Question 1

If Canada buys cameras from Japan, both Canadian net exports and Canadian net capital outflow decrease.

Accepted Answer

A) True 
 B)False

Question 2

A country has $150 million of net exports and $190 million of saving. What is net capital outflow?

Accepted Answer

A) $40 million 
B) -$40 million 
C) $150 million 
D) $190 million 
A) $40 million 
B) -$40 million 
C) $150 million 
D) $190 million

Question 3

What does the law of one price state?

Accepted Answer

A) A good cannot be sold at a black market price. 
B) A good must sell at the price fixed by law. 
C) A good must sell at the same price at all locations. 
D) A good cannot sell for a price greater than the legal price ceiling. 
A) A good cannot be sold at a black market price. 
B) A good must sell at the price fixed by law. 
C) A good must sell at the same price at all locations. 
D) A good cannot sell for a price greater than the legal price ceiling.

Question 4

Suppose that money supply growth continues to be higher in Turkey than it is in Canada. What does purchasing-power parity imply will happen to the real and to the nominal exchange rate?

Accepted Answer

Higher money growth leads to higher pric

Question 5

Suppose a lobster supper in Nova Scotia costs fewer dollars than a lobster supper in Moscow. Explain why this is inconsistent with purchasing-power parity and explain why the inconsistency may exist.

Accepted Answer

According to purchasing-power parity, a

Question 6

Which of the following best describes net capital outflow in Canada from 1961 to about 1998?

Accepted Answer

A) small but always positive 
B) small and sometimes negative and sometimes positive 
C) large and positive 
D) large and negative in all but three years 
A) small but always positive 
B) small and sometimes negative and sometimes positive 
C) large and positive 
D) large and negative in all but three years

Question 7

If the purchasing power of the dollar is always the same at home and abroad, then the nominal exchange rate defined as foreign goods per unit of Canadian goods decreases if the Canadian price level rises more than the price level in foreign countries.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following best describes Canadian net capital outflow and net exports since 1999?

Accepted Answer

A) Net capital outflow has been positive, and net exports have been negative. 
B) Net capital outflow has been positive, and net exports have been positive. 
C) Net capital outflow has been negative, and net exports have been negative. 
D) Net capital outflow has been negative and net exports have been positive. 
A) Net capital outflow has been positive, and net exports have been negative. 
B) Net capital outflow has been positive, and net exports have been positive. 
C) Net capital outflow has been negative, and net exports have been negative. 
D) Net capital outflow has been negative and net exports have been positive.

Question 9

According to purchasing-power parity theory, the real exchange rate should equal the nominal exchange rate.

Accepted Answer

A) True 
 B)False

Question 10

Suppose the price level in Canada (P) and the nominal exchange rate (e) between the Canadian dollar and the foreign currency remain the same, while the price level abroad increases from P1* to P2*. Let the real exchange rate be X. What is the percentage change in the real exchange rate?

Accepted Answer

The percentage change in the real exchan

Question 11

A firm in India sells jackets to a Canadian department store chain. Which of the following correctly identifies the effects of this transaction?

Accepted Answer

A) It increases Canadian and Indian net exports. 
B) It decreases Canadian and Indian net exports. 
C) It increases Canadian net exports and decreases Indian net exports. 
D) It decreases Canadian net exports and increases Indian net exports. 
A) It increases Canadian and Indian net exports. 
B) It decreases Canadian and Indian net exports. 
C) It increases Canadian net exports and decreases Indian net exports. 
D) It decreases Canadian net exports and increases Indian net exports.

Question 12

Sue, a Canadian citizen, buys stock in a French chain of boutiques. Her purchase counts as which of the following?

Accepted Answer

A) investment for Sue and Canadian foreign direct investment 
B) investment for Sue and Canadian foreign portfolio investment 
C) saving for Sue and Canadian foreign direct investment 
D) saving for Sue and Canadian foreign portfolio investment 
A) investment for Sue and Canadian foreign direct investment 
B) investment for Sue and Canadian foreign portfolio investment 
C) saving for Sue and Canadian foreign direct investment 
D) saving for Sue and Canadian foreign portfolio investment

Question 13

Table 31-1
  
-Refer to Table 31-1. Which currency (ies) is (are) more valuable than predicted by the doctrine of purchasing-power parity?

Accepted Answer

A) the boliviano and dinar 
B) the yen, kroner, and baht 
C) the yen and kroner 
D) the baht 
A) the boliviano and dinar 
B) the yen, kroner, and baht 
C) the yen and kroner 
D) the baht

Question 14

What is the logic behind the theory of purchasing-power parity?

Accepted Answer

The logic behind purchasing-power parity

Question 15

How do we find the real exchange rate from the nominal exchange rate?

Accepted Answer

Real Exchange Rate =

Question 16

If the exchange rate changes from 40 Thai baht per dollar to 35 Thai baht per dollar, what has happened to the dollar?

Accepted Answer

A) It has appreciated and so buys more Thai goods. 
B) It has appreciated and so buys fewer Thai goods. 
C) It has depreciated and so buys more Thai goods. 
D) It has depreciated and so buys fewer Thai goods. 
A) It has appreciated and so buys more Thai goods. 
B) It has appreciated and so buys fewer Thai goods. 
C) It has depreciated and so buys more Thai goods. 
D) It has depreciated and so buys fewer Thai goods.

Question 17

If the world real interest rate exceeds the Canadian real interest rate, what would Canadian savers most likely do?

Accepted Answer

A) Canadian savers would prefer to buy foreign assets. 
B) Canadian savers would prefer to buy Canadian assets. 
C) Canadian savers will prefer to wait until the two real interest rates are again equal. 
D) Canadian savers will sell their foreign assets and buy Canadian assets instead. 
A) Canadian savers would prefer to buy foreign assets. 
B) Canadian savers would prefer to buy Canadian assets. 
C) Canadian savers will prefer to wait until the two real interest rates are again equal. 
D) Canadian savers will sell their foreign assets and buy Canadian assets instead.

Question 18

Canadian exports make up less than 20 percent of GDP.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following would be Canadian foreign direct investment?

Accepted Answer

A) Your Canadian-based mutual fund buys stock in Eastern European companies. 
B) A Canadian citizen opens a guitar store in Hong Kong. 
C) A Swiss bank buys a Canadian government bond. 
D) A German tractor factory opens a plant in Victoria, B.C. 
A) Your Canadian-based mutual fund buys stock in Eastern European companies. 
B) A Canadian citizen opens a guitar store in Hong Kong. 
C) A Swiss bank buys a Canadian government bond. 
D) A German tractor factory opens a plant in Victoria, B.C.

Question 20

Which of the following would a depreciation of the Canadian real exchange rate induce Canadian consumers to buy?

Accepted Answer

A) fewer domestic goods and fewer foreign goods 
B) more domestic goods and fewer foreign goods 
C) fewer domestic goods and more foreign goods 
D) more domestic goods and more foreign goods 
A) fewer domestic goods and fewer foreign goods 
B) more domestic goods and fewer foreign goods 
C) fewer domestic goods and more foreign goods 
D) more domestic goods and more foreign goods

If Canada buys cameras from Japan, both Canadian net exports and Canadian net capital outflow decrease.

A country has $150 million of net exports and $190 million of saving. What is net capital outflow?

What does the law of one price state?

Suppose that money supply growth continues to be higher in Turkey than it is in Canada. What does purchasing-power parity imply will happen to the real and to the nominal exchange rate?

Suppose a lobster supper in Nova Scotia costs fewer dollars than a lobster supper in Moscow. Explain why this is inconsistent with purchasing-power parity and explain why the inconsistency may exist.

Which of the following best describes net capital outflow in Canada from 1961 to about 1998?

If the purchasing power of the dollar is always the same at home and abroad, then the nominal exchange rate defined as foreign goods per unit of Canadian goods decreases if the Canadian price level rises more than the price level in foreign countries.

Which of the following best describes Canadian net capital outflow and net exports since 1999?

According to purchasing-power parity theory, the real exchange rate should equal the nominal exchange rate.

Suppose the price level in Canada (P) and the nominal exchange rate (e) between the Canadian dollar and the foreign currency remain the same, while the price level abroad increases from P₁* to P₂*. Let the real exchange rate be X. What is the percentage change in the real exchange rate?

A firm in India sells jackets to a Canadian department store chain. Which of the following correctly identifies the effects of this transaction?

Sue, a Canadian citizen, buys stock in a French chain of boutiques. Her purchase counts as which of the following?

Table 31-1 -Refer to Table 31-1. Which currency (ies) is (are) more valuable than predicted by the doctrine of purchasing-power parity?

What is the logic behind the theory of purchasing-power parity?

How do we find the real exchange rate from the nominal exchange rate?

If the exchange rate changes from 40 Thai baht per dollar to 35 Thai baht per dollar, what has happened to the dollar?

If the world real interest rate exceeds the Canadian real interest rate, what would Canadian savers most likely do?

Canadian exports make up less than 20 percent of GDP.

Which of the following would be Canadian foreign direct investment?

Which of the following would a depreciation of the Canadian real exchange rate induce Canadian consumers to buy?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

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 Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters

Exam 12: Open-Economy Macroeconomics: Basic Concepts

If Canada buys cameras from Japan, both Canadian net exports and Canadian net capital outflow decrease.

A country has $150 million of net exports and $190 million of saving. What is net capital outflow?

What does the law of one price state?

Suppose that money supply growth continues to be higher in Turkey than it is in Canada. What does purchasing-power parity imply will happen to the real and to the nominal exchange rate?

Suppose a lobster supper in Nova Scotia costs fewer dollars than a lobster supper in Moscow. Explain why this is inconsistent with purchasing-power parity and explain why the inconsistency may exist.

Which of the following best describes net capital outflow in Canada from 1961 to about 1998?

If the purchasing power of the dollar is always the same at home and abroad, then the nominal exchange rate defined as foreign goods per unit of Canadian goods decreases if the Canadian price level rises more than the price level in foreign countries.

Which of the following best describes Canadian net capital outflow and net exports since 1999?

According to purchasing-power parity theory, the real exchange rate should equal the nominal exchange rate.

Suppose the price level in Canada (P) and the nominal exchange rate (e) between the Canadian dollar and the foreign currency remain the same, while the price level abroad increases from P1* to P2*. Let the real exchange rate be X. What is the percentage change in the real exchange rate?

A firm in India sells jackets to a Canadian department store chain. Which of the following correctly identifies the effects of this transaction?

Sue, a Canadian citizen, buys stock in a French chain of boutiques. Her purchase counts as which of the following?

Table 31-1 -Refer to Table 31-1. Which currency (ies) is (are) more valuable than predicted by the doctrine of purchasing-power parity?

What is the logic behind the theory of purchasing-power parity?

How do we find the real exchange rate from the nominal exchange rate?

If the exchange rate changes from 40 Thai baht per dollar to 35 Thai baht per dollar, what has happened to the dollar?

If the world real interest rate exceeds the Canadian real interest rate, what would Canadian savers most likely do?

Canadian exports make up less than 20 percent of GDP.

Which of the following would be Canadian foreign direct investment?

Which of the following would a depreciation of the Canadian real exchange rate induce Canadian consumers to buy?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

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 Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters

Suppose the price level in Canada (P) and the nominal exchange rate (e) between the Canadian dollar and the foreign currency remain the same, while the price level abroad increases from P₁* to P₂*. Let the real exchange rate be X. What is the percentage change in the real exchange rate?