Question 1

If the exchange rate is 80 yen per dollar, then a hotel room in Tokyo that costs 25,000 yen costs $200.

Accepted Answer

A) True 
 B)False

Question 2

The purchase of U.S. government bonds by Egyptians is an example of

Accepted Answer

A) U.S. imports. 
B) U.S. exports. 
C) foreign portfolio investment by Egyptians. 
D) foreign direct investment by Egyptians. 
A) U.S. imports. 
B) U.S. exports. 
C) foreign portfolio investment by Egyptians. 
D) foreign direct investment by Egyptians.

Question 3

John, a U.S. citizen, opens up a Sports bar in Tokyo. This is an example of U.S.

Accepted Answer

A) exports. 
B) imports. 
C) foreign portfolio investment. 
D) foreign direct investment. 
A) exports. 
B) imports. 
C) foreign portfolio investment. 
D) foreign direct investment.

Question 4

If the exchange rate is 12.5 pesos per U.S. dollar, it is also 1/12.5 U.S. dollars per peso.

Accepted Answer

A) True 
 B)False

Question 5

Purchasing-power parity implies that the nominal exchange rate given as foreign currency per unit of U.S. currency must rise if the price levels in

Accepted Answer

A) foreign countries rise. 
B) the United States rises. 
C) both countries rise. 
D) both countries fall. 
A) foreign countries rise. 
B) the United States rises. 
C) both countries rise. 
D) both countries fall.

Question 6

A country has $60 million of saving and domestic investment of $40 million. Net exports are

Accepted Answer

A) $20 million. 
B) -$20 million. 
C) $100 million. 
D) -$100 million. 
A) $20 million. 
B) -$20 million. 
C) $100 million. 
D) -$100 million.

Question 7

During some year a country had exports of $50 billion, imports of $35 billion, and purchased $30 billion of foreign assets. What was the value of domestic assets purchased by foreigners?

Accepted Answer

A) $35 billion 
B) $20 billion 
C) $15 billion 
D) $5 billion 
A) $35 billion 
B) $20 billion 
C) $15 billion 
D) $5 billion

Question 8

In the U.S. a digital camera costs $200. The same camera in London sells for 90 pounds. If the exchange rate were .50 pounds per dollar, then which of the following would be correct?

Accepted Answer

A) The real exchange rate is greater than 1. A person in London with $200 could exchange them for pounds and have more than enough to buy the camera there. 
B) The real exchange rate is greater than 1. A person in London with $200 could exchange them for pounds but then wouldn't have enough to buy the camera there. 
C) The real exchange rate is less than 1. A person in London with $200 could exchange them for pounds and have more than enough to buy the camera there. 
D) The real exchange rate is less than 1. A person in London with $200 could exchange them for pounds but then wouldn't have enough to buy the camera. 
A) The real exchange rate is greater than 1. A person in London with $200 could exchange them for pounds and have more than enough to buy the camera there. 
B) The real exchange rate is greater than 1. A person in London with $200 could exchange them for pounds but then wouldn't have enough to buy the camera there. 
C) The real exchange rate is less than 1. A person in London with $200 could exchange them for pounds and have more than enough to buy the camera there. 
D) The real exchange rate is less than 1. A person in London with $200 could exchange them for pounds but then wouldn't have enough to buy the camera.

Question 9

A firm in the United Kingdom hires a firm in the U.S. to train its managers. By itself this transaction

Accepted Answer

A) increases U.S. imports and decreases U.S. net exports. 
B) increases U.S. imports and increases U.S. net exports. 
C) increases U.S. exports and decreases U.S. net exports. 
D) increases U.S. exports and increases U.S. net exports. 
A) increases U.S. imports and decreases U.S. net exports. 
B) increases U.S. imports and increases U.S. net exports. 
C) increases U.S. exports and decreases U.S. net exports. 
D) increases U.S. exports and increases U.S. net exports.

Question 10

You buy a new car built in Sweden. Other things the same, your purchase by itself

Accepted Answer

A) raises both U.S. exports and U.S. net exports. 
B) raises U.S. exports and lowers U.S. net exports. 
C) raises both U.S. imports and U.S. net exports. 
D) raises U.S. imports and lowers U.S. net exports. 
A) raises both U.S. exports and U.S. net exports. 
B) raises U.S. exports and lowers U.S. net exports. 
C) raises both U.S. imports and U.S. net exports. 
D) raises U.S. imports and lowers U.S. net exports.

Question 11

Colonial America had little industry and so had mostly raw materials to export. At the same time, there were many opportunities to purchase capital goods and earn a high rate of return because there was little existing capital so that the marginal product of capital was relatively high. What does this suggest about net exports and net capital outflow in colonial America?

Accepted Answer

Net exports were negative because the va

Question 12

Net capital outflow measures

Accepted Answer

A) foreign assets held by domestic residents minus domestic assets held by foreign residents. 
B) the imbalance between the amount of foreign assets bought by domestic residents and the amount of domestic assets bought by foreigners. 
C) the imbalance between the amount of foreign assets bought by domestic residents and the amount of domestic goods and services sold to foreigners. 
D) None of the above is correct. 
A) foreign assets held by domestic residents minus domestic assets held by foreign residents. 
B) the imbalance between the amount of foreign assets bought by domestic residents and the amount of domestic assets bought by foreigners. 
C) the imbalance between the amount of foreign assets bought by domestic residents and the amount of domestic goods and services sold to foreigners. 
D) None of the above is correct.

Question 13

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

Accepted Answer

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

Question 14

Suppose the real exchange rate is 5/4 of a Canadian textbook per U.S. textbook , a U.S. textbook costs $150, and a Canadian one costs 120 Canadian dollars. To the nearest penny, what is the nominal exchange rate?

Accepted Answer

A) .64 Canadian dollars per U.S. dollar 
B) 1 Canadian dollar per U.S. dollar 
C) 1.56 Canadian dollars per U.S. dollar 
D) None of the above is correct. 
A) .64 Canadian dollars per U.S. dollar 
B) 1 Canadian dollar per U.S. dollar 
C) 1.56 Canadian dollars per U.S. dollar 
D) None of the above is correct.

Question 15

When making investment decisions, investors

Accepted Answer

A) compare the real interest rates offered on different bonds. 
B) compare the nominal, but not the real, interest rates offered on different bonds. 
C) purchase the highest-priced bond available. 
D) All of the above are correct. 
A) compare the real interest rates offered on different bonds. 
B) compare the nominal, but not the real, interest rates offered on different bonds. 
C) purchase the highest-priced bond available. 
D) All of the above are correct.

Question 16

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

Accepted Answer

A) A Swedish car manufacturer opens a plant in Tennessee. 
B) A Dutch citizen buys shares of stock in a U.S. company. 
C) A U.S. based restaurant chain opens new restaurants in India. 
D) A U.S. citizen buys stock in companies located in Japan. 
A) A Swedish car manufacturer opens a plant in Tennessee. 
B) A Dutch citizen buys shares of stock in a U.S. company. 
C) A U.S. based restaurant chain opens new restaurants in India. 
D) A U.S. citizen buys stock in companies located in Japan.

Question 17

If the real exchange rate between the U.S. and Japan is 1, the nominal exchange rate is 100 yen per U.S. dollar and the price of chicken in the U.S. is $2.50 per pound, what is the price of chicken in Japan?

Accepted Answer

A) 400 yen per pound 
B) 250 yen per pound 
C) 100 yen per pound 
D) 40 yen per pound 
A) 400 yen per pound 
B) 250 yen per pound 
C) 100 yen per pound 
D) 40 yen per pound

Question 18

Which of the following is correct? Over about the last fifty years

Accepted Answer

A) U.S. exports and U.S. imports each about doubled. 
B) U.S. exports and U.S. imports each about tripled. 
C) U.S. exports about doubled and U.S. imports about tripled. 
D) U.S. exports about tripled and U.S. imports about doubled. 
A) U.S. exports and U.S. imports each about doubled. 
B) U.S. exports and U.S. imports each about tripled. 
C) U.S. exports about doubled and U.S. imports about tripled. 
D) U.S. exports about tripled and U.S. imports about doubled.

Question 19

The nominal exchange rate is .80 euros per dollar and the real exchange rate is 4/3. Which of the following prices for a particular good are consistent with these exchange rates?

Accepted Answer

A) $4 in the U.S. and 3 euros in Italy. 
B) $4 in the U.S. and 3.75 euros in Italy. 
C) $5 in the U.S. and 3 euros in Italy. 
D) $6 in the U.S. and 2.50 euros in Italy. 
A) $4 in the U.S. and 3 euros in Italy. 
B) $4 in the U.S. and 3.75 euros in Italy. 
C) $5 in the U.S. and 3 euros in Italy. 
D) $6 in the U.S. and 2.50 euros in Italy.

Question 20

If U.S. consumers increase their demand for apples from New Zealand, then other things the same New Zealand's

Accepted Answer

A) imports and net exports rise. 
B) imports rise and net exports fall. 
C) exports and net exports rise. 
D) exports rise and net exports fall. 
A) imports and net exports rise. 
B) imports rise and net exports fall. 
C) exports and net exports rise. 
D) exports rise and net exports fall.

Exam 18: Open-Economy Macroeconomic Models

If the exchange rate is 80 yen per dollar, then a hotel room in Tokyo that costs 25,000 yen costs $200.

The purchase of U.S. government bonds by Egyptians is an example of

John, a U.S. citizen, opens up a Sports bar in Tokyo. This is an example of U.S.

If the exchange rate is 12.5 pesos per U.S. dollar, it is also 1/12.5 U.S. dollars per peso.

Purchasing-power parity implies that the nominal exchange rate given as foreign currency per unit of U.S. currency must rise if the price levels in

A country has $60 million of saving and domestic investment of $40 million. Net exports are

During some year a country had exports of $50 billion, imports of $35 billion, and purchased $30 billion of foreign assets. What was the value of domestic assets purchased by foreigners?

In the U.S. a digital camera costs $200. The same camera in London sells for 90 pounds. If the exchange rate were .50 pounds per dollar, then which of the following would be correct?

A firm in the United Kingdom hires a firm in the U.S. to train its managers. By itself this transaction

You buy a new car built in Sweden. Other things the same, your purchase by itself

Net capital outflow measures

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

Suppose the real exchange rate is 5/4 of a Canadian textbook per U.S. textbook , a U.S. textbook costs $150, and a Canadian one costs 120 Canadian dollars. To the nearest penny, what is the nominal exchange rate?

When making investment decisions, investors

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

If the real exchange rate between the U.S. and Japan is 1, the nominal exchange rate is 100 yen per U.S. dollar and the price of chicken in the U.S. is $2.50 per pound, what is the price of chicken in Japan?

Which of the following is correct? Over about the last fifty years

The nominal exchange rate is .80 euros per dollar and the real exchange rate is 4/3. Which of the following prices for a particular good are consistent with these exchange rates?

If U.S. consumers increase their demand for apples from New Zealand, then other things the same New Zealand's

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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