Question 1

A depreciation of the U.S.real exchange rate induces U.S.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.

Question 2

A Swiss company sells chocolates to a retailer in the United States.These sales by themselves

Accepted Answer

A)  decrease U.S.net export and Swiss net exports. 
B)  decrease U.S.net exports and increase Swiss net exports. 
C)  increase U.S.and Swiss net exports. 
D)  increase U.S.net exports and decrease Swiss net exports. 
A)  decrease U.S.net export and Swiss net exports. 
B)  decrease U.S.net exports and increase Swiss net exports. 
C)  increase U.S.and Swiss net exports. 
D)  increase U.S.net exports and decrease Swiss net exports.

Question 3

The real exchange rate is the nominal exchange rate,defined as foreign currency per dollar,times

Accepted Answer

A)  U.S.prices minus foreign prices. 
B)  prices in the United States divided by foreign prices. 
C)  foreign prices divided by U.S.prices. 
D)  None of the above is correct. 
A)  U.S.prices minus foreign prices. 
B)  prices in the United States divided by foreign prices. 
C)  foreign prices divided by U.S.prices. 
D)  None of the above is correct.

Question 4

If US goods cost one dollar for each euro German goods costs,the real exchange rate would be computed as how many German goods per U.S.goods?

Accepted Answer

A)  one 
B)  the price of the U.S.goods 
C)  the amount of euros that can be bought with one U.S.dollar 
D)  None of the above is correct. 
A)  one 
B)  the price of the U.S.goods 
C)  the amount of euros that can be bought with one U.S.dollar 
D)  None of the above is correct.

Question 5

Suppose a Starbucks tall-latte cost $4.00 in the United States and 3.20 euros in the Euro area.Also,suppose a McDonald's Big Mac costs $3.50 in the United States and 2.45 euros in Euro area.If the nominal exchange rate is .75 euros per dollar,the prices of which goods have prices that are consistent with purchasing power parity?

Accepted Answer

A)  Both the tall-latte and the Big Mac. 
B)  Neither the tall-latte nor the Big Mac. 
C)  The tall-latte but not the Big Mac. 
D)  The Big Mac but not the tall-latte. 
A)  Both the tall-latte and the Big Mac. 
B)  Neither the tall-latte nor the Big Mac. 
C)  The tall-latte but not the Big Mac. 
D)  The Big Mac but not the tall-latte.

Question 6

A U.S.firm buys sardines from Morocco and pays for them with U.S.dollars.Other things the same,U.S.net exports

Accepted Answer

A)  increase,and U.S.net capital outflow increases. 
B)  increase,and U.S.net capital outflow decreases. 
C)  decrease,and U.S.net capital outflow increases. 
D)  decrease,and U.S.net capital outflow decreases. 
A)  increase,and U.S.net capital outflow increases. 
B)  increase,and U.S.net capital outflow decreases. 
C)  decrease,and U.S.net capital outflow increases. 
D)  decrease,and U.S.net capital outflow decreases.

Question 7

From 1970 to 1998 the U.S.dollar

Accepted Answer

A)  gained value compared to the Italian lira because inflation was higher in the U.S. 
B)  gained value compared to the Italian lira because inflation was lower in the U.S. 
C)  lost value compared to the Italian lira because inflation was higher in the U.S. 
D)  lost value compared to the Italian lira because inflation was lower in the U.S. 
A)  gained value compared to the Italian lira because inflation was higher in the U.S. 
B)  gained value compared to the Italian lira because inflation was lower in the U.S. 
C)  lost value compared to the Italian lira because inflation was higher in the U.S. 
D)  lost value compared to the Italian lira because inflation was lower in the U.S.

Question 8

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

Question 9

Which of the following equations is correct?

Accepted Answer

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

Question 10

If the exchange rate is 10 pesos per U.S.dollar,it is also 1/10 U.S.dollars per peso.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

Real Exchange Rate =

Question 12

Which of the following is correct?

Accepted Answer

A)  U.S.exports as a percentage of GDP have more than doubled since 1950.The U.S.currently has a trade surplus. 
B)  U.S.exports as a percentage of GDP have more than doubled since 1950.The U.S.currently has a trade deficit. 
C)  U.S.exports as a percentage of GDP have increased,but have not nearly doubled since 1950.The U.S.currently has a trade surplus. 
D)  U.S.exports as a percentage of GDP have increased,but have not nearly doubled since 1950.The U.S.currently has a trade deficit. 
A)  U.S.exports as a percentage of GDP have more than doubled since 1950.The U.S.currently has a trade surplus. 
B)  U.S.exports as a percentage of GDP have more than doubled since 1950.The U.S.currently has a trade deficit. 
C)  U.S.exports as a percentage of GDP have increased,but have not nearly doubled since 1950.The U.S.currently has a trade surplus. 
D)  U.S.exports as a percentage of GDP have increased,but have not nearly doubled since 1950.The U.S.currently has a trade deficit.

Question 13

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 14

U.S.based John Deere sells machinery to residents of South Africa who pay with South African currency (the rand).

Accepted Answer

A)  This increases U.S.net capital outflow because the U.S.acquires foreign assets. 
B)  This decreases U.S.net capital outflow because the U.S.acquires foreign assets. 
C)  This increases U.S.net capital outflow because the U.S.sells capital goods. 
D)  This decreases U.S.net capital outflow because the U.S.sells capital goods. 
A)  This increases U.S.net capital outflow because the U.S.acquires foreign assets. 
B)  This decreases U.S.net capital outflow because the U.S.acquires foreign assets. 
C)  This increases U.S.net capital outflow because the U.S.sells capital goods. 
D)  This decreases U.S.net capital outflow because the U.S.sells capital goods.

Question 15

If citizens of a country are not saving much,it is better to

Accepted Answer

A)  force citizens to save. 
B)  reduce investment. 
C)  have foreigners invest in the domestic economy than no one at all. 
D)  to prevent opportunities for citizens to buy capital assets abroad. 
A)  force citizens to save. 
B)  reduce investment. 
C)  have foreigners invest in the domestic economy than no one at all. 
D)  to prevent opportunities for citizens to buy capital assets abroad.

Question 16

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 17

By itself,the purchase of a U.S.bond by a foreign resident decreases U.S.net capital outflow and increases foreign capital outflow.

Accepted Answer

A) True 
 B)False

Question 18

Suppose a lobster supper in Maine costs fewer dollars than a Lobster supper in Paris,France.Explain why this is inconsistent with purchasing-power parity and explain why the inconsistency may exist.

Accepted Answer

According to purchasing-power parity,a d

Question 19

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 China. 
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 China. 
D)  A U.S.citizen buys stock in companies located in Japan.

Question 20

Table 31-1
  
-Refer to Table 31-1.What are Argentina's net exports?

Accepted Answer

A)  $30 billion 
B)  $5 billion 
C)  -$5 billion 
D)  -$25 billion 
A)  $30 billion 
B)  $5 billion 
C)  -$5 billion 
D)  -$25 billion

Exam 31: Open-Economy Macroeconomics: Basic Concepts

A depreciation of the U.S.real exchange rate induces U.S.consumers to buy

A Swiss company sells chocolates to a retailer in the United States.These sales by themselves

The real exchange rate is the nominal exchange rate,defined as foreign currency per dollar,times

If US goods cost one dollar for each euro German goods costs,the real exchange rate would be computed as how many German goods per U.S.goods?

A U.S.firm buys sardines from Morocco and pays for them with U.S.dollars.Other things the same,U.S.net exports

From 1970 to 1998 the U.S.dollar

Net capital outflow equals

Which of the following equations is correct?

If the exchange rate is 10 pesos per U.S.dollar,it is also 1/10 U.S.dollars per peso.

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

Which of the following is correct?

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

U.S.based John Deere sells machinery to residents of South Africa who pay with South African currency (the rand).

If citizens of a country are not saving much,it is better to

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?

By itself,the purchase of a U.S.bond by a foreign resident decreases U.S.net capital outflow and increases foreign capital outflow.

Suppose a lobster supper in Maine costs fewer dollars than a Lobster supper in Paris,France.Explain why this is inconsistent with purchasing-power parity and explain why the inconsistency may exist.

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

Table 31-1 -Refer to Table 31-1.What are Argentina's net exports?

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

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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

Five Debates Over Macroeconomic Policy

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