Question 1

According to purchasing-power parity, if it took 55 Indian rupees to buy a dollar today, but it took 58 to buy it a year ago, then the dollar has

Accepted Answer

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

Question 2

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

Accepted Answer

A)  A U.S. legal office opens a branch office in Holland. 
B)  Erica, a U.S. resident, buys bonds issued by the Swiss government. 
C)  Both A and B are examples of U.S. portfolio investment. 
D)  Neither A nor B are examples of U.S. portfolio investment. 
A)  A U.S. legal office opens a branch office in Holland. 
B)  Erica, a U.S. resident, buys bonds issued by the Swiss government. 
C)  Both A and B are examples of U.S. portfolio investment. 
D)  Neither A nor B are examples of U.S. portfolio investment.

Question 3

Peru has exports of $31.5 million and imports of $30 million. Peru

Accepted Answer

A)  sells more overseas then it buys from overseas; it has a trade deficit. 
B)  sells more overseas then it buys from overseas; it has a trade surplus. 
C)  buys more from overseas then it sells overseas; it has a trade deficit. 
D)  buys more from overseas then it sells overseas; it has a trade surplus. 
A)  sells more overseas then it buys from overseas; it has a trade deficit. 
B)  sells more overseas then it buys from overseas; it has a trade surplus. 
C)  buys more from overseas then it sells overseas; it has a trade deficit. 
D)  buys more from overseas then it sells overseas; it has a trade surplus.

Question 4

When net capital outflow is negative, it means that on net the value of domestic assets purchased by foreigners exceeds the value of foreign assets purchased by domestic residents.

Accepted Answer

A) True 
 B)False

Question 5

If a dollar buys more rice in the China. than in the U.S., then

Accepted Answer

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

Question 6

You are planning a graduation trip to Mexico. Other things the same, if the dollar appreciates relative to the peso, then

Accepted Answer

A)  the dollar buys fewer pesos. Your hotel room in Mexico will require fewer dollars. 
B)  the dollar buys fewer pesos. Your hotel room in Mexico will require more dollars. 
C)  the dollar buys more pesos. Your hotel room in Mexico will require fewer dollars. 
D)  the dollar buys more pesos. Your hotel room in Mexico will require more dollars. 
A)  the dollar buys fewer pesos. Your hotel room in Mexico will require fewer dollars. 
B)  the dollar buys fewer pesos. Your hotel room in Mexico will require more dollars. 
C)  the dollar buys more pesos. Your hotel room in Mexico will require fewer dollars. 
D)  the dollar buys more pesos. Your hotel room in Mexico will require more dollars.

Question 7

Which of the following is correct? Since 1950

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 8

In the United States, a three-pound can of coffee costs about $5. If the exchange rate is 0.8 euros per dollar and a three-pound can of coffee in Belgium costs 7 euros. What is the real exchange rate?

Accepted Answer

A)  7/4 cans of Belgian coffee per can of U.S. coffee 
B)  5.6/5 cans of Belgian coffee per can of U.S. coffee 
C)  5/5.6 cans of Belgian coffee per can of U.S. coffee 
D)  4/7 cans of Belgian coffee per can of U.S. coffee 
A)  7/4 cans of Belgian coffee per can of U.S. coffee 
B)  5.6/5 cans of Belgian coffee per can of U.S. coffee 
C)  5/5.6 cans of Belgian coffee per can of U.S. coffee 
D)  4/7 cans of Belgian coffee per can of U.S. coffee

Question 9

Net capital outflow

Accepted Answer

A)  is always greater than net exports. 
B)  is always less than net exports. 
C)  is always equal to net exports. 
D)  could be any of the above. 
A)  is always greater than net exports. 
B)  is always less than net exports. 
C)  is always equal to net exports. 
D)  could be any of the above.

Question 10

You are planning a graduation trip to Mexico. Other things the same, if the dollar depreciates relative to the peso, then

Accepted Answer

A)  the dollar buys fewer pesos. Your hotel room in Mexico will require fewer dollars. 
B)  the dollar buys fewer pesos. Your hotel room in Mexico will require more dollars. 
C)  the dollar buys more pesos. Your hotel room in Mexico will require fewer dollars. 
D)  the dollar buys more pesos. Your hotel room in Mexico will require more dollars. 
A)  the dollar buys fewer pesos. Your hotel room in Mexico will require fewer dollars. 
B)  the dollar buys fewer pesos. Your hotel room in Mexico will require more dollars. 
C)  the dollar buys more pesos. Your hotel room in Mexico will require fewer dollars. 
D)  the dollar buys more pesos. Your hotel room in Mexico will require more dollars.

Question 11

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 12

If the real exchange rate is less than 1, then the

Accepted Answer

A) nominal exchange rate x U.S. price > foreign price. The dollars required to purchase a good in the U.S. would buy more than enough foreign currency to buy the same good overseas. B) nominal exchange rate x U.S. price > foreign price. The dollars required to purchase a good in the U.S. would not buy enough foregoing currency to buy the same good overseas. C) nominal exchange rate x U.S. price < foreign price. The dollars required to purchase a good in the U.S. would buy more than enough foreign currency to buy the same good overseas. D) nominal exchange rate x U.S. price < foreign price. The dollars required to purchase a good in the U.S. would not buy enough foreign currency to buy the same good overseas. A) nominal exchange rate x U.S. price > foreign price. The dollars required to purchase a good in the U.S. would buy more than enough foreign currency to buy the same good overseas. B) nominal exchange rate x U.S. price > foreign price. The dollars required to purchase a good in the U.S. would not buy enough foregoing currency to buy the same good overseas. C) nominal exchange rate x U.S. price < foreign price. The dollars required to purchase a good in the U.S. would buy more than enough foreign currency to buy the same good overseas. D) nominal exchange rate x U.S. price < foreign price. The dollars required to purchase a good in the U.S. would not buy enough foreign currency to buy the same good overseas.

Question 13

If France 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 14

While on a study abroad program you see a McDonald's in Paris. A combo meal costs 8 euros. The same meal costs $6 in the U.S. and the exchange rate is .75 euros per dollar.
A. Find the real exchange rate. Show your work.
B. In terms of dollars where is the combo meal cheaper?

Accepted Answer

The real exchange rate = .75 x

Question 15

If domestic residents of France purchase 1.2 trillion euros of foreign assets and foreigners purchase 1.5 trillion euros of French assets, then France's net capital outflow is

Accepted Answer

A)  -.3 trillion euros, so it must have a trade deficit. 
B)  -.3 trillion euros, so it must have a trade surplus. 
C)  .3 trillion euros, so it must have a trade deficit. 
D)  .3 trillion euros, so it must have a trade surplus. 
A)  -.3 trillion euros, so it must have a trade deficit. 
B)  -.3 trillion euros, so it must have a trade surplus. 
C)  .3 trillion euros, so it must have a trade deficit. 
D)  .3 trillion euros, so it must have a trade surplus.

Question 16

When Ghana sells chocolate to the United States, 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 17

Suppose that money supply growth continues to be higher in Turkey than it is in the United States. What does purchasing-power parity imply will happen to the real and to the nominal exchange rate?

Accepted Answer

Higher money growth leads to higher pric

Question 18

A country recently had GDP of $1,200 billion. Its consumption expenditures were $700 billion, its government spent $200 billion, and it had domestic investment of $175 billion. What was the value of this country's net capital outflow?
Show your work.

Accepted Answer

Y = C + I + G + NX
$1,200 bill

Question 19

A rational investor will always purchase the bond that pays the highest real interest rate.

Accepted Answer

A) True 
 B)False

Question 20

A country has $20 billion of domestic investment and net capital outflow of $10 billion. What is saving?

Accepted Answer

A)  $10 billion 
B)  $30 billion 
C)  -$20 billion 
D)  -$30 billion 
A)  $10 billion 
B)  $30 billion 
C)  -$20 billion 
D)  -$30 billion

Exam 18: Open-Economy Macroeconomics: Basic Concepts

According to purchasing-power parity, if it took 55 Indian rupees to buy a dollar today, but it took 58 to buy it a year ago, then the dollar has

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

Peru has exports of $31.5 million and imports of $30 million. Peru

When net capital outflow is negative, it means that on net the value of domestic assets purchased by foreigners exceeds the value of foreign assets purchased by domestic residents.

If a dollar buys more rice in the China. than in the U.S., then

You are planning a graduation trip to Mexico. Other things the same, if the dollar appreciates relative to the peso, then

Which of the following is correct? Since 1950

In the United States, a three-pound can of coffee costs about $5. If the exchange rate is 0.8 euros per dollar and a three-pound can of coffee in Belgium costs 7 euros. What is the real exchange rate?

Net capital outflow

You are planning a graduation trip to Mexico. Other things the same, if the dollar depreciates relative to the peso, then

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

If the real exchange rate is less than 1, then the

If France had positive net exports last year, then it

While on a study abroad program you see a McDonald's in Paris. A combo meal costs 8 euros. The same meal costs $6 in the U.S. and the exchange rate is .75 euros per dollar. A. Find the real exchange rate. Show your work. B. In terms of dollars where is the combo meal cheaper?

If domestic residents of France purchase 1.2 trillion euros of foreign assets and foreigners purchase 1.5 trillion euros of French assets, then France's net capital outflow is

When Ghana sells chocolate to the United States, U.S. net exports

Suppose that money supply growth continues to be higher in Turkey than it is in the United States. What does purchasing-power parity imply will happen to the real and to the nominal exchange rate?

A country recently had GDP of $1,200 billion. Its consumption expenditures were $700 billion, its government spent $200 billion, and it had domestic investment of $175 billion. What was the value of this country's net capital outflow? Show your work.

A rational investor will always purchase the bond that pays the highest real interest rate.

A country has $20 billion of domestic investment and net capital outflow of $10 billion. What is saving?

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

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

Six Debates Over Macroeconomic Policy

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