Question 1

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 billion 
A) $80 billion 
B) $100 billion 
C) $120 billion 
D) $150 billion

Question 2

If the real exchange rate is less than 1, then the

Accepted Answer

A) nominal exchange rate x U.S. price > foreign price. The dollars required to purchase a good in the U.S. would buy more then enough foreign currency to buy the same good overseas. B) nominal exchange rate x U.S. price > foreign price. The dollars required to purchase a good in the U.S. would not buy enough foregoing currency to buy the same good overseas. C) nominal exchange rate x U.S. price < foreign price. The dollars required to purchase a good in the U.S. would buy more then enough foreign currency to buy the same good overseas. D) nominal exchange rate x U.S. price < foreign price. The dollars required to purchase a good in the U.S. would not buy enough foreign currency to buy the same good overseas. A) nominal exchange rate x U.S. price > foreign price. The dollars required to purchase a good in the U.S. would buy more then enough foreign currency to buy the same good overseas. B) nominal exchange rate x U.S. price > foreign price. The dollars required to purchase a good in the U.S. would not buy enough foregoing currency to buy the same good overseas. C) nominal exchange rate x U.S. price < foreign price. The dollars required to purchase a good in the U.S. would buy more then enough foreign currency to buy the same good overseas. D) nominal exchange rate x U.S. price < foreign price. The dollars required to purchase a good in the U.S. would not buy enough foreign currency to buy the same good overseas.

Question 3

Suppose that the nominal exchange rate is 80 yen per dollar, that the price of a basket of goods in the U.S. is $500 and the price of a basket of goods in Japan is 50,000 yen. Suppose that these values change to 100 yen per dollar, $600, and 70,000 yen. Then the real exchange rate would

Accepted Answer

A) appreciate which by itself would make U.S. net exports fall. 
B) appreciate which by itself would make U.S. net exports rise. 
C) depreciate which by itself would make U.S. net exports fall. 
D) depreciate which by itself would make U.S. net exports rise. 
A) appreciate which by itself would make U.S. net exports fall. 
B) appreciate which by itself would make U.S. net exports rise. 
C) depreciate which by itself would make U.S. net exports fall. 
D) depreciate which by itself would make U.S. net exports rise.

Question 4

If a dollar buys more rice in the China. than in the U.S., then

Accepted Answer

A) the real exchange rate is greater than 1; a profit might be made by buying rice in the U.S. and selling it in China. 
B) the real exchange rate is greater than 1; a profit might be made by buying rice in China. and selling it in the U.S. 
C) the real exchange rate is less than 1; a profit might be made by buying rice in the U.S. and selling it in China. 
D) the real exchange rate is less than 1; a profit might be made by buying rice in China and selling it in the U.S. 
A) the real exchange rate is greater than 1; a profit might be made by buying rice in the U.S. and selling it in China. 
B) the real exchange rate is greater than 1; a profit might be made by buying rice in China. and selling it in the U.S. 
C) the real exchange rate is less than 1; a profit might be made by buying rice in the U.S. and selling it in China. 
D) the real exchange rate is less than 1; a profit might be made by buying rice in China and selling it in the U.S.

Question 5

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

Accepted Answer

a.the tastes of consumers for domestic a

Question 6

In Ireland, a pint of beer costs 3 euros. In Australia, a pint of beer costs 4 Australian dollars. If the exchange rate is .8 euros per Australian dollar, what is the real exchange rate?

Accepted Answer

A) 4/2.4 pints of Irish beer per pint of Australian beer 
B) 3/3.2 pint of Irish beer per pint of Australian beer 
C) 3.2/3 pints of Irish beer per pint of Australian beer 
D) 2.4/4 pints of Irish beer per pint of Australian beer 
A) 4/2.4 pints of Irish beer per pint of Australian beer 
B) 3/3.2 pint of Irish beer per pint of Australian beer 
C) 3.2/3 pints of Irish beer per pint of Australian beer 
D) 2.4/4 pints of Irish beer per pint of Australian beer

Question 7

A country's trade balance

Accepted Answer

A) must be zero. 
B) must be greater than zero. 
C) is greater than zero only if exports are greater than imports. 
D) is greater than zero only if imports are greater than exports. 
A) must be zero. 
B) must be greater than zero. 
C) is greater than zero only if exports are greater than imports. 
D) is greater than zero only if imports are greater than exports.

Question 8

Last summer when you went to Stockholm Sweden you exchanged $20 to get 16 kronas to buy a meal. This summer you exchanged $25 to get 18 kronas to buy the same meal. The nominal exchange rate

Accepted Answer

A) rose. If purchasing-power parity holds, than prices in the Sweden rose faster than prices in the U.S. 
B) rose. If purchasing-power parity holds, than prices in the U.S. rose faster than prices in the Sweden. 
C) fell. If purchasing-power parity holds, than prices in the Sweden rose faster than prices in the U.S. 
D) fell. If purchasing-power parity holds, than prices in the U.S. rose faster than prices in the Sweden. 
A) rose. If purchasing-power parity holds, than prices in the Sweden rose faster than prices in the U.S. 
B) rose. If purchasing-power parity holds, than prices in the U.S. rose faster than prices in the Sweden. 
C) fell. If purchasing-power parity holds, than prices in the Sweden rose faster than prices in the U.S. 
D) fell. If purchasing-power parity holds, than prices in the U.S. rose faster than prices in the Sweden.

Question 9

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. 
A) S = I + C 
B) S = I - NX 
C) S = I + NCO 
D) S = NX - NCO.

Question 10

By itself, when a Japanese bank purchases a bond issued by a U.S. coporation, U.S. net capital outflow rises.

Accepted Answer

A) True 
 B)False

Question 11

A U.S. mutual fund buys stocks issued by a Columbian company. This purchase is an example of

Accepted Answer

A) U.S. foreign direct investment. It increases Columbia's net capital outflow. 
B) U.S. foreign direct investment. It decreases Columbia's net capital outflow. 
C) U.S. foreign portfolio investment. It decreases Columbia's net capital outflow. 
D) U.S. foreign portfolio investment. It increases Columbia's net capital outflow. 
A) U.S. foreign direct investment. It increases Columbia's net capital outflow. 
B) U.S. foreign direct investment. It decreases Columbia's net capital outflow. 
C) U.S. foreign portfolio investment. It decreases Columbia's net capital outflow. 
D) U.S. foreign portfolio investment. It increases Columbia's net capital outflow.

Question 12

If the American company Stryker builds and operates a new factory in France,

Accepted Answer

A) it engages in foreign direct investment. By itself this action lowers U.S. net capital outflow. 
B) it engages in foreign direct investment. By itself this action raises U.S. net capital outflow. 
C) it engages in foreign portfolio investment. By itself this action lowers U.S. net capital outflow. 
D) it engages in foreign portfolio investment. By itself this action raises U.S. net capital outflow. 
A) it engages in foreign direct investment. By itself this action lowers U.S. net capital outflow. 
B) it engages in foreign direct investment. By itself this action raises U.S. net capital outflow. 
C) it engages in foreign portfolio investment. By itself this action lowers U.S. net capital outflow. 
D) it engages in foreign portfolio investment. By itself this action raises U.S. net capital outflow.

Question 13

A Swiss company sells chocolates to a retailer in the United States. These sales by themselves

Accepted Answer

A) decrease U.S. net export and Swiss net exports. 
B) decrease U.S. net exports and increase Swiss net exports. 
C) increase U.S. and Swiss net exports. 
D) increase U.S. net exports and decrease Swiss net exports. 
A) decrease U.S. net export and Swiss net exports. 
B) decrease U.S. net exports and increase Swiss net exports. 
C) increase U.S. and Swiss net exports. 
D) increase U.S. net exports and decrease Swiss net exports.

Question 14

Reductions in transportation costs help explain the increase in U.S. trade flows.

Accepted Answer

A) True 
 B)False

Question 15

If prices in Thailand rise less than prices in the United States, then according to the doctrine of purchasing-power parity the U.S. nominal exchange rate should rise.

Accepted Answer

A) True 
 B)False

Question 16

Other things the same, which of the following would both make Americans more willing to buy Italian goods?

Accepted Answer

A) the nominal exchange rate falls, the price of goods in Italy falls 
B) the nominal exchange rate falls, the price of goods in Italy rises 
C) the nominal exchange rate rises, the price of goods in Italy falls 
D) the nominal exchange rate rises, the price of goods in Italy rises 
A) the nominal exchange rate falls, the price of goods in Italy falls 
B) the nominal exchange rate falls, the price of goods in Italy rises 
C) the nominal exchange rate rises, the price of goods in Italy falls 
D) the nominal exchange rate rises, the price of goods in Italy rises

Question 17

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. 
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.

Question 18

Suppose that the real exchange rate between the United States and Kenya is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate (that is increase the number of baskets of Kenyan goods a basket of U.S. goods buys)?

Accepted Answer

A) an increase in the number of Kenyan shillings that can be purchased with a dollar 
B) an increase in the price of U.S. baskets of goods 
C) a decrease in the price in Kenyan shillings of Kenyan goods 
D) All of the above are correct. 
A) an increase in the number of Kenyan shillings that can be purchased with a dollar 
B) an increase in the price of U.S. baskets of goods 
C) a decrease in the price in Kenyan shillings of Kenyan goods 
D) All of the above are correct.

Question 19

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. 
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.

Question 20

From 1970 to 1998 the U.S. dollar

Accepted Answer

A) gained value compared to the German mark because inflation was higher in the U.S. 
B) gained value compared to the German mark because inflation was lower in the U.S. 
C) lost value compared to the German mark because inflation was higher in the U.S. 
D) lost value compared to the German mark because inflation was lower in the U.S. 
A) gained value compared to the German mark because inflation was higher in the U.S. 
B) gained value compared to the German mark because inflation was lower in the U.S. 
C) lost value compared to the German mark because inflation was higher in the U.S. 
D) lost value compared to the German mark because inflation was lower in the U.S.

Exam 18: Open-Economy Macroeconomic Models

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?

If the real exchange rate is less than 1, then the

Suppose that the nominal exchange rate is 80 yen per dollar, that the price of a basket of goods in the U.S. is $500 and the price of a basket of goods in Japan is 50,000 yen. Suppose that these values change to 100 yen per dollar, $600, and 70,000 yen. Then the real exchange rate would

If a dollar buys more rice in the China. than in the U.S., then

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

In Ireland, a pint of beer costs 3 euros. In Australia, a pint of beer costs 4 Australian dollars. If the exchange rate is .8 euros per Australian dollar, what is the real exchange rate?

A country's trade balance

Last summer when you went to Stockholm Sweden you exchanged $20 to get 16 kronas to buy a meal. This summer you exchanged $25 to get 18 kronas to buy the same meal. The nominal exchange rate

Which of the following equations is correct?

By itself, when a Japanese bank purchases a bond issued by a U.S. coporation, U.S. net capital outflow rises.

A U.S. mutual fund buys stocks issued by a Columbian company. This purchase is an example of

If the American company Stryker builds and operates a new factory in France,

A Swiss company sells chocolates to a retailer in the United States. These sales by themselves

Reductions in transportation costs help explain the increase in U.S. trade flows.

If prices in Thailand rise less than prices in the United States, then according to the doctrine of purchasing-power parity the U.S. nominal exchange rate should rise.

Other things the same, which of the following would both make Americans more willing to buy Italian goods?

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

Suppose that the real exchange rate between the United States and Kenya is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate (that is increase the number of baskets of Kenyan goods a basket of U.S. goods buys)?

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

From 1970 to 1998 the U.S. dollar

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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