Question 1

U.S. exports are $400 billion, U.S. imports are $900 billion. Which of the following are consistent with the level of net exports?

Accepted Answer

A) The U.S has a trade surplus. The U.S. purchases $800 of foreign assets and foreign countries purchase $300 of U.S. assets. 
B) The U.S. has a trade surplus. The U.S. purchases $300 of foreign assets and foreign countries purchase $800 of U.S. assets. 
C) The U.S has a trade deficit. The U.S. purchases $800 of foreign assets and foreign countries purchase $300 of U.S. assets. 
D) The U.S. has a trade deficit. The U.S. purchases $300 of foreign assets and foreign countries purchase $800 of U.S. asset. 
A) The U.S has a trade surplus. The U.S. purchases $800 of foreign assets and foreign countries purchase $300 of U.S. assets. 
B) The U.S. has a trade surplus. The U.S. purchases $300 of foreign assets and foreign countries purchase $800 of U.S. assets. 
C) The U.S has a trade deficit. The U.S. purchases $800 of foreign assets and foreign countries purchase $300 of U.S. assets. 
D) The U.S. has a trade deficit. The U.S. purchases $300 of foreign assets and foreign countries purchase $800 of U.S. asset.

Question 2

During some year a country had exports of $30 billion, imports of $40 billion, and domestic investment of $60 billion. What was its saving during the year?

Accepted Answer

A) $70 billion 
B) $50 billion 
C) $10 billion 
D) -$10 billion 
A) $70 billion 
B) $50 billion 
C) $10 billion 
D) -$10 billion

Question 3

A Turkish firm excahnges lira (Turkish currency) for dollars. It then uses these dollars to purchase computers from the U.S. These actions decrease U.S. net capital outflow and increase U.S. net exports.

Accepted Answer

A) True 
 B)False

Question 4

The exchange rate is 1.5 Bosnian markas per U.S. dollar. The price of a refrigerator in Bosnia is 1,200 markas while in the U.S. it is $1,000. The real exchange rate is

Accepted Answer

A) 9/5 
B) 5/4 
C) 4/5 
D) None of the above are correct. 
A) 9/5 
B) 5/4 
C) 4/5 
D) None of the above are correct.

Question 5

If the real exchange rate for coal is 1.5, the price of coal in the U.S. is $50 per ton, and the price of coal in Britain is 20 British pounds per ton, what is the nominal exchange rate?

Accepted Answer

A) 15/4 
B) 5/3 
C) 3/5 
D) 4/15 
A) 15/4 
B) 5/3 
C) 3/5 
D) 4/15

Question 6

Consider an identical basket of goods in both the U.S. and India. For a given nominal exchange rate, in which case is it certain that the U.S. real exchange rate with India falls?

Accepted Answer

A) the price of the basket of goods rises in the U.S. and India. 
B) the price of the basket of goods rises in the U.S. and falls in India. 
C) the price of the basket of goods falls in the U.S. and rises in India. 
D) the price of the basket of goods falls in both India and the U.S.. 
A) the price of the basket of goods rises in the U.S. and India. 
B) the price of the basket of goods rises in the U.S. and falls in India. 
C) the price of the basket of goods falls in the U.S. and rises in India. 
D) the price of the basket of goods falls in both India and the U.S..

Question 7

A country has $100 million of net exports and $170 million of saving. Net capital outflow is

Accepted Answer

A) $70 million and domestic investment is $170 million. 
B) $70 million and domestic investment is $270 million. 
C) $100 million and domestic investment is $70 million. 
D) None of the above is correct. 
A) $70 million and domestic investment is $170 million. 
B) $70 million and domestic investment is $270 million. 
C) $100 million and domestic investment is $70 million. 
D) None of the above is correct.

Question 8

You hold currency from a foreign country. If that country has a higher rate of inflation than the United States, then over time the foreign currency will buy

Accepted Answer

A) more goods in that country and buy more dollars. 
B) more goods in that country but buy fewer dollars. 
C) fewer goods in that country but buy more dollars. 
D) fewer goods in that country and buy fewer dollars. 
A) more goods in that country and buy more dollars. 
B) more goods in that country but buy fewer dollars. 
C) fewer goods in that country but buy more dollars. 
D) fewer goods in that country and buy fewer dollars.

Question 9

If P = domestic prices, P* = foreign prices, and e is the nominal exchange rate, which of the following is implied by purchasing-power parity?

Accepted Answer

A) P = e/P* 
B) 1 = e/P* 
C) e = P*/P 
D) None of the above is correct. 
A) P = e/P* 
B) 1 = e/P* 
C) e = P*/P 
D) None of the above is correct.

Question 10

If a country has a trade deficit then

Accepted Answer

A) S > I and Y > C + I + G. B) S > I and Y C + I + G. D) S < I and Y < C + I + G. A) S > I and Y > C + I + G. B) S > I and Y C + I + G. D) S < I and Y < C + I + G.

Question 11

If a Starbucks tall latte cost $3.20 in the United States and 3 euros in the Euro area, then purchasing-power parity implies the nominal exchange rate is how many euros per dollar?

Accepted Answer

A) .938 If the exchange rate is less than this, it costs more dollars to buy a tall latte in the U.S. than in the Euro area. 
B) .938 If the exchange rate is less than this, it costs fewer dollars to buy a tall latte in the U.S. then in the Euro area. 
C) 1.067 If the exchange rate is less than this, it costs more dollars to buy a tall latte in the U.S. than in the Euro area. 
D) 1.067 If the exchange rate is less than this, it costs fewer dollars to buy a tall latte in the U.S. than in the Euro area. 
A) .938 If the exchange rate is less than this, it costs more dollars to buy a tall latte in the U.S. than in the Euro area. 
B) .938 If the exchange rate is less than this, it costs fewer dollars to buy a tall latte in the U.S. then in the Euro area. 
C) 1.067 If the exchange rate is less than this, it costs more dollars to buy a tall latte in the U.S. than in the Euro area. 
D) 1.067 If the exchange rate is less than this, it costs fewer dollars to buy a tall latte in the U.S. than in the Euro area.

Question 12

Which of the following is always correct?

Accepted Answer

A) Y - I = NCO 
B) NCO = NX 
C) NX = I 
D) All of the above are correct. 
A) Y - I = NCO 
B) NCO = NX 
C) NX = I 
D) All of the above are correct.

Question 13

According to purchasing power parity, if the Federal Reserve increased the money supply

Accepted Answer

A) U.S. prices would rise and the nominal exchange rate would rise. 
B) U.S. prices would rise and the nominal exchange rate would fall. 
C) U.S. prices would fall and the nominal exchange rate would rise. 
D) U.S. prices and the nominal exchange rate would fall. 
A) U.S. prices would rise and the nominal exchange rate would rise. 
B) U.S. prices would rise and the nominal exchange rate would fall. 
C) U.S. prices would fall and the nominal exchange rate would rise. 
D) U.S. prices and the nominal exchange rate would fall.

Question 14

A U.S. firm buys apples from New Zealand with New Zealand dollars it got in exchange for U.S. dollars. New Zealand residents then use these dollars to purchase oranges from the U.S. Which of the following increases?

Accepted Answer

A) New Zeland's net capital outflow and New Zeland's net exports 
B) only New Zeland's net exports 
C) only New Zeland's net capital outflow 
D) neither New Zeland's net exports nor New Zeland's capital outflow 
A) New Zeland's net capital outflow and New Zeland's net exports 
B) only New Zeland's net exports 
C) only New Zeland's net capital outflow 
D) neither New Zeland's net exports nor New Zeland's capital outflow

Question 15

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

Accepted Answer

A) Disney builds a new amusement park near Barcelona, Spain. 
B) A U.S. citizen buys bonds issued by the British government. 
C) A Dutch hotel chain opens a new hotel in the United States. 
D) A citizen of Singapore buys a bond issued by a U.S. corporation. 
A) Disney builds a new amusement park near Barcelona, Spain. 
B) A U.S. citizen buys bonds issued by the British government. 
C) A Dutch hotel chain opens a new hotel in the United States. 
D) A citizen of Singapore buys a bond issued by a U.S. corporation.

Question 16

The nominal exchange rate is 4 Saudi Arabian riyals, 8 Moroccan dirham, 45 Indian rupee, or .6 British pounds per U.S. dollar. A double latte espresso and a cinnamon biscotti costs $6 in the U.S., 24 riyals in Saudi Arabia, 40 Moroccan dirham in Morocco, 250 Indian rupees in India, and 5 British pounds in Britain. According to these numbers, where is the real exchange rate between American and foreign goods the lowest?

Accepted Answer

A) Saudi Arabia 
B) Morocco 
C) India 
D) Britain 
A) Saudi Arabia 
B) Morocco 
C) India 
D) Britain

Question 17

After the 1980s, U.S. net capital outflow was

Accepted Answer

A) negative, meaning that foreigners were buying more capital assets from the United States than Americans were buying abroad. 
B) negative, meaning that Americans were buying more capital assets abroad than foreigners were buying from the United States. 
C) positive, meaning that foreigners were buying more capital assets from the United States than Americans were buying abroad. 
D) positive, meaning that Americans were buying more capital assets abroad than foreigners were buying from the United States. 
A) negative, meaning that foreigners were buying more capital assets from the United States than Americans were buying abroad. 
B) negative, meaning that Americans were buying more capital assets abroad than foreigners were buying from the United States. 
C) positive, meaning that foreigners were buying more capital assets from the United States than Americans were buying abroad. 
D) positive, meaning that Americans were buying more capital assets abroad than foreigners were buying from the United States.

Question 18

Which of the following both reduce net exports?

Accepted Answer

A) exports rise, imports rise 
B) exports rise, imports fall 
C) imports rise, exports rise 
D) imports rise, exports fall 
A) exports rise, imports rise 
B) exports rise, imports fall 
C) imports rise, exports rise 
D) imports rise, exports fall

Question 19

From 1970 to 1998 the U.S. dollar

Accepted Answer

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

Question 20

If U.S. exports are $150 billion and U.S. imports are $100 billion, which of the following is correct?

Accepted Answer

A) The U.S. has a trade surplus of $100 billion. 
B) The U.S. has a trade surplus of $50 billion. 
C) The U.S. has a trade deficit of $100 billion. 
D) The U.S. has a trade deficit of $50 billion. 
A) The U.S. has a trade surplus of $100 billion. 
B) The U.S. has a trade surplus of $50 billion. 
C) The U.S. has a trade deficit of $100 billion. 
D) The U.S. has a trade deficit of $50 billion.

Exam 18: Open-Economy Macroeconomic Models

U.S. exports are $400 billion, U.S. imports are $900 billion. Which of the following are consistent with the level of net exports?

During some year a country had exports of $30 billion, imports of $40 billion, and domestic investment of $60 billion. What was its saving during the year?

A Turkish firm excahnges lira (Turkish currency) for dollars. It then uses these dollars to purchase computers from the U.S. These actions decrease U.S. net capital outflow and increase U.S. net exports.

The exchange rate is 1.5 Bosnian markas per U.S. dollar. The price of a refrigerator in Bosnia is 1,200 markas while in the U.S. it is $1,000. The real exchange rate is

If the real exchange rate for coal is 1.5, the price of coal in the U.S. is $50 per ton, and the price of coal in Britain is 20 British pounds per ton, what is the nominal exchange rate?

Consider an identical basket of goods in both the U.S. and India. For a given nominal exchange rate, in which case is it certain that the U.S. real exchange rate with India falls?

A country has $100 million of net exports and $170 million of saving. Net capital outflow is

You hold currency from a foreign country. If that country has a higher rate of inflation than the United States, then over time the foreign currency will buy

If P = domestic prices, P* = foreign prices, and e is the nominal exchange rate, which of the following is implied by purchasing-power parity?

If a country has a trade deficit then

If a Starbucks tall latte cost $3.20 in the United States and 3 euros in the Euro area, then purchasing-power parity implies the nominal exchange rate is how many euros per dollar?

Which of the following is always correct?

According to purchasing power parity, if the Federal Reserve increased the money supply

A U.S. firm buys apples from New Zealand with New Zealand dollars it got in exchange for U.S. dollars. New Zealand residents then use these dollars to purchase oranges from the U.S. Which of the following increases?

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

After the 1980s, U.S. net capital outflow was

Which of the following both reduce net exports?

From 1970 to 1998 the U.S. dollar

If U.S. exports are $150 billion and U.S. imports are $100 billion, which of the following is correct?

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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