Question 1

Most of the change from 1980 to 1987 in U.S.net capital outflow as a percent of GDP was due to a(n)

Accepted Answer

A)  decrease in U.S.investment. 
B)  decrease in U.S.national saving. 
C)  increase in U.S.investment. 
D)  increase in U.S.national saving. 
A)  decrease in U.S.investment. 
B)  decrease in U.S.national saving. 
C)  increase in U.S.investment. 
D)  increase in U.S.national saving.

Question 2

Foreign-produced goods and services that are sold domestically are called

Accepted Answer

A)  imports. 
B)  exports. 
C)  net imports. 
D)  net exports. 
A)  imports. 
B)  exports. 
C)  net imports. 
D)  net exports.

Question 3

A country's trade balance

Accepted Answer

A)  must be zero. 
B)  must be greater than zero. 
C)  is greater than zero only if exports are greater than imports. 
D)  is greater than zero only if imports are greater than exports. 
A)  must be zero. 
B)  must be greater than zero. 
C)  is greater than zero only if exports are greater than imports. 
D)  is greater than zero only if imports are greater than exports.

Question 4

If a country changes its corporate tax laws so that domestic businesses build and manage more business in other countries,then the net capital outflow of that country

Accepted Answer

A)  and the net capital outflow of other countries rise. 
B)  rises and the net capital outflow of other countries fall. 
C)  falls and the net capital outflow of other countries rise. 
D)  None of the above are correct. 
A)  and the net capital outflow of other countries rise. 
B)  rises and the net capital outflow of other countries fall. 
C)  falls and the net capital outflow of other countries rise. 
D)  None of the above are correct.

Question 5

Clear Brook Farms,a U.S.manufacturer of frozen vegetarian entrees,sells cases of its product to stores overseas.Its sales

Accepted Answer

A)  decrease U.S.exports but increase U.S.net exports. 
B)  decrease both U.S.exports and U.S.net exports. 
C)  increase both U.S.exports and U.S.net exports. 
D)  increase U.S.exports but decrease U.S.net exports. 
A)  decrease U.S.exports but increase U.S.net exports. 
B)  decrease both U.S.exports and U.S.net exports. 
C)  increase both U.S.exports and U.S.net exports. 
D)  increase U.S.exports but decrease U.S.net exports.

Question 6

Larry,a U.S.citizen,opens and operates a bookstore in Spain.This action is an example of

Accepted Answer

A)  investment for Larry and U.S.foreign direct investment. 
B)  investment for Larry and U.S.foreign portfolio investment. 
C)  U.S.foreign direct investment and U.S.domestic investment. 
D)  U.S.foreign portfolio investment and U.S.domestic investment. 
A)  investment for Larry and U.S.foreign direct investment. 
B)  investment for Larry and U.S.foreign portfolio investment. 
C)  U.S.foreign direct investment and U.S.domestic investment. 
D)  U.S.foreign portfolio investment and U.S.domestic investment.

Question 7

Suppose that a U.S.dollar buys more gold in Australia than it buys in Russia.What does purchasing-power parity imply should happen?

Accepted Answer

People can make a profit by buying gold

Question 8

Paul,a U.S.citizen,builds a telescope factory in Israel.His expenditures

Accepted Answer

A)  increase U.S.and Israeli net capital outflow. 
B)  increase U.S.net capital outflow,but decrease Israeli net capital outflow. 
C)  decrease U.S.net capital outflow,but increase Israeli net capital outflow. 
D)  None of the above is correct. 
A)  increase U.S.and Israeli net capital outflow. 
B)  increase U.S.net capital outflow,but decrease Israeli net capital outflow. 
C)  decrease U.S.net capital outflow,but increase Israeli net capital outflow. 
D)  None of the above is correct.

Question 9

An Italian company builds and operates a pasta factory in the United States.This is an example of Italian

Accepted Answer

A)  foreign direct investment that increases Italian net capital outflow. 
B)  foreign direct investment that decreases Italian net capital outflow. 
C)  foreign portfolio investment that increases Italian net capital outflow. 
D)  foreign portfolio investment that decreases Italian net capital outflow. 
A)  foreign direct investment that increases Italian net capital outflow. 
B)  foreign direct investment that decreases Italian net capital outflow. 
C)  foreign portfolio investment that increases Italian net capital outflow. 
D)  foreign portfolio investment that decreases Italian net capital outflow.

Question 10

If the United States had negative net exports last year,then it

Accepted Answer

A)  sold more abroad than it purchased abroad and had a trade surplus. 
B)  sold more abroad than it purchased abroad and had a trade deficit. 
C)  bought more abroad than it sold abroad and had a trade surplus. 
D)  bought more abroad than it sold abroad and had a trade deficit. 
A)  sold more abroad than it purchased abroad and had a trade surplus. 
B)  sold more abroad than it purchased abroad and had a trade deficit. 
C)  bought more abroad than it sold abroad and had a trade surplus. 
D)  bought more abroad than it sold abroad and had a trade deficit.

Question 11

From 1970 to 1998 the U.S.dollar

Accepted Answer

A)  gained value compared to the German mark because inflation was higher in Germany. 
B)  gained value compared to the German mark because inflation was lower in Germany. 
C)  lost value compared to the German mark because inflation was higher in Germany. 
D)  lost value compared to the German mark because inflation was lower in Germany. 
A)  gained value compared to the German mark because inflation was higher in Germany. 
B)  gained value compared to the German mark because inflation was lower in Germany. 
C)  lost value compared to the German mark because inflation was higher in Germany. 
D)  lost value compared to the German mark because inflation was lower in Germany.

Question 12

If you go to the bank and notice that a dollar buys more Mexican pesos than it used to,then the dollar has

Accepted Answer

A)  appreciated.Other things the same,the appreciation would make Americans less likely to travel to Mexico. 
B)  appreciated.Other things the same,the appreciation would make Americans more likely to travel to Mexico. 
C)  depreciated.Other things the same,the depreciation would make Americans less likely to travel to Mexico. 
D)  depreciated.Other things the same,the depreciation would make Americans more likely to travel to Mexico. 
A)  appreciated.Other things the same,the appreciation would make Americans less likely to travel to Mexico. 
B)  appreciated.Other things the same,the appreciation would make Americans more likely to travel to Mexico. 
C)  depreciated.Other things the same,the depreciation would make Americans less likely to travel to Mexico. 
D)  depreciated.Other things the same,the depreciation would make Americans more likely to travel to Mexico.

Question 13

A nation with a trade surplus will necessarily have domestic investment that is greater than domestic saving.

Accepted Answer

A) True 
 B)False

Question 14

Jill,a U.S.citizen,uses some euros to purchase a bond issued by a French vineyard.This exchange

Accepted Answer

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

Question 15

Suppose inflation is higher in the United States over the next six months than in foreign countries.If exchange rates are given in terms of how much foreign currency a dollar buys or how many foreign goods U.S.goods buy,then according to purchasing-power parity we should expect to see

Accepted Answer

A)  only the nominal exchange rate depreciate. 
B)  both the real and nominal exchange rate appreciate. 
C)  both the real and nominal exchange rate depreciate. 
D)  only the real exchange rate appreciate. 
A)  only the nominal exchange rate depreciate. 
B)  both the real and nominal exchange rate appreciate. 
C)  both the real and nominal exchange rate depreciate. 
D)  only the real exchange rate appreciate.

Question 16

In the 1970s and 1980s the U.S.dollar depreciated against the German mark and appreciated against the Italian lira because U.S.inflation was lower than in Germany but higher than in Italy.

Accepted Answer

A) True 
 B)False

Question 17

International trade

Accepted Answer

A)  raises the standard of living in all trading countries. 
B)  lowers the standard of living in all trading countries. 
C)  leaves the standard of living unchanged. 
D)  raises the standard of living for importing countries and lowers it for exporting countries. 
A)  raises the standard of living in all trading countries. 
B)  lowers the standard of living in all trading countries. 
C)  leaves the standard of living unchanged. 
D)  raises the standard of living for importing countries and lowers it for exporting countries.

Question 18

In the United States,a cup of hot chocolate costs $5.In Australia,the same hot chocolate costs $6.5 Australian dollars.If the exchange rate is $1.3 Australian dollars per U.S.dollar,what is the real exchange rate?

Accepted Answer

A)  1/2 cup of Australian hot chocolate per cup of U.S.hot chocolate 
B)  1 cup of Australian hot chocolate per cup of U.S.hot chocolate 
C)  2 cups of Australian hot chocolate per cup of U.S.hot chocolate 
D)  None of the above is correct. 
A)  1/2 cup of Australian hot chocolate per cup of U.S.hot chocolate 
B)  1 cup of Australian hot chocolate per cup of U.S.hot chocolate 
C)  2 cups of Australian hot chocolate per cup of U.S.hot chocolate 
D)  None of the above is correct.

Question 19

Mary,a U.S.citizen,buys stock in an Italian railroad.This purchase is an example of

Accepted Answer

A)  investment for Mary and U.S.foreign direct investment. 
B)  investment for Mary and U.S.foreign portfolio investment. 
C)  saving for Mary and U.S.foreign direct investment. 
D)  saving for Mary and U.S.foreign portfolio investment. 
A)  investment for Mary and U.S.foreign direct investment. 
B)  investment for Mary and U.S.foreign portfolio investment. 
C)  saving for Mary and U.S.foreign direct investment. 
D)  saving for Mary and U.S.foreign portfolio investment.

Question 20

If the nominal exchange rate e is foreign currency per dollar,the domestic price is P,and the foreign price is P*,then the real exchange rate is defined as

Accepted Answer

A)  e(P*/P). 
B)  e(P/P*). 
C)  e + P/P. 
D)  e - P/P*. 
A)  e(P*/P). 
B)  e(P/P*). 
C)  e + P/P. 
D)  e - P/P*.

Exam 31: Open-Economy Macroeconomics: Basic Concepts

Most of the change from 1980 to 1987 in U.S.net capital outflow as a percent of GDP was due to a(n)

Foreign-produced goods and services that are sold domestically are called

A country's trade balance

If a country changes its corporate tax laws so that domestic businesses build and manage more business in other countries,then the net capital outflow of that country

Clear Brook Farms,a U.S.manufacturer of frozen vegetarian entrees,sells cases of its product to stores overseas.Its sales

Larry,a U.S.citizen,opens and operates a bookstore in Spain.This action is an example of

Suppose that a U.S.dollar buys more gold in Australia than it buys in Russia.What does purchasing-power parity imply should happen?

Paul,a U.S.citizen,builds a telescope factory in Israel.His expenditures

An Italian company builds and operates a pasta factory in the United States.This is an example of Italian

If the United States had negative net exports last year,then it

From 1970 to 1998 the U.S.dollar

If you go to the bank and notice that a dollar buys more Mexican pesos than it used to,then the dollar has

A nation with a trade surplus will necessarily have domestic investment that is greater than domestic saving.

Jill,a U.S.citizen,uses some euros to purchase a bond issued by a French vineyard.This exchange

Suppose inflation is higher in the United States over the next six months than in foreign countries.If exchange rates are given in terms of how much foreign currency a dollar buys or how many foreign goods U.S.goods buy,then according to purchasing-power parity we should expect to see

In the 1970s and 1980s the U.S.dollar depreciated against the German mark and appreciated against the Italian lira because U.S.inflation was lower than in Germany but higher than in Italy.

International trade

In the United States,a cup of hot chocolate costs $5.In Australia,the same hot chocolate costs $6.5 Australian dollars.If the exchange rate is $1.3 Australian dollars per U.S.dollar,what is the real exchange rate?

Mary,a U.S.citizen,buys stock in an Italian railroad.This purchase is an example of

If the nominal exchange rate e is foreign currency per dollar,the domestic price is P,and the foreign price is P*,then the real exchange rate is defined as

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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