Question 1

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.

Question 2

Suppose that the inflation rate is higher in Turkey than in the U.S.for the next six months.Then according to purchasing power parity,if exchange rates are given in terms of how many Turkish lira or how many Turkish goods a U.S.dollar buys,

Accepted Answer

A) the nominal exchange rate rises but the real exchange rate does not. 
B) the nominal exchange rate does not rise, but the real exchange rate does. 
C) both the nominal and real exchange rates rise. 
D) neither the nominal nor the real exchange rate rises.

Question 3

When a company from Germany builds an automobile factory in the United States,the German firm has engaged in foreign direct investment.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is correct?

Accepted Answer

A) U.S.exports as a percentage of GDP have about doubled over the last 50 years.The U.S.currently has a trade surplus. 
B) U.S.exports as a percentage of GDP have about doubled over the last 50 years.The U.S.currently has a trade deficit. 
C) U.S.exports as a percentage of GDP have increased, but have not nearly doubled over the last 50 years.The U.S.currently has a trade surplus. 
D) U.S.exports as a percentage of GDP have increased, but have not nearly doubled over the last 50 years.The U.S.currently has a trade deficit.

Question 5

Suppose that a U.S.dollar buys more gold in Australia than it buys in Russia.What does purchasing-power parity imply should happen?

Accepted Answer

The answer of Suppose that a U.S.dollar buys more gold...

Question 6

A U.S.citizen buys bonds issued by an automobile manufacturer in Japan.Her expenditures are U.S.

Accepted Answer

A) foreign direct investment that increase U.S.net capital outflow. 
B) foreign direct investment that decrease U.S.net capital outflow. 
C) foreign portfolio investment that increase U.S.net capital outflow. 
D) foreign portfolio investment that decrease U.S.net capital outflow.

Question 7

The value of Peru's exports minus the value of Peru's imports is called

Accepted Answer

A) Peru's foreign portfolio investment. 
B) Peru's foreign direct investment. 
C) Peru's net exports. 
D) Peru's net imports.

Question 8

Suppose the real exchange rate is 4/5 pounds of Chilean beef per pound of U.S.beef,a pound of U.S.beef costs $2 and the nominal exchange rate is 600 Chilean pesos per dollar.It follows that Chilean beef costs

Accepted Answer

A) 960 pesos per pound. 
B) 1,200 pesos per pound. 
C) 1,500 pesos per pound. 
D) None of the above is correct.

Question 9

Use the (hypothetical) information in the following table to answer the following questions.
Table 31-1
 
-Refer to Table 31-1.In real terms,U.S.goods are more expensive than goods in which country(ies)?

Accepted Answer

A) Bolovia and Morocco 
B) Japan, Norway, and Thailand 
C) Japan and Norway 
D) Thailand

Question 10

The nominal exchange rate is 2 Thai bhat for one U.S.dollar.A sub sandwich combo deal in the U.S.costs $6 dollars in the U.S.and 8 bhat in Thailand.The real exchange rate is

Accepted Answer

A) 3/8 
B) 2/3 
C) 3/2 
D) 8/3

Question 11

Larry,a U.S.citizen,opens and operates a bookstore in Spain.This counts as

Accepted Answer

A) investment for Larry and U.S.foreign direct investment. 
B) investment for Larry and U.S.foreign portfolio investment. 
C) U.S.foreign direct investment and U.S.domestic investment. 
D) U.S.foreign portfolio investment and U.S.domestic investment.

Question 12

A U.S.firm buys sardines from Morocco and pays for them with U.S.dollars.Other things the same,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.

Question 13

Suppose that more Chinese decide to vacation in the U.S.and that the Chinese purchase more U.S.Treasury bonds.Ignoring how payments are made for these purchases,

Accepted Answer

A) the first action by itself raises U.S.net exports, the second action by itself raises U.S.net capital outflow. 
B) the first action by itself raises U.S.net exports, the second action by itself lowers U.S.net capital outflow. 
C) the first action by itself lowers U.S.net exports, the second action by itself raises U.S.net capital outflow. 
D) the first action by itself lowers U.S.net exports, the second action by itself lowers U.S.net capital outflow.

Question 14

Over the past five decades,the U.S.economy has become

Accepted Answer

A) more closed. 
B) more open. 
C) less trade-oriented. 
D) more self-sufficient.

Question 15

Over the last 50 years or so,U.S.imports as a percentage of GDP have approximately

Accepted Answer

A) stayed constant. 
B) doubled. 
C) tripled. 
D) quadrupled.

Question 16

After the 1980s,U.S.net capital outflow was

Accepted Answer

A) negative, meaning that foreigners were buying more capital assets from the United States than Americans were buying abroad. 
B) negative, meaning that Americans were buying more capital assets abroad than foreigners were buying from the United States. 
C) positive, meaning that foreigners were buying more capital assets from the United States than Americans were buying abroad. 
D) positive, meaning that Americans were buying more capital assets abroad than foreigners were buying from the United States.

Question 17

You are the CEO of a firm considering opening a factory in Peru.If the dollar appreciated relative to the Peruvian peso,then other things the same

Accepted Answer

A) you'd find it took fewer dollars to build the factory.The building of the factory increases U.S.net capital outflow. 
B) you'd find it took fewer dollars to build the factory.The building of the factory decreases U.S.net capital outflow. 
C) you'd find it took more dollars to build the factory.If you still build the factory anyway, it will increase U.S.net capital outflow. 
D) you'd find it took more dollars to build the factory.If you still build the factory anyway, it will decrease U.S.net capital outflow.

Question 18

A U.S.pharmacy buys drugs from a British company and pays for them with US dollars.This transaction

Accepted Answer

A) increases British net exports, and increases U.S.capital outflow. 
B) increases British net exports, and decreases U.S.capital outflow. 
C) decreases British net exports, and increases U.S.capital outflow. 
D) decreases British net exports, and decreases U.S.capital outflow.

Question 19

If a country has business opportunities that are relatively attractive to other countries,we would expect it to have

Accepted Answer

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

Question 20

In which of the following situations must national saving rise?

Accepted Answer

A) Both domestic investment and net capital outflow increase. 
B) Domestic investment increases and net capital outflow decreases. 
C) Domestic investment decreases and net capital outflow increases. 
D) Both domestic investment and net capital outflow decrease.

Exam 31: Open-Economy Macroeconomics: Basic Concepts