Question 1

If the Mexican nominal exchange rate does not change,but prices rise faster abroad than in Mexico,then the Mexican real exchange rate

Accepted Answer

A)  does not change. 
B)  rises. 
C)  declines. 
D)  None of the above is necessarily correct. 
A)  does not change. 
B)  rises. 
C)  declines. 
D)  None of the above is necessarily correct.

Question 2

Suppose that the inflation rate is higher in Turkey than in the U.S.for the next six months.Then according to purchasing power parity,if exchange rates are given in terms of how many Turkish lira or how many Turkish goods a U.S.dollar buys,

Accepted Answer

A)  the nominal exchange rate rises but the real exchange rate does not. 
B)  the nominal exchange rate does not rise,but the real exchange rate does. 
C)  both the nominal and real exchange rates rise. 
D)  neither the nominal nor the real exchange rate rises. 
A)  the nominal exchange rate rises but the real exchange rate does not. 
B)  the nominal exchange rate does not rise,but the real exchange rate does. 
C)  both the nominal and real exchange rates rise. 
D)  neither the nominal nor the real exchange rate rises.

Question 3

Net capital outflow is defined as the purchase of

Accepted Answer

A)  foreign assets by domestic residents minus the purchase of domestic assets by foreign residents. 
B)  foreign assets by domestic residents minus the purchase of foreign goods and services by domestic residents. 
C)  domestic assets by foreign residents minus the purchase of domestic goods and services by foreign residents. 
D)  domestic assets by foreign residents minus the purchase of foreign assets by domestic residents. 
A)  foreign assets by domestic residents minus the purchase of domestic assets by foreign residents. 
B)  foreign assets by domestic residents minus the purchase of foreign goods and services by domestic residents. 
C)  domestic assets by foreign residents minus the purchase of domestic goods and services by foreign residents. 
D)  domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.

Question 4

If a U.S.textbook publishing company sells texts overseas,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 5

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 6

A citizen of Saudi Arabia uses previously obtained U.S.dollars to purchase apples from the United States.This transaction

Accepted Answer

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

Question 7

The nominal exchange rate is .80 euros per dollar and the real exchange rate is 4/3.Which of the following prices for a particular good are consistent with these exchange rates?

Accepted Answer

A)  $4 in the U.S.and 3 euros in Italy. 
B)  $4 in the U.S.and 3.75 euros in Italy. 
C)  $5 in the U.S.and 3 euros in Italy. 
D)  $6 in the U.S.and 2.50 euros in Italy. 
A)  $4 in the U.S.and 3 euros in Italy. 
B)  $4 in the U.S.and 3.75 euros in Italy. 
C)  $5 in the U.S.and 3 euros in Italy. 
D)  $6 in the U.S.and 2.50 euros in Italy.

Question 8

Which of the following is correct?

Accepted Answer

A)  NCO = NX 
B)  NCO + I = NX 
C)  NX + NCO = Y 
D)  Y = NCO - I 
A)  NCO = NX 
B)  NCO + I = NX 
C)  NX + NCO = Y 
D)  Y = NCO - I

Question 9

A country has a trade deficit.Which of the following must also be true?

Accepted Answer

A)  net capital outflow is positive and domestic investment is larger than saving 
B)  net capital outflow is positive and saving is larger than domestic investment 
C)  net capital outflow is negative and domestic investment is larger than saving 
D)  net capital outflow is negative and saving is larger than domestic investment 
A)  net capital outflow is positive and domestic investment is larger than saving 
B)  net capital outflow is positive and saving is larger than domestic investment 
C)  net capital outflow is negative and domestic investment is larger than saving 
D)  net capital outflow is negative and saving is larger than domestic investment

Question 10

Nominal exchange rates

Accepted Answer

A)  vary little over time. 
B)  vary substantially over time. 
C)  appreciate over time for most countries. 
D)  depreciate over time for most countries. 
A)  vary little over time. 
B)  vary substantially over time. 
C)  appreciate over time for most countries. 
D)  depreciate over time for most countries.

Question 11

If there is a trade deficit,then

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 12

Table 31-2
  
-Refer to Table 31-2.Which currency(ies)is(are)less valuable than predicted by the doctrine of purchasing-power parity?

Accepted Answer

A)  boloviano and dinar 
B)  yen and kroner 
C)  baht and kroner 
D)  baht 
A)  boloviano and dinar 
B)  yen and kroner 
C)  baht and kroner 
D)  baht

Question 13

Assuming all other things equal,what would happen to the U.S.dollar real exchange rate under each of the following circumstances?
a.
The U.S.nominal exchange rate depreciates.
b.
U.S.domestic prices increase.
c.
Prices in the rest of the world rise.

Accepted Answer

a.
The U.S.dollar real exchang

Question 14

Jason plans to buy shrimp in Florida and sell them in Ames,Iowa where the price is higher.Jason plans to engage in arbitrage.

Accepted Answer

A) True 
 B)False

Question 15

If the Canadian nominal exchange rate does not change,but prices rise faster in Canada than in all other countries,then the Canadian real exchange rate

Accepted Answer

A)  does not change. 
B)  rises. 
C)  declines. 
D)  There is not enough information to answer the question 
A)  does not change. 
B)  rises. 
C)  declines. 
D)  There is not enough information to answer the question

Question 16

Why are net exports and net capital outflow always equal?

Accepted Answer

Net exports and net capital outflow are

Question 17

If a country had a trade surplus of $50 billion and then its exports rose by $30 billion and its imports rose by $20 billion,its net exports would now be

Accepted Answer

A)  $0 billion. 
B)  $20 billion. 
C)  $40 billion. 
D)  $60 billion. 
A)  $0 billion. 
B)  $20 billion. 
C)  $40 billion. 
D)  $60 billion.

Question 18

A U.S.pharmacy buys drugs from a British company and pays for them with US dollars.This transaction

Accepted Answer

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

Question 19

In which of the following situations must national saving rise?

Accepted Answer

A)  Both domestic investment and net capital outflow increase. 
B)  Domestic investment increases and net capital outflow decreases. 
C)  Domestic investment decreases and net capital outflow increases. 
D)  Both domestic investment and net capital outflow decrease. 
A)  Both domestic investment and net capital outflow increase. 
B)  Domestic investment increases and net capital outflow decreases. 
C)  Domestic investment decreases and net capital outflow increases. 
D)  Both domestic investment and net capital outflow decrease.

Question 20

The nominal exchange rate is 4 Saudi Arabian riyals,9 Moroccan dirham,45 Indian rupee,or .6 British pounds per U.S.dollar.A double latte espresso and a cinnamon biscotti costs $6 in the U.S. ,24 riyals in Saudi Arabia,45 Moroccan dirham in Morocco,250 Indian rupees in India,and 5 British pounds in Britain.According to these numbers,where is the real exchange rate between American and foreign goods the lowest?

Accepted Answer

A)  Saudi Arabia 
B)  Morocco 
C)  India 
D)  Britain 
A)  Saudi Arabia 
B)  Morocco 
C)  India 
D)  Britain

Exam 31: Open-Economy Macroeconomics: Basic Concepts

If the Mexican nominal exchange rate does not change,but prices rise faster abroad than in Mexico,then the Mexican real exchange rate

Suppose that the inflation rate is higher in Turkey than in the U.S.for the next six months.Then according to purchasing power parity,if exchange rates are given in terms of how many Turkish lira or how many Turkish goods a U.S.dollar buys,

Net capital outflow is defined as the purchase of

If a U.S.textbook publishing company sells texts overseas,U.S.net exports

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

A citizen of Saudi Arabia uses previously obtained U.S.dollars to purchase apples from the United States.This transaction

The nominal exchange rate is .80 euros per dollar and the real exchange rate is 4/3.Which of the following prices for a particular good are consistent with these exchange rates?

Which of the following is correct?

A country has a trade deficit.Which of the following must also be true?

Nominal exchange rates

If there is a trade deficit,then

Table 31-2 -Refer to Table 31-2.Which currency(ies)is(are)less valuable than predicted by the doctrine of purchasing-power parity?

Assuming all other things equal,what would happen to the U.S.dollar real exchange rate under each of the following circumstances? a. The U.S.nominal exchange rate depreciates. b. U.S.domestic prices increase. c. Prices in the rest of the world rise.

Jason plans to buy shrimp in Florida and sell them in Ames,Iowa where the price is higher.Jason plans to engage in arbitrage.

If the Canadian nominal exchange rate does not change,but prices rise faster in Canada than in all other countries,then the Canadian real exchange rate

Why are net exports and net capital outflow always equal?

If a country had a trade surplus of $50 billion and then its exports rose by $30 billion and its imports rose by $20 billion,its net exports would now be

A U.S.pharmacy buys drugs from a British company and pays for them with US dollars.This transaction

In which of the following situations must national saving rise?

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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