Question 1

If the U.S.has exports of $1.5 trillion and imports of $2.2 trillion,then the U.S.

Accepted Answer

A)  sells more overseas then it buys from overseas;it has a trade deficit. 
B)  sells more overseas then it buys from overseas;it has a trade surplus. 
C)  buys more from overseas then it sells overseas;it has a trade deficit. 
D)  buys more from overseas then it sells overseas;it has a trade surplus. 
A)  sells more overseas then it buys from overseas;it has a trade deficit. 
B)  sells more overseas then it buys from overseas;it has a trade surplus. 
C)  buys more from overseas then it sells overseas;it has a trade deficit. 
D)  buys more from overseas then it sells overseas;it has a trade surplus.

Question 2

Sonya,a citizen of Denmark,produces boots and shoes that she sells to department stores in the United States.Other things the same,these sales

Accepted Answer

A)  increase U.S.net exports and have no effect on Danish net exports. 
B)  decrease U.S.net exports and have no effect on Danish net exports. 
C)  increase U.S.net exports and decrease Danish net exports. 
D)  decrease U.S.net exports and increase Danish net exports. 
A)  increase U.S.net exports and have no effect on Danish net exports. 
B)  decrease U.S.net exports and have no effect on Danish net exports. 
C)  increase U.S.net exports and decrease Danish net exports. 
D)  decrease U.S.net exports and increase Danish net exports.

Question 3

Purchasing-power parity describes the forces that determine

Accepted Answer

A)  prices in the short run. 
B)  prices in the long run. 
C)  exchange rates in the short run. 
D)  exchange rates in the long run. 
A)  prices in the short run. 
B)  prices in the long run. 
C)  exchange rates in the short run. 
D)  exchange rates in the long run.

Question 4

If prices in the U.S.rise faster than prices in the United Kingdom,then according to the doctrine of purchasing-power parity the U.S.nominal exchange rate should fall.

Accepted Answer

A) True 
 B)False

Question 5

Other things the same,which of the following would both make foreigners more willing to engage in U.S.portfolio investment?

Accepted Answer

A)  U.S.interest rates rise,the default risk of U.S.assets rise 
B)  U.S.interest rates rise,the default risk of U.S.assets fall 
C)  U.S.interest rates fall,the default risk of U.S.assets rise 
D)  U.S.interest rates fall,the default risk of U.S.assets fall 
A)  U.S.interest rates rise,the default risk of U.S.assets rise 
B)  U.S.interest rates rise,the default risk of U.S.assets fall 
C)  U.S.interest rates fall,the default risk of U.S.assets rise 
D)  U.S.interest rates fall,the default risk of U.S.assets fall

Question 6

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 7

If a country exports more than it imports,then it has

Accepted Answer

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

Question 8

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 .80 euros per dollar,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 9

In Ireland,a pint of beer costs 2.2 Irish pounds.In Australia,a pint of beer costs 4 Australian dollars.If the exchange rate is .5 pounds per Australian dollar,what is the real exchange rate?

Accepted Answer

A)  .91 pints of Irish beer per pint of Australian beer 
B)  1.1 pint of Irish beer per pint of Australian beer 
C)  3.64 pints of Irish beer per pint of Australian beer 
D)  4.4 pints of Irish beer per pint of Australian beer 
A)  .91 pints of Irish beer per pint of Australian beer 
B)  1.1 pint of Irish beer per pint of Australian beer 
C)  3.64 pints of Irish beer per pint of Australian beer 
D)  4.4 pints of Irish beer per pint of Australian beer

Question 10

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 11

Suppose that a country has $120 billion of national saving,and $80 billion of domestic investment.Is this possible? Where did the other $40 billion of national savings go?

Accepted Answer

This is possible for an open economy.The

Question 12

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 13

A Mexican firm exchanges Pesos for U.S.dollars and then uses these dollars to purchase corn from the U.S.This transaction

Accepted Answer

A)  increases Mexican net capital outflow,and increases U.S.net exports. 
B)  increases Mexican net capital outflow,and decreases U.S.net exports. 
C)  decreases Mexican net capital outflow,and increases U.S.net exports. 
D)  decreases Mexican net capital outflow,and decreases U.S.net exports. 
A)  increases Mexican net capital outflow,and increases U.S.net exports. 
B)  increases Mexican net capital outflow,and decreases U.S.net exports. 
C)  decreases Mexican net capital outflow,and increases U.S.net exports. 
D)  decreases Mexican net capital outflow,and decreases U.S.net exports.

Question 14

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 15

Other things the same,the real exchange rate between U.S.and South African goods would be higher if

Accepted Answer

A)  prices in the U.S.were higher,or the number of South African rand the dollar purchased were higher. 
B)  prices in the U.S.were higher,or the number of South African rand the dollar purchased were lower. 
C)  prices in the U.S.were lower,or the number of South African rand the dollar purchased were higher. 
D)  prices in the U.S.were lower,or the number of South African rand the dollar purchased were lower. 
A)  prices in the U.S.were higher,or the number of South African rand the dollar purchased were higher. 
B)  prices in the U.S.were higher,or the number of South African rand the dollar purchased were lower. 
C)  prices in the U.S.were lower,or the number of South African rand the dollar purchased were higher. 
D)  prices in the U.S.were lower,or the number of South African rand the dollar purchased were lower.

Question 16

The law of one price states that

Accepted Answer

A)  a good must sell at the price fixed by law. 
B)  a good must sell at the same price at all locations. 
C)  a good cannot sell for a price greater than the legal price ceiling. 
D)  nominal exchange rates will not vary. 
A)  a good must sell at the price fixed by law. 
B)  a good must sell at the same price at all locations. 
C)  a good cannot sell for a price greater than the legal price ceiling. 
D)  nominal exchange rates will not vary.

Question 17

The price of a basket of goods and services in the U.S.is $600.In Canada the same basket of goods costs 700 Canadian dollars.If the nominal exchange rate is 1.2 Canadian dollars per U.S.dollar,what is the real exchange rate?

Accepted Answer

A)  700/600 
B)  600/700 
C)  700/720 
D)  None of the above is correct. 
A)  700/600 
B)  600/700 
C)  700/720 
D)  None of the above is correct.

Question 18

A U.S.firm buys bonds issued by a technology center in India.This purchase is an example of U.S.

Accepted Answer

A)  foreign portfolio investment.By itself it is an increase in U.S.holdings of foreign bonds and increases U.S.net capital outflow. 
B)  foreign portfolio investment.By itself it is an increase in U.S.holdings of foreign bonds and decreases U.S.net capital outflow. 
C)  foreign direct investment.By itself it is an increase in U.S.holdings of foreign bonds and increases U.S.net capital outflow. 
D)  foreign direct investment.By itself it is an increase in U.S.holdings of foreign bonds and decreases U.S.net capital outflow. 
A)  foreign portfolio investment.By itself it is an increase in U.S.holdings of foreign bonds and increases U.S.net capital outflow. 
B)  foreign portfolio investment.By itself it is an increase in U.S.holdings of foreign bonds and decreases U.S.net capital outflow. 
C)  foreign direct investment.By itself it is an increase in U.S.holdings of foreign bonds and increases U.S.net capital outflow. 
D)  foreign direct investment.By itself it is an increase in U.S.holdings of foreign bonds and decreases U.S.net capital outflow.

Question 19

A Swiss watchmaker opens a factory in the United States.This is an example of Swiss

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 20

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

Accepted Answer

A)  Toni,a U.S.citizen,buys bonds issued by a Swedish corporation. 
B)  Randall,a U.S.citizen,opens a cheesecake factory in Italy. 
C)  Both A and B are examples of U.S.portfolio investment. 
D)  Neither A nor B are examples of U.S.portfolio investment. 
A)  Toni,a U.S.citizen,buys bonds issued by a Swedish corporation. 
B)  Randall,a U.S.citizen,opens a cheesecake factory in Italy. 
C)  Both A and B are examples of U.S.portfolio investment. 
D)  Neither A nor B are examples of U.S.portfolio investment.

Exam 31: Open-Economy Macroeconomics: Basic Concepts

If the U.S.has exports of $1.5 trillion and imports of $2.2 trillion,then the U.S.

Sonya,a citizen of Denmark,produces boots and shoes that she sells to department stores in the United States.Other things the same,these sales

Purchasing-power parity describes the forces that determine

If prices in the U.S.rise faster than prices in the United Kingdom,then according to the doctrine of purchasing-power parity the U.S.nominal exchange rate should fall.

Other things the same,which of the following would both make foreigners more willing to engage in U.S.portfolio investment?

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

If a country exports more than it imports,then it has

In Ireland,a pint of beer costs 2.2 Irish pounds.In Australia,a pint of beer costs 4 Australian dollars.If the exchange rate is .5 pounds per Australian dollar,what is the real exchange rate?

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

Suppose that a country has $120 billion of national saving,and $80 billion of domestic investment.Is this possible? Where did the other $40 billion of national savings go?

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

A Mexican firm exchanges Pesos for U.S.dollars and then uses these dollars to purchase corn from the U.S.This transaction

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

Other things the same,the real exchange rate between U.S.and South African goods would be higher if

The law of one price states that

The price of a basket of goods and services in the U.S.is $600.In Canada the same basket of goods costs 700 Canadian dollars.If the nominal exchange rate is 1.2 Canadian dollars per U.S.dollar,what is the real exchange rate?

A U.S.firm buys bonds issued by a technology center in India.This purchase is an example of U.S.

A Swiss watchmaker opens a factory in the United States.This is an example of Swiss

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

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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