Question 1

If the United States had negative net exports last year, then it

Accepted Answer

A) sold more abroad than it purchased abroad and had a trade surplus. 
B) sold more abroad than it purchased abroad and had a trade deficit. 
C) bought more abroad than it sold abroad and had a trade surplus. 
D) bought more abroad than it sold abroad and had a trade deficit. 
A) sold more abroad than it purchased abroad and had a trade surplus. 
B) sold more abroad than it purchased abroad and had a trade deficit. 
C) bought more abroad than it sold abroad and had a trade surplus. 
D) bought more abroad than it sold abroad and had a trade deficit.

Question 2

If the nominal exchange rate e is foreign currency per dollar, the domestic price is P, and the foreign price is P*, then the real exchange rate is defined as

Accepted Answer

A) e(P*/P). 
B) e(P/P*). 
C) e + P*/P. 
D) e - P/P*. 
A) e(P*/P). 
B) e(P/P*). 
C) e + P*/P. 
D) e - P/P*.

Question 3

If saving is greater 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 + I + G. D) there is a trade surplus and Y < C + I + G. A) there is a trade deficit and Y > C + I + G. B) there is a trade deficit and Y C + I + G. D) there is a trade surplus and Y < C + I + G.

Question 4

How do the nominal exchange rate and the real exchange rate differ?

Accepted Answer

The nominal exchange rate is the rate at

Question 5

If Ireland's domestic investment exceeds national saving, then Ireland has

Accepted Answer

A) positive net capital outflows and negative net exports. 
B) positive net capital outflows and positive net exports. 
C) negative net capital outflows and negative net exports. 
D) negative net capital outflows and positive net exports. 
A) positive net capital outflows and negative net exports. 
B) positive net capital outflows and positive net exports. 
C) negative net capital outflows and negative net exports. 
D) negative net capital outflows and positive net exports.

Question 6

When the Sykes Corporation (an American company) buys shares of Audi stock (a German company) for its pension fund, U.S. net capital outflow

Accepted Answer

A) increases because an American company makes a portfolio investment in Germany. 
B) declines because an American company makes a portfolio investment in Germany. 
C) increases because an American company makes a direct investment in Germany. 
D) declines because an American company makes a direct investment in Germany. 
A) increases because an American company makes a portfolio investment in Germany. 
B) declines because an American company makes a portfolio investment in Germany. 
C) increases because an American company makes a direct investment in Germany. 
D) declines because an American company makes a direct investment in Germany.

Question 7

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

Accepted Answer

A) S > I and it has a trade surplus. B) S > I and it has a trade deficit. C) S < I and it has a trade surplus. D) S < I and it has a trade deficit. A) S > I and it has a trade surplus. B) S > I and it has a trade deficit. C) S < I and it has a trade surplus. D) S < I and it has a trade deficit.

Question 8

The price of a basket of goods is $2000 in the U.S. If purchasing power parity holds, and the dollar buys two units of some country's currency, then how many units of foreign currency does the same basket of goods cost in that country?

Accepted Answer

A) 4000 
B) 2000 
C) 1000 
D) None of the above are correct. 
A) 4000 
B) 2000 
C) 1000 
D) None of the above are correct.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

If purchasing power parity holds, when a country's central bank decreases the money supply, its

Accepted Answer

A) price level rises and its currency appreciates relative to other currencies in the world. 
B) price level falls and its currency appreciates relative to other currencies in the world. 
C) price level rises and its currency depreciates relative to other currencies in the world. 
D) price level falls and its currency depreciates relative to other currencies in the world. 
A) price level rises and its currency appreciates relative to other currencies in the world. 
B) price level falls and its currency appreciates relative to other currencies in the world. 
C) price level rises and its currency depreciates relative to other currencies in the world. 
D) price level falls and its currency depreciates relative to other currencies in the world.

Question 11

Most of the change from 2000 to 2006 in U.S. net capital outflow as a percent of GDP was due to a(n)

Accepted Answer

A) decrease in U.S. investment. 
B) decrease in U.S. national saving. 
C) increase in U.S. investment. 
D) increase in U.S. national saving. 
A) decrease in U.S. investment. 
B) decrease in U.S. national saving. 
C) increase in U.S. investment. 
D) increase in U.S. national saving.

Question 12

According to purchasing power parity, if it took 4 Israeli Shekels to buy a dollar this year, but it took 3.5 to buy it last year, then the dollar has

Accepted Answer

A) appreciated, indicating inflation was higher in the U.S. than in Israel. 
B) appreciated, indicating inflation was lower in the U.S. than in Israel. 
C) depreciated, indicating inflation was higher in the U.S. than in Israel. 
D) depreciated, indicating inflation was lower in the U.S. than in Israel. 
A) appreciated, indicating inflation was higher in the U.S. than in Israel. 
B) appreciated, indicating inflation was lower in the U.S. than in Israel. 
C) depreciated, indicating inflation was higher in the U.S. than in Israel. 
D) depreciated, indicating inflation was lower in the U.S. than in Israel.

Question 13

Which of the following equations is always correct in an open economy?

Accepted Answer

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

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

If you go to the bank and notice that a dollar buys more Mexican pesos than it used to, then the dollar has

Accepted Answer

A) appreciated. Other things the same, the appreciation would make Americans less likely to travel to Mexico. 
B) appreciated. Other things the same, the appreciation would make Americans more likely to travel to Mexico. 
C) depreciated. Other things the same, the depreciation would make Americans less likely to travel to Mexico. 
D) depreciated. Other things the same, the depreciation would make Americans more likely to travel to Mexico. 
A) appreciated. Other things the same, the appreciation would make Americans less likely to travel to Mexico. 
B) appreciated. Other things the same, the appreciation would make Americans more likely to travel to Mexico. 
C) depreciated. Other things the same, the depreciation would make Americans less likely to travel to Mexico. 
D) depreciated. Other things the same, the depreciation would make Americans more likely to travel to Mexico.

Question 16

Carl and Carly are American residents. Carl buys stock of a corporation in Austria. Carly opens a coffee shop in Austria. Whose purchase, by itself, decreases Austria's net capital outflow?

Accepted Answer

A) Carl's 
B) Carly's 
C) both Carl's and Carly's 
D) neither Carl's nor Carly's 
A) Carl's 
B) Carly's 
C) both Carl's and Carly's 
D) neither Carl's nor Carly's

Question 17

If a country has net exports of $8 billion and sold $40 billion of goods and services abroad, then it has

Accepted Answer

A) $48 billion of imports and $40 billion of exports. 
B) $48 billion of exports and $40 billion of imports. 
C) $40 billion of imports and $32 billion of exports. 
D) $40 billion of exports and $32 billion of imports. 
A) $48 billion of imports and $40 billion of exports. 
B) $48 billion of exports and $40 billion of imports. 
C) $40 billion of imports and $32 billion of exports. 
D) $40 billion of exports and $32 billion of imports.

Question 18

In an open economy, gross domestic product equals $1,850 billion, consumption expenditure equals $975 billion, government expenditure equals $225 billion, investment equals $500 billion, and net exports equals $150 billion. What is national savings?

Accepted Answer

A) $0 
B) $500 billion 
C) $650 billion 
D) $975 billion 
A) $0 
B) $500 billion 
C) $650 billion 
D) $975 billion

Question 19

An MP3 player in Singapore costs 200 Singaporean dollars. In the U.S. it costs 100 US dollars. Which of the following is correct?

Accepted Answer

A) if the nominal exchange rate is 2.0 Singaporean dollars per U.S. dollar, purchasing power parity holds. 
B) if the nominal exchange rate is 1 Singaporean dollars per U.S. dollar, purchasing power parity holds. 
C) if the nominal exchange rate is .50 Singaporean dollars per U.S. dollar, purchasing power parity holds. 
D) purchasing power parity does not hold at any of the above exchange rates. 
A) if the nominal exchange rate is 2.0 Singaporean dollars per U.S. dollar, purchasing power parity holds. 
B) if the nominal exchange rate is 1 Singaporean dollars per U.S. dollar, purchasing power parity holds. 
C) if the nominal exchange rate is .50 Singaporean dollars per U.S. dollar, purchasing power parity holds. 
D) purchasing power parity does not hold at any of the above exchange rates.

Question 20

Suppose that a country imports $75 million of goods and services and exports $100 million of goods and services. What is the value of net exports?

Accepted Answer

A) $175 million 
B) $75 million 
C) $25 million 
D) -$25 million 
A) $175 million 
B) $75 million 
C) $25 million 
D) -$25 million

Exam 18: Open-Economy Macroeconomic Models

If the United States had negative net exports last year, then it

If the nominal exchange rate e is foreign currency per dollar, the domestic price is P, and the foreign price is P*, then the real exchange rate is defined as

If saving is greater than domestic investment, then

How do the nominal exchange rate and the real exchange rate differ?

If Ireland's domestic investment exceeds national saving, then Ireland has

When the Sykes Corporation (an American company) buys shares of Audi stock (a German company) for its pension fund, U.S. net capital outflow

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

The price of a basket of goods is $2000 in the U.S. If purchasing power parity holds, and the dollar buys two units of some country's currency, then how many units of foreign currency does the same basket of goods cost in that country?

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

If purchasing power parity holds, when a country's central bank decreases the money supply, its

Most of the change from 2000 to 2006 in U.S. net capital outflow as a percent of GDP was due to a(n)

According to purchasing power parity, if it took 4 Israeli Shekels to buy a dollar this year, but it took 3.5 to buy it last year, then the dollar has

Which of the following equations is always correct in an open economy?

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

If you go to the bank and notice that a dollar buys more Mexican pesos than it used to, then the dollar has

Carl and Carly are American residents. Carl buys stock of a corporation in Austria. Carly opens a coffee shop in Austria. Whose purchase, by itself, decreases Austria's net capital outflow?

If a country has net exports of $8 billion and sold $40 billion of goods and services abroad, then it has

In an open economy, gross domestic product equals $1,850 billion, consumption expenditure equals $975 billion, government expenditure equals $225 billion, investment equals $500 billion, and net exports equals $150 billion. What is national savings?

An MP3 player in Singapore costs 200 Singaporean dollars. In the U.S. it costs 100 US dollars. Which of the following is correct?

Suppose that a country imports $75 million of goods and services and exports $100 million of goods and services. What is the value of net exports?

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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