Question 1

When the yen gets "stronger" relative to the dollar,

Accepted Answer

A) the U.S. trade deficit with Japan will rise. 
B) the U.S. trade deficit with Japan will fall. 
C) the U.S. trade deficit with Japan will be unchanged. 
D) None of the above necessarily happens. 
A) the U.S. trade deficit with Japan will rise. 
B) the U.S. trade deficit with Japan will fall. 
C) the U.S. trade deficit with Japan will be unchanged. 
D) None of the above necessarily happens.

Question 2

A U.S. firm buys wool from Australia with U.S. currency. The Australian firm then uses this money to buy electric shears from a U.S. firm. Which of the following increases?

Accepted Answer

A) Australian net capital outflow and Australian net exports 
B) only Australian net exports 
C) only Australian net capital outflow 
D) neither Australian net exports nor Australian capital outflow 
A) Australian net capital outflow and Australian net exports 
B) only Australian net exports 
C) only Australian net capital outflow 
D) neither Australian net exports nor Australian capital outflow

Question 3

Use the (hypothetical) information in the following table to answer the following questions.Table 18-2
 $\begin{array}{|l|l|c|l|c}
\hline \text { Country } & \text { Currency } & \begin{array}{l}
\text { Currency per } \
\text { U.S. Dollar }
\end{array} & \begin{array}{l}
\text { U.S. Price } \
\text { Index }
\end{array} & \begin{array}{l}
\text { Country Price } \
\text { Index }
\end{array} \
\hline \text { Bolivia } & \text { boloviano } & 8.00 & 200 & 1600 \
\hline \text { Japan } & \text { yen } & 80.00 & 200 & 20,000 \
\hline \text { Morocco } & \text { dinar } & 10.00 & 200 & 2,000 \
\hline \text { Norwegian } & \text { kroner } & 6.5 & 200 & 1,500 \
\hline \text { Thailand } & \text { baht } & 40.00 & 200 & 7,000 \
\hline
\end{array}$

-Refer to Table 18-2. For which country(ies) in the table does purchasing-power parity hold?

Accepted Answer

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

Question 4

Clear Brook Farms, a U.S. manufacturer of frozen vegetarian entrees, sells cases of its product to stores overseas. These sales

Accepted Answer

A) decrease U.S. exports but increase U.S. net exports. 
B) decrease both U.S. exports and U.S. net exports. 
C) increase both U.S. exports and U.S. net exports. 
D) increase U.S. exports but decrease U.S. net exports. 
A) decrease U.S. exports but increase U.S. net exports. 
B) decrease both U.S. exports and U.S. net exports. 
C) increase both U.S. exports and U.S. net exports. 
D) increase U.S. exports but decrease U.S. net exports.

Question 5

Reduced barriers to trade help explain an increase in U.S. exports and imports relative to GDP since 1950.

Accepted Answer

A) True 
 B)False

Question 6

According to purchasing-power parity, which of the following necessarily equals the ratio of the foreign price level divided by the domestic price level?

Accepted Answer

A) the real exchange rate, but not the nominal exchange rate 
B) the nominal exchange rate, but not the real exchange rate 
C) the real exchange rate and the nominal exchange rate 
D) neither the real exchange rate nor the nominal exchange rate 
A) the real exchange rate, but not the nominal exchange rate 
B) the nominal exchange rate, but not the real exchange rate 
C) the real exchange rate and the nominal exchange rate 
D) neither the real exchange rate nor the nominal exchange rate

Question 7

Assuming all other things equal, what would happen to the U.S. dollar real exchange rate under each of the following circumstances?
a.The U.S. nominal exchange rate depreciates.

Accepted Answer

a.The U.S. dollar real exchang

Question 8

Which of the following is correct?

Accepted Answer

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

Question 9

Which of the following statements is correct for an open economy with a trade surplus?

Accepted Answer

A) The trade surplus cannot last for very many years. 
B) The trade surplus must be offset by negative net capital outflow. 
C) The trade surplus implies that the country's national saving is greater than domestic investment. 
D) None of the above is correct. 
A) The trade surplus cannot last for very many years. 
B) The trade surplus must be offset by negative net capital outflow. 
C) The trade surplus implies that the country's national saving is greater than domestic investment. 
D) None of the above is correct.

Question 10

When the central bank of some country prints large quantities of money, that county's currency loses value both in terms of the goods and services it buys and in terms of the amount of foreign currencies it can buy.

Accepted Answer

A) True 
 B)False

Question 11

If a country sells more goods and services abroad than it purchases abroad, it has positive net exports and a trade surplus.

Accepted Answer

A) True 
 B)False

Question 12

A country has net capital outflow of $20 billion. Which of the following is consistent with this net capital outflow?

Accepted Answer

A) It has $20 billion of net exports. 
B) Purchases of domestic assets by foreigners exceed purchases of foreign assets by domestic residents by $20 billion. 
C) It's saving is $15 billion and its domestic investment is $5 billion. 
D) All of the above are consistent with a net capital outflow of $20 billion. 
A) It has $20 billion of net exports. 
B) Purchases of domestic assets by foreigners exceed purchases of foreign assets by domestic residents by $20 billion. 
C) It's saving is $15 billion and its domestic investment is $5 billion. 
D) All of the above are consistent with a net capital outflow of $20 billion.

Question 13

In 2006 the U.S. had a large trade

Accepted Answer

A) surplus and a large net capital inflow. 
B) surplus and a large net capital outflow. 
C) deficit and a large net capital inflow. 
D) deficit and a large net capital outflow. 
A) surplus and a large net capital inflow. 
B) surplus and a large net capital outflow. 
C) deficit and a large net capital inflow. 
D) deficit and a large net capital outflow.

Question 14

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

Accepted Answer

A) A Polish company opens a shipbuilding plant in the United States. 
B) A Bolivian bank buys U.S. corporate bonds. 
C) A U.S. bank buys Bolivian corporate bonds. 
D) A U.S. furniture maker opens a plant in Mexico. 
A) A Polish company opens a shipbuilding plant in the United States. 
B) A Bolivian bank buys U.S. corporate bonds. 
C) A U.S. bank buys Bolivian corporate bonds. 
D) A U.S. furniture maker opens a plant in Mexico.

Question 15

Oceania buys $40 of wine from Escudia and Escudia buys $100 of wool from Oceania. Supposing this is the only trade that these countries do. What are the net exports of Oceania and Escudia in that order?

Accepted Answer

A) $140 and $140 
B) $100 and $40 
C) $60 and -$60 
D) None of the above is correct. 
A) $140 and $140 
B) $100 and $40 
C) $60 and -$60 
D) None of the above is correct.

Question 16

Most of the change from 1991 to 2000 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 17

From 1980-1987, U.S. net capital outflow as a percent of GDP became a

Accepted Answer

A) larger positive number. 
B) smaller positive number. 
C) larger negative number. 
D) smaller negative number. 
A) larger positive number. 
B) smaller positive number. 
C) larger negative number. 
D) smaller negative number.

Question 18

A country has a trade deficit. Which of the following must also be true?

Accepted Answer

A) net capital outflow is positive and domestic investment is larger than saving 
B) net capital outflow is positive and saving is larger than domestic investment 
C) net capital outflow is negative and domestic investment is larger than saving 
D) net capital outflow is negative and saving is larger than domestic investment 
A) net capital outflow is positive and domestic investment is larger than saving 
B) net capital outflow is positive and saving is larger than domestic investment 
C) net capital outflow is negative and domestic investment is larger than saving 
D) net capital outflow is negative and saving is larger than domestic investment

Question 19

Exchange rates are 82 yen per dollar, 0.8 euro per dollar, and 10 pesos per dollar. A bottle of beer in New York costs 6 dollars, 820 yen in Tokyo, 7.2 euro in Munich, and 50 pesos in Cancun. Where is the most expensive and the cheapest beer in that order?

Accepted Answer

A) Cancun, New York 
B) New York, Tokyo 
C) Tokyo, Cancun 
D) Munich, New York 
A) Cancun, New York 
B) New York, Tokyo 
C) Tokyo, Cancun 
D) Munich, New York

Question 20

Bolivia buys railroad engines from a U.S. firm and pays for them with Bolivianos (Bolivian currency). By itself, this exchange

Accepted Answer

A) increases both U.S. net exports and U.S. net capital outflow. 
B) decreases both U.S. net exports and U.S. net capital outflow. 
C) increases U.S. net exports and does not affect U.S. net capital outflow. 
D) None of the above is correct. 
A) increases both U.S. net exports and U.S. net capital outflow. 
B) decreases both U.S. net exports and U.S. net capital outflow. 
C) increases U.S. net exports and does not affect U.S. net capital outflow. 
D) None of the above is correct.

Exam 18: Open-Economy Macroeconomic Models

When the yen gets "stronger" relative to the dollar,

A U.S. firm buys wool from Australia with U.S. currency. The Australian firm then uses this money to buy electric shears from a U.S. firm. Which of the following increases?

Clear Brook Farms, a U.S. manufacturer of frozen vegetarian entrees, sells cases of its product to stores overseas. These sales

Reduced barriers to trade help explain an increase in U.S. exports and imports relative to GDP since 1950.

According to purchasing-power parity, which of the following necessarily equals the ratio of the foreign price level divided by the domestic price level?

Assuming all other things equal, what would happen to the U.S. dollar real exchange rate under each of the following circumstances? a.The U.S. nominal exchange rate depreciates.

Which of the following is correct?

Which of the following statements is correct for an open economy with a trade surplus?

When the central bank of some country prints large quantities of money, that county's currency loses value both in terms of the goods and services it buys and in terms of the amount of foreign currencies it can buy.

If a country sells more goods and services abroad than it purchases abroad, it has positive net exports and a trade surplus.

A country has net capital outflow of $20 billion. Which of the following is consistent with this net capital outflow?

In 2006 the U.S. had a large trade

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

Oceania buys $40 of wine from Escudia and Escudia buys $100 of wool from Oceania. Supposing this is the only trade that these countries do. What are the net exports of Oceania and Escudia in that order?

Most of the change from 1991 to 2000 in U.S. net capital outflow as a percent of GDP was due to a(n)

From 1980-1987, U.S. net capital outflow as a percent of GDP became a

A country has a trade deficit. Which of the following must also be true?

Exchange rates are 82 yen per dollar, 0.8 euro per dollar, and 10 pesos per dollar. A bottle of beer in New York costs 6 dollars, 820 yen in Tokyo, 7.2 euro in Munich, and 50 pesos in Cancun. Where is the most expensive and the cheapest beer in that order?

Bolivia buys railroad engines from a U.S. firm and pays for them with Bolivianos (Bolivian currency). By itself, this exchange

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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