Question 1

If U.S. residents purchase $600 billion worth of foreign assets and foreigners purchase $300 billion worth of U.S. assets,

Accepted Answer

A)  U.S. net capital outflow is $300 billion; capital is flowing into the U.S. 
B)  U.S. net capital outflow is $300 billion; capital is flowing out of the U.S. 
C)  U.S. net capital outflow is -$300 billion; capital is flowing into the U.S. 
D)  U.S. net capital outflow is -$300 billion; capital is flowing out of the U.S. 
A)  U.S. net capital outflow is $300 billion; capital is flowing into the U.S. 
B)  U.S. net capital outflow is $300 billion; capital is flowing out of the U.S. 
C)  U.S. net capital outflow is -$300 billion; capital is flowing into the U.S. 
D)  U.S. net capital outflow is -$300 billion; capital is flowing out of the U.S.

Question 2

Last year country A's residents purchased $700 billion of goods and services from and sold $500 billion of goods and services to residents of foreign countries. Its domestic investment was $1,100. What was country A's saving? Show your work.

Accepted Answer

net capital outflow = net expo

Question 3

By itself, if a U.S. firm builds a new factory overseas, U.S. net capital outflow rises.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is always correct?

Accepted Answer

A)  Y - I = NCO 
B)  NCO = NX 
C)  NX = I 
D)  All of the above are correct. 
A)  Y - I = NCO 
B)  NCO = NX 
C)  NX = I 
D)  All of the above are correct.

Question 5

According to purchasing-power parity, if prices in the United States increase by a smaller percentage than prices in the United Kingdom, then the

Accepted Answer

A)  real exchange rate rises. 
B)  nominal exchange rate rises. 
C)  real exchange rate falls. 
D)  nominal exchange rate falls. 
A)  real exchange rate rises. 
B)  nominal exchange rate rises. 
C)  real exchange rate falls. 
D)  nominal exchange rate falls.

Question 6

If purchasing-power parity holds, the price level in the U.S. is 250, and the price level in Japan is 260, which of the following is true?

Accepted Answer

A)  the real exchange rate is 250/260 
B)  the real exchange rate is 260/250 
C)  the nominal exchange rate is 250/260 
D)  the nominal exchange rate is 260/250 
A)  the real exchange rate is 250/260 
B)  the real exchange rate is 260/250 
C)  the nominal exchange rate is 250/260 
D)  the nominal exchange rate is 260/250

Question 7

An MP3 player in Singapore costs 200 Singaporean dollars. In the U.S. it costs 100 US dollars. What is the nominal exchange rate if purchasing-power parity holds?

Accepted Answer

A)  2.0 
B)  1.0 
C)  .50 
D)  None of the above is correct. 
A)  2.0 
B)  1.0 
C)  .50 
D)  None of the above is correct.

Question 8

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 9

If the U.S. real exchange rate appreciates, U.S. exports

Accepted Answer

A)  increase and U.S. imports decrease. 
B)  decrease and U.S. imports increase. 
C)  and U.S. imports both increase. 
D)  and U.S. imports both decrease. 
A)  increase and U.S. imports decrease. 
B)  decrease and U.S. imports increase. 
C)  and U.S. imports both increase. 
D)  and U.S. imports both decrease.

Question 10

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 11

Over the past six decades, the U.S. economy has experienced a dramatic increase in the relative importance of international trade and finance.

Accepted Answer

A) True 
 B)False

Question 12

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 13

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 14

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

Accepted Answer

A)  Disney builds a new amusement park near Barcelona, Spain. 
B)  A U.S. citizen buys bonds issued by the British government. 
C)  A Dutch hotel chain opens a new hotel in the United States. 
D)  A citizen of Singapore buys a bond issued by a U.S. corporation. 
A)  Disney builds a new amusement park near Barcelona, Spain. 
B)  A U.S. citizen buys bonds issued by the British government. 
C)  A Dutch hotel chain opens a new hotel in the United States. 
D)  A citizen of Singapore buys a bond issued by a U.S. corporation.

Question 15

You are the CEO of a U.S. firm considering building a factory in Chile. If the dollar appreciates relative to the Chilean peso, then other things the same

Accepted Answer

A)  it takes fewer dollars to build the factory. By itself building the factory increases U.S. net capital outflow. 
B)  it takes fewer dollars to build the factory. By itself building the factory decreases U.S. net capital outflow. 
C)  it takes more dollars to build the factory. By itself building the factory increases U.S. net capital outflow. 
D)  it takes more dollars to build the factory. By itself building the factory decreases U.S. net capital outflow. 
A)  it takes fewer dollars to build the factory. By itself building the factory increases U.S. net capital outflow. 
B)  it takes fewer dollars to build the factory. By itself building the factory decreases U.S. net capital outflow. 
C)  it takes more dollars to build the factory. By itself building the factory increases U.S. net capital outflow. 
D)  it takes more dollars to build the factory. By itself building the factory decreases U.S. net capital outflow.

Question 16

If a country has a trade deficit then

Accepted Answer

A) S > I and Y > C + I + G. B) S > I and Y C + I + G. D) S < I and Y < C + I + G. A) S > I and Y > C + I + G. B) S > I and Y C + I + G. D) S < I and Y < C + I + G.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

If a country had a trade deficit of $20 billion and then its exports rose by $7 billion and its imports fell by $10 billion, its net exports would now be

Accepted Answer

A)  $37 billion 
B)  $3 billion 
C)  -$3 billion 
D)  -$37 billion 
A)  $37 billion 
B)  $3 billion 
C)  -$3 billion 
D)  -$37 billion

Question 19

Other things the same, an increase in the foreign price level

Accepted Answer

A)  reduces the real exchange rate. This reduction could be offset by a decrease in the domestic price level. 
B)  reduces the real exchange rate. This reduction could be offset by an increase in the domestic price level. 
C)  increases the real exchange rate. This increase could be offset by a decrease in the domestic price level. 
D)  increases the real exchange rate. This increase could be offset by an increase in the domestic price level. 
A)  reduces the real exchange rate. This reduction could be offset by a decrease in the domestic price level. 
B)  reduces the real exchange rate. This reduction could be offset by an increase in the domestic price level. 
C)  increases the real exchange rate. This increase could be offset by a decrease in the domestic price level. 
D)  increases the real exchange rate. This increase could be offset by an increase in the domestic price level.

Question 20

If a nation is selling more goods and services to foreigners than it is buying from them, then on net it must be buying assets abroad.

Accepted Answer

A) True 
 B)False

Exam 31: Open-Economy Macroeconomics: Basic Concepts

If U.S. residents purchase $600 billion worth of foreign assets and foreigners purchase $300 billion worth of U.S. assets,

Last year country A's residents purchased $700 billion of goods and services from and sold $500 billion of goods and services to residents of foreign countries. Its domestic investment was $1,100. What was country A's saving? Show your work.

By itself, if a U.S. firm builds a new factory overseas, U.S. net capital outflow rises.

Which of the following is always correct?

According to purchasing-power parity, if prices in the United States increase by a smaller percentage than prices in the United Kingdom, then the

If purchasing-power parity holds, the price level in the U.S. is 250, and the price level in Japan is 260, which of the following is true?

An MP3 player in Singapore costs 200 Singaporean dollars. In the U.S. it costs 100 US dollars. What is the nominal exchange rate if purchasing-power parity holds?

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

If the U.S. real exchange rate appreciates, U.S. exports

The nominal exchange rate is the

Over the past six decades, the U.S. economy has experienced a dramatic increase in the relative importance of international trade and finance.

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

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.

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

You are the CEO of a U.S. firm considering building a factory in Chile. If the dollar appreciates relative to the Chilean peso, then other things the same

If a country has a trade deficit then

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

If a country had a trade deficit of $20 billion and then its exports rose by $7 billion and its imports fell by $10 billion, its net exports would now be

Other things the same, an increase in the foreign price level

If a nation is selling more goods and services to foreigners than it is buying from them, then on net it must be buying assets abroad.

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

Six Debates Over Macroeconomic Policy

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