Question 1

By itself, if a U.S. firm builds a new factroy overseas, U.S. net captial outflow rises.

Accepted Answer

A) True 
 B)False

Question 2

From 1960 to about 1975 in the United States, net capital outflow was

Accepted Answer

A) small but always positive. 
B) small and sometimes negative and sometimes positive. 
C) large and positive. 
D) large but sometimes negative and sometimes positive. 
A) small but always positive. 
B) small and sometimes negative and sometimes positive. 
C) large and positive. 
D) large but sometimes negative and sometimes positive.

Question 3

If purchasing power parity holds, the price level in the U.S. is 220, and the price level in Japan is 200, which of the following is true?

Accepted Answer

A) the real exchange rate is 200/220 
B) the real exchange rate is 220/200 
C) the nominal exchange rate is 200/220 
D) the nominal exchange rate is 220/200 
A) the real exchange rate is 200/220 
B) the real exchange rate is 220/200 
C) the nominal exchange rate is 200/220 
D) the nominal exchange rate is 220/200

Question 4

Gabrielle, an Italian citizen, uses some previously obtained dollars to purchase a bond issued by a U.S. company. This transaction

Accepted Answer

A) decreases U.S. net capital outflow. 
B) does not change U.S. net capital outflow. 
C) increases U.S. net capital outflow by more than the value of the bond. 
D) increases U.S. net capital outflow by the value of the bond. 
A) decreases U.S. net capital outflow. 
B) does not change U.S. net capital outflow. 
C) increases U.S. net capital outflow by more than the value of the bond. 
D) increases U.S. net capital outflow by the value of the bond.

Question 5

The nominal exchange rate is 30 Thai bhat for one U.S. dollar. A sub sandwich combo deal in the U.S. costs $6 dollars in the U.S. and 120 bhat in Thailand. The real exchange rate is

Accepted Answer

A) 3/8 
B) 2/3 
C) 3/2 
D) 8/3 
A) 3/8 
B) 2/3 
C) 3/2 
D) 8/3

Question 6

If the dollar buys less cotton in Egypt than in the United States, then traders could make a profit by

Accepted Answer

A) buying cotton in the United States and selling it in Egypt, which would tend to raise the price of cotton in the United States. 
B) buying cotton in the United States and selling it in Egypt, which would tend to raise the price of cotton in Egypt. 
C) buying cotton in Egypt and selling it in the United States, which would tend to raise the price of cotton in Egypt. 
D) buying cotton in Egypt and selling it in the United States, which would tend to raise the price of cotton in the United States. 
A) buying cotton in the United States and selling it in Egypt, which would tend to raise the price of cotton in the United States. 
B) buying cotton in the United States and selling it in Egypt, which would tend to raise the price of cotton in Egypt. 
C) buying cotton in Egypt and selling it in the United States, which would tend to raise the price of cotton in Egypt. 
D) buying cotton in Egypt and selling it in the United States, which would tend to raise the price of cotton in the United States.

Question 7

If a country has a trade surplus, then its

Accepted Answer

A) saving is greater than domestic investment and Y > C + I + G. B) saving is greater than domestic investment and Y C +I + G. D) saving is less than domestic investment and Y < C + I + G. A) saving is greater than domestic investment and Y > C + I + G. B) saving is greater than domestic investment and Y C +I + G. D) saving is less than domestic investment and Y < C + I + G.

Question 8

Other things the same, if a country saves less, then

Accepted Answer

A) net capital outflow rises, so net exports rise. 
B) net capital outflow rises, so net exports fall. 
C) net capital outflow falls, so net exports rise. 
D) net capital outflow falls, so net exports fall. 
A) net capital outflow rises, so net exports rise. 
B) net capital outflow rises, so net exports fall. 
C) net capital outflow falls, so net exports rise. 
D) net capital outflow falls, so net exports fall.

Question 9

Other things the same, if the dollar appreciates relative to the Japanese yen, then

Accepted Answer

A) the exchange rate falls. It will cost fewer yen to travel in the U.S. 
B) the exchange rate falls. It will cost more yen to travel in the U.S. 
C) the exchange rate rises. It will cost fewer yen to travel in the U.S. 
D) the exchange rate rises. It will cost more yen to travel in the U.S. 
A) the exchange rate falls. It will cost fewer yen to travel in the U.S. 
B) the exchange rate falls. It will cost more yen to travel in the U.S. 
C) the exchange rate rises. It will cost fewer yen to travel in the U.S. 
D) the exchange rate rises. It will cost more yen to travel in the U.S.

Question 10

A U.S. firm opens a factory that produces camping equipment in Estonia.

Accepted Answer

A) This increases U.S. net capital outflow and decreases Estonian net capital outflow. 
B) This decreases U.S. net capital outflow and increases Estonian net capital outflow. 
C) This increases only U.S. net capital outflow. 
D) This increases only Estonian net capital outflow. 
A) This increases U.S. net capital outflow and decreases Estonian net capital outflow. 
B) This decreases U.S. net capital outflow and increases Estonian net capital outflow. 
C) This increases only U.S. net capital outflow. 
D) This increases only Estonian net capital outflow.

Question 11

Citizens in India buy music from the U.S. To do so they use Indian rupees to purchase U.S. dollars. If U.S. citizens hold these rupees rather than spending them, what happens to U.S. net exports and U.S. net capital outflows?

Accepted Answer

A) both U.S. net exports and U.S. net capital outflow rise 
B) both U.S. net exports and U.S. net capital outflow fall 
C) U.S. net exports rise and U.S. net capital outflow fall 
D) U.S. net exports fall and U.S. net capita outflow rise 
A) both U.S. net exports and U.S. net capital outflow rise 
B) both U.S. net exports and U.S. net capital outflow fall 
C) U.S. net exports rise and U.S. net capital outflow fall 
D) U.S. net exports fall and U.S. net capita outflow rise

Question 12

If U.S. exports are $300 billion and U.S. imports total $350 billion, which of the following is correct?

Accepted Answer

A) The U.S. has a trade surplus of $350 billion. 
B) The U.S. has a trade surplus of $50 billion. 
C) The U.S. has a trade deficit of $350 billion. 
D) The U.S. has a trade deficit of $50 billion. 
A) The U.S. has a trade surplus of $350 billion. 
B) The U.S. has a trade surplus of $50 billion. 
C) The U.S. has a trade deficit of $350 billion. 
D) The U.S. has a trade deficit of $50 billion.

Question 13

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 14

A country sells more to foreign countries than it buys from them. It has

Accepted Answer

A) a trade surplus and positive net exports. 
B) a trade surplus and negative net exports. 
C) a trade deficit and positive net exports. 
D) a trade deficit and negative net exports. 
A) a trade surplus and positive net exports. 
B) a trade surplus and negative net exports. 
C) a trade deficit and positive net exports. 
D) a trade deficit and negative net exports.

Question 15

Suppose that the real exchange rate between the United States and Kenya is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate?

Accepted Answer

A) a decrease in the quantity of Kenyan currency that can be purchased with a dollar 
B) a decrease in the price of U.S. baskets of goods 
C) a decrease in the price in Kenyan currency of Kenyan goods. 
D) None of the above is correct. 
A) a decrease in the quantity of Kenyan currency that can be purchased with a dollar 
B) a decrease in the price of U.S. baskets of goods 
C) a decrease in the price in Kenyan currency of Kenyan goods. 
D) None of the above is correct.

Question 16

Suppose that Bill, a resident of the U.S., buys software from a company in Japan. Explain why and in what directions this changes U.S. net exports and U.S. net capital outflow.

Accepted Answer

The purchase of a foreign good by a U.S.

Question 17

In an open economy, gross domestic product equals $1,650 billion, government expenditure equals $250 billion, and savings equals $550 billion. What is consumption expenditure?

Accepted Answer

A) $250 billion 
B) $300 billion 
C) $550 billion 
D) $850 billion 
A) $250 billion 
B) $300 billion 
C) $550 billion 
D) $850 billion

Question 18

If a country has positive net capital outflows, then its net exports are

Accepted Answer

A) positive, and its saving is larger than its domestic investment. 
B) positive, and its saving is smaller than its domestic investment. 
C) negative, and its saving is larger than its domestic investment. 
D) negative, and its saving is smaller than its domestic investment. 
A) positive, and its saving is larger than its domestic investment. 
B) positive, and its saving is smaller than its domestic investment. 
C) negative, and its saving is larger than its domestic investment. 
D) negative, and its saving is smaller than its domestic investment.

Question 19

If sales of Saudi Arabian oil to the rest of the world increase and Saudis use the proceeds to buy foreign goods, which of the following increases?

Accepted Answer

A) Saudi Arabian net exports but not Saudi Arabian net capital outflow 
B) Saudi Arabian net capital outflow but not Saudi Arabian net exports 
C) both Saudi Arabian net exports and net capital outflow 
D) neither Saudi Arabian net exports nor net capital outflow 
A) Saudi Arabian net exports but not Saudi Arabian net capital outflow 
B) Saudi Arabian net capital outflow but not Saudi Arabian net exports 
C) both Saudi Arabian net exports and net capital outflow 
D) neither Saudi Arabian net exports nor net capital outflow

Question 20

Net capital outflow equals

Accepted Answer

A) the purchase of foreign assets by domestic residents. 
B) the purchase of domestic assets by foreign residents. 
C) the purchase of domestic assets by foreign residents - the purchase of foreign assets by domestic residents 
D) the purchase of foreign assets by domestic residents - the purchase of domestic assets by foreign residents 
A) the purchase of foreign assets by domestic residents. 
B) the purchase of domestic assets by foreign residents. 
C) the purchase of domestic assets by foreign residents - the purchase of foreign assets by domestic residents 
D) the purchase of foreign assets by domestic residents - the purchase of domestic assets by foreign residents

Exam 18: Open-Economy Macroeconomic Models

By itself, if a U.S. firm builds a new factroy overseas, U.S. net captial outflow rises.

From 1960 to about 1975 in the United States, net capital outflow was

If purchasing power parity holds, the price level in the U.S. is 220, and the price level in Japan is 200, which of the following is true?

Gabrielle, an Italian citizen, uses some previously obtained dollars to purchase a bond issued by a U.S. company. This transaction

The nominal exchange rate is 30 Thai bhat for one U.S. dollar. A sub sandwich combo deal in the U.S. costs $6 dollars in the U.S. and 120 bhat in Thailand. The real exchange rate is

If the dollar buys less cotton in Egypt than in the United States, then traders could make a profit by

If a country has a trade surplus, then its

Other things the same, if a country saves less, then

Other things the same, if the dollar appreciates relative to the Japanese yen, then

A U.S. firm opens a factory that produces camping equipment in Estonia.

Citizens in India buy music from the U.S. To do so they use Indian rupees to purchase U.S. dollars. If U.S. citizens hold these rupees rather than spending them, what happens to U.S. net exports and U.S. net capital outflows?

If U.S. exports are $300 billion and U.S. imports total $350 billion, which of the following is correct?

If saving is greater than domestic investment, then

A country sells more to foreign countries than it buys from them. It has

Suppose that the real exchange rate between the United States and Kenya is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate?

Suppose that Bill, a resident of the U.S., buys software from a company in Japan. Explain why and in what directions this changes U.S. net exports and U.S. net capital outflow.

In an open economy, gross domestic product equals $1,650 billion, government expenditure equals $250 billion, and savings equals $550 billion. What is consumption expenditure?

If a country has positive net capital outflows, then its net exports are

If sales of Saudi Arabian oil to the rest of the world increase and Saudis use the proceeds to buy foreign goods, which of the following increases?

Net capital outflow equals

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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