Question 1

If you are vacationing in France and the dollar depreciates relative to the euro,then

Accepted Answer

A)  the dollar buys more euros.It will take fewer dollars to buy a good that costs 50 euros. 
B)  the dollar buys more euros.It will take more dollars to buy a good that costs 50 euros. 
C)  the dollar buys fewer euros.It will take fewer dollars to buy a good that costs 50 euros. 
D)  the dollar buys fewer euros.It will take more dollars to buy a good that costs 50 euros. 
A)  the dollar buys more euros.It will take fewer dollars to buy a good that costs 50 euros. 
B)  the dollar buys more euros.It will take more dollars to buy a good that costs 50 euros. 
C)  the dollar buys fewer euros.It will take fewer dollars to buy a good that costs 50 euros. 
D)  the dollar buys fewer euros.It will take more dollars to buy a good that costs 50 euros.

Question 2

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

Accepted Answer

A)  A Polish company opens a shipbuilding plant in the United States. 
B)  A Bolivian bank buys U.S.corporate bonds. 
C)  A U.S.bank buys Bolivian corporate bonds. 
D)  A U.S.furniture maker opens a plant in Mexico. 
A)  A Polish company opens a shipbuilding plant in the United States. 
B)  A Bolivian bank buys U.S.corporate bonds. 
C)  A U.S.bank buys Bolivian corporate bonds. 
D)  A U.S.furniture maker opens a plant in Mexico.

Question 3

A country has a trade deficit.Its

Accepted Answer

A)  net capital outflow must be positive,and saving is larger than investment. 
B)  net capital outflow must be positive and saving is smaller than investment. 
C)  net capital outflow must be negative and saving is larger than investment. 
D)  net capital outflow must be negative and saving is smaller than investment. 
A)  net capital outflow must be positive,and saving is larger than investment. 
B)  net capital outflow must be positive and saving is smaller than investment. 
C)  net capital outflow must be negative and saving is larger than investment. 
D)  net capital outflow must be negative and saving is smaller than investment.

Question 4

The increase in international trade in the United States is partly due to

Accepted Answer

A)  improvements in transportation. 
B)  advances in telecommunications. 
C)  increased trade of goods with a high value per pound. 
D)  All of the above are correct. 
A)  improvements in transportation. 
B)  advances in telecommunications. 
C)  increased trade of goods with a high value per pound. 
D)  All of the above are correct.

Question 5

Catherine,a citizen of Spain,decides to purchase bonds issued by Chile instead of ones issued by the United States even though the Chilean bonds have a higher risk of default.An economic reason for her decision might be that

Accepted Answer

A)  she dislikes U.S.foreign policy. 
B)  the Chilean bonds pay a higher rate of interest. 
C)  the U.S.government is more stable than the Chilean government. 
D)  None of the above provide an economic reason for buying the riskier bond. 
A)  she dislikes U.S.foreign policy. 
B)  the Chilean bonds pay a higher rate of interest. 
C)  the U.S.government is more stable than the Chilean government. 
D)  None of the above provide an economic reason for buying the riskier bond.

Question 6

When U.S.national saving rises,domestic investment also necessarily rises.

Accepted Answer

A) True 
 B)False

Question 7

According to purchasing power parity,if over the course of a year the price level in the U.S.rises more than in Canada,then which of the following rises?

Accepted Answer

A)  the U.S.real exchange rate,but not the U.S.nominal exchange rate 
B)  the U.S.nominal exchange rate,but not the U.S.real exchange rate 
C)  the U.S.nominal exchange rate and the U.S.real exchange rate 
D)  neither the real exchange rate nor the nominal exchange rate 
A)  the U.S.real exchange rate,but not the U.S.nominal exchange rate 
B)  the U.S.nominal exchange rate,but not the U.S.real exchange rate 
C)  the U.S.nominal exchange rate and the U.S.real exchange rate 
D)  neither the real exchange rate nor the nominal exchange rate

Question 8

U.S.based Dell sells computers to an Irish company that pays with previously obtained U.S.currency.This exchange

Accepted Answer

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

Question 9

If the U.S.has a trade deficit and the nominal exchange rate depreciates,then other things the same

Accepted Answer

A)  the trade deficit rises and net capital outflow rises. 
B)  the trade deficit rises and net capital outflow falls. 
C)  the trade deficit falls and net capital outflows rise. 
D)  the trade deficit falls and net capital outflows fall. 
A)  the trade deficit rises and net capital outflow rises. 
B)  the trade deficit rises and net capital outflow falls. 
C)  the trade deficit falls and net capital outflows rise. 
D)  the trade deficit falls and net capital outflows fall.

Question 10

Which of the following is correct? Over about the last fifty years

Accepted Answer

A)  U.S.exports and U.S.imports each about doubled. 
B)  U.S.exports and U.S.imports each about tripled. 
C)  U.S.exports about doubled and U.S.imports about tripled. 
D)  U.S.exports about tripled and U.S.imports about doubled. 
A)  U.S.exports and U.S.imports each about doubled. 
B)  U.S.exports and U.S.imports each about tripled. 
C)  U.S.exports about doubled and U.S.imports about tripled. 
D)  U.S.exports about tripled and U.S.imports about doubled.

Question 11

If Ireland's domestic investment exceeds national saving,then Ireland has

Accepted Answer

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

Question 12

A U.S.firm buys wool from Australia with U.S.currency.The Australia firm then uses this money to buy electric shears from a U.S.firm.Which of the following increases?

Accepted Answer

A)  Australian net capital outflow and Australian net exports 
B)  only Australian net exports 
C)  only Australian net capital outflow 
D)  neither Australian net exports nor Australian capital outflow 
A)  Australian net capital outflow and Australian net exports 
B)  only Australian net exports 
C)  only Australian net capital outflow 
D)  neither Australian net exports nor Australian capital outflow

Question 13

Suppose that the nominal exchange rate is 120 yen per dollar,that the price of a basket of goods in the U.S.is $500 and the price of a basket of goods in Japan is 50,000 yen.Suppose that these values change to 100 yen per dollar,$600,and 70,000 yen.Then the real exchange rate would

Accepted Answer

A)  appreciate which by itself would make U.S.net exports fall. 
B)  appreciate which by itself would make U.S.net exports rise. 
C)  depreciate which by itself would make U.S.net exports fall. 
D)  depreciate which by itself would make U.S.net exports rise. 
A)  appreciate which by itself would make U.S.net exports fall. 
B)  appreciate which by itself would make U.S.net exports rise. 
C)  depreciate which by itself would make U.S.net exports fall. 
D)  depreciate which by itself would make U.S.net exports rise.

Question 14

If a country has Y > C + I + G,then it has

Accepted Answer

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

Question 15

If the purchasing power of the dollar is always the same at home and abroad,then the nominal exchange rate defined as units of foreign currency per dollar decreases if the U.S.price level rises more than the price level in foreign countries.

Accepted Answer

A) True 
 B)False

Question 16

Net exports measures the difference between a country's

Accepted Answer

A)  income and expenditures. 
B)  sale of goods and services abroad and purchase of foreign goods and services. 
C)  sale of domestic assets abroad and purchase of foreign assets. 
D)  All of the above are correct. 
A)  income and expenditures. 
B)  sale of goods and services abroad and purchase of foreign goods and services. 
C)  sale of domestic assets abroad and purchase of foreign assets. 
D)  All of the above are correct.

Question 17

The country of Wiknam has net capital outflow of $1,000,government purchases of $5,000 and consumption of $20,000.Which of the following is correct?

Accepted Answer

A)  If its domestic investment is $1,000,its GDP is $26,000. 
B)  If its domestic investment is $2,000,its GDP is $28,000. 
C)  If its domestic investment is $5,000,its GDP is $29,000. 
D)  None of the above are correct. 
A)  If its domestic investment is $1,000,its GDP is $26,000. 
B)  If its domestic investment is $2,000,its GDP is $28,000. 
C)  If its domestic investment is $5,000,its GDP is $29,000. 
D)  None of the above are correct.

Question 18

If a dollar buys more potatoes in the U.S.than in France,then

Accepted Answer

A)  the real exchange rate is greater than 1;a profit might be made by buying potatoes in the U.S.and selling them in France. 
B)  the real exchange rate is greater than 1;a profit might be made by buying potatoes in France.and selling them in the U.S. 
C)  the real exchange rate is less than 1;a profit might be made by buying potatoes in the U.S.and selling them in France. 
D)  the real exchange rate is less than 1;a profit might be made by buying potatoes in France and selling them in the U.S. 
A)  the real exchange rate is greater than 1;a profit might be made by buying potatoes in the U.S.and selling them in France. 
B)  the real exchange rate is greater than 1;a profit might be made by buying potatoes in France.and selling them in the U.S. 
C)  the real exchange rate is less than 1;a profit might be made by buying potatoes in the U.S.and selling them in France. 
D)  the real exchange rate is less than 1;a profit might be made by buying potatoes in France and selling them in the U.S.

Question 19

According to purchasing power parity,if the Federal Reserve increased the money supply

Accepted Answer

A)  U.S.prices would rise and the nominal exchange rate would rise. 
B)  U.S.prices would rise and the nominal exchange rate would fall. 
C)  U.S.prices would fall and the nominal exchange rate would rise. 
D)  U.S.prices and the nominal exchange rate would fall. 
A)  U.S.prices would rise and the nominal exchange rate would rise. 
B)  U.S.prices would rise and the nominal exchange rate would fall. 
C)  U.S.prices would fall and the nominal exchange rate would rise. 
D)  U.S.prices and the nominal exchange rate would fall.

Question 20

Mike,a U.S.citizen,buys $1,000 worth of olives from Greece.By itself this purchase

Accepted Answer

A)  increases U.S.imports by $1,000 and increases U.S.net exports by $1,000. 
B)  increases U.S.imports by $1,000 and decreases U.S.net exports by $1,000. 
C)  increases U.S.exports by $1,000 and increases U.S.net exports by $1,000. 
D)  increases U.S.exports by $1,000 and decreases U.S.net exports by $1,000. 
A)  increases U.S.imports by $1,000 and increases U.S.net exports by $1,000. 
B)  increases U.S.imports by $1,000 and decreases U.S.net exports by $1,000. 
C)  increases U.S.exports by $1,000 and increases U.S.net exports by $1,000. 
D)  increases U.S.exports by $1,000 and decreases U.S.net exports by $1,000.

Exam 31: Open-Economy Macroeconomics: Basic Concepts

If you are vacationing in France and the dollar depreciates relative to the euro,then

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

A country has a trade deficit.Its

The increase in international trade in the United States is partly due to

Catherine,a citizen of Spain,decides to purchase bonds issued by Chile instead of ones issued by the United States even though the Chilean bonds have a higher risk of default.An economic reason for her decision might be that

When U.S.national saving rises,domestic investment also necessarily rises.

According to purchasing power parity,if over the course of a year the price level in the U.S.rises more than in Canada,then which of the following rises?

U.S.based Dell sells computers to an Irish company that pays with previously obtained U.S.currency.This exchange

If the U.S.has a trade deficit and the nominal exchange rate depreciates,then other things the same

Which of the following is correct? Over about the last fifty years

If Ireland's domestic investment exceeds national saving,then Ireland has

A U.S.firm buys wool from Australia with U.S.currency.The Australia firm then uses this money to buy electric shears from a U.S.firm.Which of the following increases?

Suppose that the nominal exchange rate is 120 yen per dollar,that the price of a basket of goods in the U.S.is $500 and the price of a basket of goods in Japan is 50,000 yen.Suppose that these values change to 100 yen per dollar,$600,and 70,000 yen.Then the real exchange rate would

If a country has Y > C + I + G,then it has

If the purchasing power of the dollar is always the same at home and abroad,then the nominal exchange rate defined as units of foreign currency per dollar decreases if the U.S.price level rises more than the price level in foreign countries.

Net exports measures the difference between a country's

The country of Wiknam has net capital outflow of $1,000,government purchases of $5,000 and consumption of $20,000.Which of the following is correct?

If a dollar buys more potatoes in the U.S.than in France,then

According to purchasing power parity,if the Federal Reserve increased the money supply

Mike,a U.S.citizen,buys $1,000 worth of olives from Greece.By itself this purchase

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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