Question 1

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 2

If a country had a trade deficit of $10 billion and then its exports rose by $20 billion and its imports rose by $10 billion, its net exports would now be

Accepted Answer

A)  $0 
B)  $10 billion. 
C)  -$10 billion. 
D)  -$20 billion. 
A)  $0 
B)  $10 billion. 
C)  -$10 billion. 
D)  -$20 billion.

Question 3

If Saudi Arabia 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 4

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 5

Over the last 5 years the amount of country A's currency it took to buy a unit of country B's currency more than doubled.
A. Did country A's currency depreciate or appreciate?
B. According to purchasing­power parity, what explains the change in the value of country B's currency?

Accepted Answer

A. It depreciated.
B

Question 6

If the unit of foreign currency is the peso, in which case is the real exchange rate 1.2?

Accepted Answer

A)  the U.S. price is $2, the foreign price is 5 pesos, and the exchange rate is 3 pesos per dollar. 
B)  the U.S. price is $3, the foreign price is 18 pesos, and the exchange rate is 5 pesos per dollar. 
C)  the U.S. price is $5, the foreign price 12 pesos, and the exchange rate is 2 pesos per dollar. 
D)  the U.S. price is $10, the foreign price is 3 pesos, and the exchange rate is 4 pesos per dollar. 
A)  the U.S. price is $2, the foreign price is 5 pesos, and the exchange rate is 3 pesos per dollar. 
B)  the U.S. price is $3, the foreign price is 18 pesos, and the exchange rate is 5 pesos per dollar. 
C)  the U.S. price is $5, the foreign price 12 pesos, and the exchange rate is 2 pesos per dollar. 
D)  the U.S. price is $10, the foreign price is 3 pesos, and the exchange rate is 4 pesos per dollar.

Question 7

A nation's domestic investment is greater than its savings. Which of the following is correct?

Accepted Answer

A)  This nation has a negative net capital outflow. 
B)  This nation has a trade surplus. 
C)  Purchases of foreign assets by domestic residents exceed purchases of domestic assets by foreigners. 
D)  All of the above are correct. 
A)  This nation has a negative net capital outflow. 
B)  This nation has a trade surplus. 
C)  Purchases of foreign assets by domestic residents exceed purchases of domestic assets by foreigners. 
D)  All of the above are correct.

Question 8

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 9

A Finnish corporation builds a factory the produces ceiling fans in the United States. This is an example of Finish

Accepted Answer

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

Question 10

Other things the same, an increase in the real exchange rate raises U.S. net exports.

Accepted Answer

A) True 
 B)False

Question 11

A Portuguese company exchanges euros for $60,000 from a U.S. bank. The Portuguese firm then uses the dollars to purchase $60,000 of canning equipment from a U.S. company. As a result of these two transactions alone

Accepted Answer

A)  both U.S. net capital outflow and U.S. net exports rise. 
B)  U.S. net capital outflow rose and U.S. net exports fall. 
C)  U.S. net capital outflow fell and U.S. net exports rise. 
D)  both U.S. net capital and U.S. net exports fall. 
A)  both U.S. net capital outflow and U.S. net exports rise. 
B)  U.S. net capital outflow rose and U.S. net exports fall. 
C)  U.S. net capital outflow fell and U.S. net exports rise. 
D)  both U.S. net capital and U.S. net exports fall.

Question 12

A Turkish firm exchanges lira Turkish currency) for dollars. It then uses these dollars to purchase computers from the U.S. These actions decrease U.S. net capital outflow and increase U.S. net exports.

Accepted Answer

A) True 
 B)False

Question 13

How do we find the real exchange rate from the nominal exchange rate?

Accepted Answer

Real Exchange Rate =

Question 14

If saving is less 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 15

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

Accepted Answer

A) S > I and it has a trade surplus. B) S > I and it has a trade deficit. C) S < I and it has a trade surplus. D) S < I and it has a trade deficit. A) S > I and it has a trade surplus. B) S > I and it has a trade deficit. C) S < I and it has a trade surplus. D) S < I and it has a trade deficit.

Question 16

If a country's trade surplus falls, its net capital outflow rises.

Accepted Answer

A) True 
 B)False

Question 17

A basket of goods costs $800 in the U.S. In Belgium the basket of goods costs 640 euros and the exchange rate is .80 euros per U.S. dollar. In Japan the basket of goods costs 90,000 yen and the exchange rate is 90 yen per dollar. Which country has purchasing-power parity with the U.S.?

Accepted Answer

A)  both Belgium and Japan 
B)  Belgium but not Japan 
C)  Japan but not Belgium 
D)  neither Belgium nor Japan 
A)  both Belgium and Japan 
B)  Belgium but not Japan 
C)  Japan but not Belgium 
D)  neither Belgium nor Japan

Question 18

You buy a new car built in Sweden. Other things the same, your purchase by itself

Accepted Answer

A)  raises both U.S. exports and U.S. net exports. 
B)  raises U.S. exports and lowers U.S. net exports. 
C)  raises both U.S. imports and U.S. net exports. 
D)  raises U.S. imports and lowers U.S. net exports. 
A)  raises both U.S. exports and U.S. net exports. 
B)  raises U.S. exports and lowers U.S. net exports. 
C)  raises both U.S. imports and U.S. net exports. 
D)  raises U.S. imports and lowers U.S. net exports.

Question 19

If a country changes its corporate tax laws so that foreign businesses build and manage more business in that country, 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 20

The dollar is said to appreciate against the euro if

Accepted Answer

A)  the exchange rate falls. Other things the same, it will cost fewer euros to buy U.S. goods. 
B)  the exchange rate falls. Other things the same, it will cost more euros to buy U.S. goods. 
C)  the exchange rate rises. Other things the same, it will cost fewer euros to buy U.S. goods. 
D)  the exchange rate rises. Other things the same, it will cost more euros to buy U.S. goods. 
A)  the exchange rate falls. Other things the same, it will cost fewer euros to buy U.S. goods. 
B)  the exchange rate falls. Other things the same, it will cost more euros to buy U.S. goods. 
C)  the exchange rate rises. Other things the same, it will cost fewer euros to buy U.S. goods. 
D)  the exchange rate rises. Other things the same, it will cost more euros to buy U.S. goods.

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

If a country had a trade deficit of $10 billion and then its exports rose by $20 billion and its imports rose by $10 billion, its net exports would now be

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

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

Over the last 5 years the amount of country A's currency it took to buy a unit of country B's currency more than doubled. A. Did country A's currency depreciate or appreciate? B. According to purchasingpower parity, what explains the change in the value of country B's currency?

If the unit of foreign currency is the peso, in which case is the real exchange rate 1.2?

A nation's domestic investment is greater than its savings. Which of the following is correct?

Net exports measures the difference between a country's

A Finnish corporation builds a factory the produces ceiling fans in the United States. This is an example of Finish

Other things the same, an increase in the real exchange rate raises U.S. net exports.

A Portuguese company exchanges euros for $60,000 from a U.S. bank. The Portuguese firm then uses the dollars to purchase $60,000 of canning equipment from a U.S. company. As a result of these two transactions alone

A Turkish firm exchanges lira Turkish currency) for dollars. It then uses these dollars to purchase computers from the U.S. These actions decrease U.S. net capital outflow and increase U.S. net exports.

How do we find the real exchange rate from the nominal exchange rate?

If saving is less than domestic investment, then

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

If a country's trade surplus falls, its net capital outflow rises.

A basket of goods costs $800 in the U.S. In Belgium the basket of goods costs 640 euros and the exchange rate is .80 euros per U.S. dollar. In Japan the basket of goods costs 90,000 yen and the exchange rate is 90 yen per dollar. Which country has purchasing-power parity with the U.S.?

You buy a new car built in Sweden. Other things the same, your purchase by itself

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

The dollar is said to appreciate against the euro if

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment and Its Natural Rate

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 Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

Exam 13: Open-Economy Macroeconomics: Basic Concepts

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

If a country had a trade deficit of $10 billion and then its exports rose by $20 billion and its imports rose by $10 billion, its net exports would now be

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

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

Over the last 5 years the amount of country A's currency it took to buy a unit of country B's currency more than doubled. A. Did country A's currency depreciate or appreciate? B. According to purchasing­power parity, what explains the change in the value of country B's currency?

If the unit of foreign currency is the peso, in which case is the real exchange rate 1.2?

A nation's domestic investment is greater than its savings. Which of the following is correct?

Net exports measures the difference between a country's

A Finnish corporation builds a factory the produces ceiling fans in the United States. This is an example of Finish

Other things the same, an increase in the real exchange rate raises U.S. net exports.

A Portuguese company exchanges euros for $60,000 from a U.S. bank. The Portuguese firm then uses the dollars to purchase $60,000 of canning equipment from a U.S. company. As a result of these two transactions alone

A Turkish firm exchanges lira Turkish currency) for dollars. It then uses these dollars to purchase computers from the U.S. These actions decrease U.S. net capital outflow and increase U.S. net exports.

How do we find the real exchange rate from the nominal exchange rate?

If saving is less than domestic investment, then

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

If a country's trade surplus falls, its net capital outflow rises.

A basket of goods costs $800 in the U.S. In Belgium the basket of goods costs 640 euros and the exchange rate is .80 euros per U.S. dollar. In Japan the basket of goods costs 90,000 yen and the exchange rate is 90 yen per dollar. Which country has purchasing-power parity with the U.S.?

You buy a new car built in Sweden. Other things the same, your purchase by itself

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

The dollar is said to appreciate against the euro if

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment and Its Natural Rate

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 Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

Over the last 5 years the amount of country A's currency it took to buy a unit of country B's currency more than doubled. A. Did country A's currency depreciate or appreciate? B. According to purchasingpower parity, what explains the change in the value of country B's currency?