Exam 18: Open-Economy Macroeconomic Models

Suppose that the real exchange rate between the United States and Vietnam 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 Vietnamese goods a basket of U.S. goods buys)?

During a hyperinflation the real domestic value of a country's currency

A U.S. company uses U.K. pounds it already owned to purchase bonds issued by a company in the U.K. Which of these countries has an increase in net capital outflow?

If a country's trade surplus falls, its net capital outflow rises.

If the U.S. real exchange rate appreciates, U.S. exports

If the purchasing power of the dollar is always the same at home and abroad, then the nominal exchange rate defined as units of foreign currency per dollar decreases if the U.S. price level rises more than the price level in foreign countries.

A country has $20 billion of domestic investment and net capital outflow of $10 billion. What is saving?

If over the next year the price level in Turkey increases and the price level in Japan falls, then the Turkish lira should depreciate relative to the Japanese Yen.

If purchasing-power parity holds, then the value of the

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

Other things the same, an increase in the foreign price level leads to an increase in the real exchange rate.

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

Suppose that U.S. citizens purchase more cars made in Korea, and Koreans purchase more bonds issued by U.S. corporations. Other things the same, these actions

Other things the same, if the exchange rate changes from 75 Algerian dinar per dollar to 72 Algerian dinar per dollar, the dollar has

A Japanese bank buys bonds sold by Minnesota Manufacturing. Minnesota Manufacturing then uses these funds to buy machinery from Canada. Which of the following decreases?

A Japanese firm buys lumber from the United States and pays for it with yen. Other things the same, Japanese

According to the theory of purchasing-power parity, the nominal exchange rate between two countries must reflect the differing

Suppose a Starbucks tall latte cost $4.00 in the United States and 3.20 euros in the Euro area. Also, suppose a McDonald's Big Mac costs $3.50 in the United States and 2.45 euros in Euro area. If the nominal exchange rate is .75 euros per dollar, the prices of which goods have prices that are consistent with purchasing power parity?

For an economy as a whole, net exports must equal minus one times net capital outflow.

In an open economy, gross domestic product equals $2,450 billion, consumption expenditure equals $1,390 billion, government expenditure equals $325 billion, investment equals $510 and net capital outflow equals $225 billion. What is national saving?