Question 1

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

Accepted Answer

The logic behind purchasing-power parity

Question 2

Ivan,a Russian citizen,sells several hundred cases of caviar to a restaurant chain in the United States.By itself,this sale

Accepted Answer

A)  increases U.S.net exports and decreases Russian net exports. 
B)  increases U.S.net exports and has no effect on Russian net exports. 
C)  decreases U.S.net exports and increases Russian net exports. 
D)  decreases U.S.net exports and has no effect on Russian net exports. 
A)  increases U.S.net exports and decreases Russian net exports. 
B)  increases U.S.net exports and has no effect on Russian net exports. 
C)  decreases U.S.net exports and increases Russian net exports. 
D)  decreases U.S.net exports and has no effect on Russian net exports.

Question 3

The nominal exchange rate is the

Accepted Answer

A)  nominal interest rate in one country divided by the nominal interest rate in the other country. 
B)  the ratio of a foreign country's interest rate to the domestic interest rate. 
C)  rate at which a person can trade the currency of one country for another. 
D)  the real exchange rate minus the inflation rate. 
A)  nominal interest rate in one country divided by the nominal interest rate in the other country. 
B)  the ratio of a foreign country's interest rate to the domestic interest rate. 
C)  rate at which a person can trade the currency of one country for another. 
D)  the real exchange rate minus the inflation rate.

Question 4

If the U.S.price level is increasing by 3 percent annually and the Swiss price level is increasing by 2 percent annually,by about what percent would the price of Swiss francs in dollars need to change according to purchasing power parity?

Accepted Answer

A)  decrease by 5 percent 
B)  decrease by 1 percent 
C)  increase by 5 percent 
D)  increase by 1 percent 
A)  decrease by 5 percent 
B)  decrease by 1 percent 
C)  increase by 5 percent 
D)  increase by 1 percent

Question 5

If the exchange rate changes from 135 Kazakhstan tenge per dollar to 150 Kazakhstan tenge per dollar,the dollar has

Accepted Answer

A)  appreciated.Other things the same,it now takes fewer dollars to buy Kazakhstani goods. 
B)  appreciated.Other things the same,it now takes more dollars to buy Kazakhstani goods. 
C)  depreciated.Other things the same,it now takes fewer dollars to buy Kazakhstani goods. 
D)  depreciated.Other things the same,it now takes more dollars to buy Kazakhstani goods. 
A)  appreciated.Other things the same,it now takes fewer dollars to buy Kazakhstani goods. 
B)  appreciated.Other things the same,it now takes more dollars to buy Kazakhstani goods. 
C)  depreciated.Other things the same,it now takes fewer dollars to buy Kazakhstani goods. 
D)  depreciated.Other things the same,it now takes more dollars to buy Kazakhstani goods.

Question 6

A country has $100 million of net exports and $170 million of saving.Net capital outflow is

Accepted Answer

A)  $70 million and domestic investment is $170 million. 
B)  $70 million and domestic investment is $270 million. 
C)  $100 million and domestic investment is $70 million. 
D)  None of the above is correct. 
A)  $70 million and domestic investment is $170 million. 
B)  $70 million and domestic investment is $270 million. 
C)  $100 million and domestic investment is $70 million. 
D)  None of the above is correct.

Question 7

The large trade deficits in the United States in the 1990s were primarily associated with a rise in domestic investment rather than a rise in the budget deficit.

Accepted Answer

A) True 
 B)False

Question 8

According to purchasing power parity,if it took 1,000 Korean Won to buy a dollar this year,but it took 1,100 to buy it last year,then the dollar has

Accepted Answer

A)  appreciated,indicating inflation was higher in the U.S.than in Korea. 
B)  appreciated indicating inflation was lower in the U.S.than in Korea. 
C)  depreciated indicating inflation was higher in the U.S.than in Korea. 
D)  depreciated indicating inflation was lower in the U.S.than in Korea. 
A)  appreciated,indicating inflation was higher in the U.S.than in Korea. 
B)  appreciated indicating inflation was lower in the U.S.than in Korea. 
C)  depreciated indicating inflation was higher in the U.S.than in Korea. 
D)  depreciated indicating inflation was lower in the U.S.than in Korea.

Question 9

When the yen gets "stronger" relative to the dollar,

Accepted Answer

A)  the U.S.trade deficit with Japan will rise. 
B)  the U.S.trade deficit with Japan will fall. 
C)  the U.S.trade deficit with Japan will be unchanged. 
D)  None of the above necessarily happens. 
A)  the U.S.trade deficit with Japan will rise. 
B)  the U.S.trade deficit with Japan will fall. 
C)  the U.S.trade deficit with Japan will be unchanged. 
D)  None of the above necessarily happens.

Question 10

If saving is greater than domestic investment,then

Accepted Answer

A) there is a trade deficit and Y > C + I + G. B) there is a trade deficit and Y C + I + G. D) there is a trade surplus and Y < C + I + G. A) there is a trade deficit and Y > C + I + G. B) there is a trade deficit and Y C + I + G. D) there is a trade surplus and Y < C + I + G.

Question 11

From 1970 to 1998 the U.S.dollar

Accepted Answer

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

Question 12

Stacey,a U.S.citizen,buys a bond issued by an Italian pasta manufacturer.

Accepted Answer

A)  This purchase is foreign direct investment.By itself it increases U.S.net capital outflow. 
B)  This purchase is foreign direct investment.By itself it decreases U.S.net capital outflow. 
C)  This purchase is foreign portfolio investment.By itself it increases U.S.net capital outflow. 
D)  This purchase is foreign portfolio investment.By itself it decreases U.S.net capital outflow. 
A)  This purchase is foreign direct investment.By itself it increases U.S.net capital outflow. 
B)  This purchase is foreign direct investment.By itself it decreases U.S.net capital outflow. 
C)  This purchase is foreign portfolio investment.By itself it increases U.S.net capital outflow. 
D)  This purchase is foreign portfolio investment.By itself it decreases U.S.net capital outflow.

Question 13

Which type(s)of economies interact with other economies?

Accepted Answer

A)  only closed economies 
B)  only open economies 
C)  closed economies and open economies 
D)  neither closed nor open economies 
A)  only closed economies 
B)  only open economies 
C)  closed economies and open economies 
D)  neither closed nor open economies

Question 14

If the dollar buys less cotton in Egypt than in the United States,then traders could make a profit by

Accepted Answer

A)  buying cotton in the United States and selling it in Egypt,which would tend to raise the price of cotton in the United States. 
B)  buying cotton in the United States and selling it in Egypt,which would tend to raise the price of cotton in Egypt. 
C)  buying cotton in Egypt and selling it in the United States,which would tend to raise the price of cotton in Egypt. 
D)  buying cotton in Egypt and selling it in the United States,which would tend to raise the price of cotton in the United States. 
A)  buying cotton in the United States and selling it in Egypt,which would tend to raise the price of cotton in the United States. 
B)  buying cotton in the United States and selling it in Egypt,which would tend to raise the price of cotton in Egypt. 
C)  buying cotton in Egypt and selling it in the United States,which would tend to raise the price of cotton in Egypt. 
D)  buying cotton in Egypt and selling it in the United States,which would tend to raise the price of cotton in the United States.

Question 15

You are planning a graduation trip to Nepal.Other things the same,if the dollar appreciates relative to the Nepalese rupee,then

Accepted Answer

A)  the dollar buys fewer rupees.Your purchases in Nepal will require fewer dollars. 
B)  the dollar buys fewer rupees.Your purchases in Nepal will require more dollars. 
C)  the dollar buys more rupees.Your purchases in Nepal will require fewer dollars. 
D)  the dollar buys more rupees.Your purchases in Nepal will require more dollars. 
A)  the dollar buys fewer rupees.Your purchases in Nepal will require fewer dollars. 
B)  the dollar buys fewer rupees.Your purchases in Nepal will require more dollars. 
C)  the dollar buys more rupees.Your purchases in Nepal will require fewer dollars. 
D)  the dollar buys more rupees.Your purchases in Nepal will require more dollars.

Question 16

If the exchange rate is 50 Bangladesh taka per dollar and a bushel of rice costs 180 taka in Bangladesh and $3 in the United States,then the real exchange rate is

Accepted Answer

A)  greater than one and arbitrageurs could profit by buying rice in the United States and selling it in Bangladesh. 
B)  greater than one and arbitrageurs could profit by buying rice in Bangladesh and selling it in the United States. 
C)  less than one and arbitrageurs could profit by buying rice in the United States and selling it in Bangladesh. 
D)  less than one and arbitrageurs could profit by buying rice in Bangladesh and selling it in the United States. 
A)  greater than one and arbitrageurs could profit by buying rice in the United States and selling it in Bangladesh. 
B)  greater than one and arbitrageurs could profit by buying rice in Bangladesh and selling it in the United States. 
C)  less than one and arbitrageurs could profit by buying rice in the United States and selling it in Bangladesh. 
D)  less than one and arbitrageurs could profit by buying rice in Bangladesh and selling it in the United States.

Question 17

If the exchange rate were .8 Canadian dollars per U.S.dollar,a watch that costs $8 US dollars would cost

Accepted Answer

A)  6.4 Canadian dollars. 
B)  10 Canadian dollars. 
C)  12.50 Canadian dollars. 
D)  None of the above is correct. 
A)  6.4 Canadian dollars. 
B)  10 Canadian dollars. 
C)  12.50 Canadian dollars. 
D)  None of the above is correct.

Question 18

If Saudi Arabia had positive 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 19

A U.S.firm buys cement mixers from China and pays for them with U.S.dollars.

Accepted Answer

A)  The purchase of the cement mixers increases U.S.net exports and the payment with dollars increases U.S.net capital outflow. 
B)  The purchase of cement mixers increases U.S.net exports and the payment with dollars decreases U.S.net capital outflow. 
C)  The purchase of cement mixers decreases U.S.net exports and the payment with dollars increases U.S.net capital outflow. 
D)  The purchase of cement mixers decreases U.S.net exports and the payment with dollars decreases U.S.net capital outflow. 
A)  The purchase of the cement mixers increases U.S.net exports and the payment with dollars increases U.S.net capital outflow. 
B)  The purchase of cement mixers increases U.S.net exports and the payment with dollars decreases U.S.net capital outflow. 
C)  The purchase of cement mixers decreases U.S.net exports and the payment with dollars increases U.S.net capital outflow. 
D)  The purchase of cement mixers decreases U.S.net exports and the payment with dollars decreases U.S.net capital outflow.

Question 20

During some year a country had exports of $50 billion,imports of $35 billion,and purchased $30 billion of foreign assets.What was the value of domestic assests purchased by foreigners?

Accepted Answer

A)  $35 billion 
B)  $20 billion 
C)  $15 billion 
D)  $5 billion 
A)  $35 billion 
B)  $20 billion 
C)  $15 billion 
D)  $5 billion

Exam 31: Open-Economy Macroeconomics: Basic Concepts

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

Ivan,a Russian citizen,sells several hundred cases of caviar to a restaurant chain in the United States.By itself,this sale

The nominal exchange rate is the

If the U.S.price level is increasing by 3 percent annually and the Swiss price level is increasing by 2 percent annually,by about what percent would the price of Swiss francs in dollars need to change according to purchasing power parity?

If the exchange rate changes from 135 Kazakhstan tenge per dollar to 150 Kazakhstan tenge per dollar,the dollar has

A country has $100 million of net exports and $170 million of saving.Net capital outflow is

The large trade deficits in the United States in the 1990s were primarily associated with a rise in domestic investment rather than a rise in the budget deficit.

According to purchasing power parity,if it took 1,000 Korean Won to buy a dollar this year,but it took 1,100 to buy it last year,then the dollar has

When the yen gets "stronger" relative to the dollar,

If saving is greater than domestic investment,then

From 1970 to 1998 the U.S.dollar

Stacey,a U.S.citizen,buys a bond issued by an Italian pasta manufacturer.

Which type(s)of economies interact with other economies?

If the dollar buys less cotton in Egypt than in the United States,then traders could make a profit by

You are planning a graduation trip to Nepal.Other things the same,if the dollar appreciates relative to the Nepalese rupee,then

If the exchange rate is 50 Bangladesh taka per dollar and a bushel of rice costs 180 taka in Bangladesh and $3 in the United States,then the real exchange rate is

If the exchange rate were .8 Canadian dollars per U.S.dollar,a watch that costs $8 US dollars would cost

If Saudi Arabia had positive net exports last year,then it

A U.S.firm buys cement mixers from China and pays for them with U.S.dollars.

During some year a country had exports of $50 billion,imports of $35 billion,and purchased $30 billion of foreign assets.What was the value of domestic assests purchased by foreigners?

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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