investment. 
C)  They will increase Canadian net exports and will decrease Canadian net foreign investment. 
D)  They will decrease Canadian net exports and will increase Canadian net foreign investment. 
A)  They will increase both Canadian net exports and Canadian net foreign investment. 
B)  They will decrease both Canadian net exports and Canadian net foreign investment. 
C)  They will increase Canadian net exports and will decrease Canadian net foreign investment. 
D)  They will decrease Canadian net exports and will increase Canadian net foreign investment.

Question 13

How did the real interest rates paid on long-term government debt in Canada and the United States compare with each other over the period from 1984 to 2017?

Accepted Answer

A)  The average real interest rate was 3.4 percent in Canada and 4.4 percent in the United States. 
B)  The average real interest rate was 3.5 percent in Canada and 2.8 percent in the United States. 
C)  The average real interest rate was 5.7 percent in Canada and 6.7 percent in the United States. 
D)  The average real interest rate was 6.7 percent in Canada and 5.7 percent in the United States. 
A)  The average real interest rate was 3.4 percent in Canada and 4.4 percent in the United States. 
B)  The average real interest rate was 3.5 percent in Canada and 2.8 percent in the United States. 
C)  The average real interest rate was 5.7 percent in Canada and 6.7 percent in the United States. 
D)  The average real interest rate was 6.7 percent in Canada and 5.7 percent in the United States.

Question 14

List the factors that might influence a country's exports, imports, and trade balance.

Accepted Answer

a. the tastes of consumers for domestic

Question 15

Healthy Grain Farms, a Canadian manufacturer of dried peas and lentils, sells cases of its product to stores overseas. Which statement best identifies the effects of these transactions?

Accepted Answer

A)  They decrease Canadian exports but increase Canadian net exports. 
B)  They decrease both Canadian exports and Canadian net exports. 
C)  They increase both Canadian exports and Canadian net exports. 
D)  They increase Canadian exports but decrease Canadian net exports. 
A)  They decrease Canadian exports but increase Canadian net exports. 
B)  They decrease both Canadian exports and Canadian net exports. 
C)  They increase both Canadian exports and Canadian net exports. 
D)  They increase Canadian exports but decrease Canadian net exports.

Question 16

In 2019, Denmark had net exports of $100 billion and sold $700 billion of goods and services abroad. What were Denmark's components of net exports?

Accepted Answer

A)  $600 billion of exports and $600 billion of imports 
B)  $600 billion of exports and $700 billion of imports 
C)  $700 billion of exports and $600 billion of imports 
D)  $800 billion of exports and $700 billion of imports 
A)  $600 billion of exports and $600 billion of imports 
B)  $600 billion of exports and $700 billion of imports 
C)  $700 billion of exports and $600 billion of imports 
D)  $800 billion of exports and $700 billion of imports

Question 17

Jill, a Canadian citizen, uses some previously obtained euros to purchase a bond issued by a French vineyard. How does this transaction affect Canadian net capital outflow?

Accepted Answer

A)  It increases Canadian net capital outflow by more than the value of the bond. 
B)  It increases Canadian net capital outflow by the value of the bond. 
C)  It does not change Canadian net capital outflow. 
D)  It decreases Canadian net capital outflow. 
A)  It increases Canadian net capital outflow by more than the value of the bond. 
B)  It increases Canadian net capital outflow by the value of the bond. 
C)  It does not change Canadian net capital outflow. 
D)  It decreases Canadian net capital outflow.

Question 18

Suppose the price level in Canada was P = 124 last year and it is up by 3 points this year. In the U.S., the price level was 112 last year and it is up by 2 points this year. The exchange rate was US$0.96 per C$1 last year. (For the following calculations, approximate all results to two decimals.)
a. Calculate the inflation rates in Canada and the U.S.
b. Calculate the real exchange rate at the beginning of the period.
c. Calculate the nominal exchange rate at the end of the period, assuming that the real exchange rate has not changed.
d. Compare the rate of change in the exchange rate with the difference between the foreign and domestic inflation rates. Are they equal?

Accepted Answer

a. The inflation rate in Canada = (127 -

Question 19

How does international trade affect the standard of living?

Accepted Answer

A)  It raises the standard of living in all trading countries. 
B)  It lowers the standard of living in all trading countries. 
C)  It raises the standard of living in the exporting country and lowers it in the importing country. 
D)  It raises the standard of living in the importing country and lowers it in the exporting country. 
A)  It raises the standard of living in all trading countries. 
B)  It lowers the standard of living in all trading countries. 
C)  It raises the standard of living in the exporting country and lowers it in the importing country. 
D)  It raises the standard of living in the importing country and lowers it in the exporting country.

Question 20

A Canadian firm opens a factory that produces climbing equipment in Austria. What are the effects of this transaction?

Accepted Answer

A)  Canadian net capital outflow increases, and Albanian net capital outflow decreases. 
B)  Canadian net capital outflow decreases, and Albanian net capital outflow increases. 
C)  Only Canadian net capital outflow increases. 
D)  Only Albanian net capital outflow increases. 
A)  Canadian net capital outflow increases, and Albanian net capital outflow decreases. 
B)  Canadian net capital outflow decreases, and Albanian net capital outflow increases. 
C)  Only Canadian net capital outflow increases. 
D)  Only Albanian net capital outflow increases.

Which statement best describes how the Canadian economy has evolved over the past five decades?

A country has $120 million of saving and domestic investment of $30 million. What are net exports?

Which unit of measurement would be appropriate for a real exchange rate?

Between 1981 and 1988, what happened to Canadian net capital outflow as a percent of GDP?

A firm in India sells spices to a Canadian chain of culinary stores. Which statement best identifies the effects of this transaction?

Suppose that the exchange rate is 50 Bangladesh taka per Canadian dollar, and that a bushel of rice costs 200 taka in Bangladesh and $3 in Canada. Which statement is consistent with these facts?

-Refer to Table 12-1. Assume that there are no transportation costs or trade restrictions. With which country can Canadian importers make a profit?

Why does purchasing-power parity theory NOT hold at all times?

If the exchange rate changes from 40 Thai baht per dollar to 25 Thai baht per dollar, what has happened to the dollar?

Under what circumstances does purchasing-power parity explain how exchange rates are determined and why is it not completely accurate?

Which of the following would be a Canadian foreign portfolio investment?

A Canadian computer maker sells computers to a Czech Republic firm. This company uses all of the revenues from this sale to purchase stock in a Czech Republic company. What happens to Canadian net exports and net foreign investment due to these transactions?

How did the real interest rates paid on long-term government debt in Canada and the United States compare with each other over the period from 1984 to 2017?

List the factors that might influence a country's exports, imports, and trade balance.

Healthy Grain Farms, a Canadian manufacturer of dried peas and lentils, sells cases of its product to stores overseas. Which statement best identifies the effects of these transactions?

In 2019, Denmark had net exports of $100 billion and sold $700 billion of goods and services abroad. What were Denmark's components of net exports?

Jill, a Canadian citizen, uses some previously obtained euros to purchase a bond issued by a French vineyard. How does this transaction affect Canadian net capital outflow?

How does international trade affect the standard of living?

A Canadian firm opens a factory that produces climbing equipment in Austria. What are the effects of this transaction?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary Policy on Aggregate Demand

The Influence of Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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Exam 12: Open-Economy Macroeconomics: Basic Concepts

Which statement best describes how the Canadian economy has evolved over the past five decades?

A country has $120 million of saving and domestic investment of $30 million. What are net exports?

Which unit of measurement would be appropriate for a real exchange rate?

Between 1981 and 1988, what happened to Canadian net capital outflow as a percent of GDP?

A firm in India sells spices to a Canadian chain of culinary stores. Which statement best identifies the effects of this transaction?

Suppose that the exchange rate is 50 Bangladesh taka per Canadian dollar, and that a bushel of rice costs 200 taka in Bangladesh and $3 in Canada. Which statement is consistent with these facts?

-Refer to Table 12-1. Assume that there are no transportation costs or trade restrictions. With which country can Canadian importers make a profit?

Why does purchasing-power parity theory NOT hold at all times?

If the exchange rate changes from 40 Thai baht per dollar to 25 Thai baht per dollar, what has happened to the dollar?

Under what circumstances does purchasing-power parity explain how exchange rates are determined and why is it not completely accurate?

Which of the following would be a Canadian foreign portfolio investment?

A Canadian computer maker sells computers to a Czech Republic firm. This company uses all of the revenues from this sale to purchase stock in a Czech Republic company. What happens to Canadian net exports and net foreign investment due to these transactions?

How did the real interest rates paid on long-term government debt in Canada and the United States compare with each other over the period from 1984 to 2017?

List the factors that might influence a country's exports, imports, and trade balance.

Healthy Grain Farms, a Canadian manufacturer of dried peas and lentils, sells cases of its product to stores overseas. Which statement best identifies the effects of these transactions?

In 2019, Denmark had net exports of $100 billion and sold $700 billion of goods and services abroad. What were Denmark's components of net exports?

Jill, a Canadian citizen, uses some previously obtained euros to purchase a bond issued by a French vineyard. How does this transaction affect Canadian net capital outflow?

How does international trade affect the standard of living?

A Canadian firm opens a factory that produces climbing equipment in Austria. What are the effects of this transaction?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary Policy on Aggregate Demand

The Influence of Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters