Question 1

Which of the following both raise net exports?

Accepted Answer

A)  exports rise,imports rise 
B)  exports rise,imports fall 
C)  imports rise,exports rise 
D)  imports rise,exports fall

Question 2

How do the nominal exchange rate and the real exchange rate differ?

Accepted Answer

The answer of How do the nominal exchange rate and...

Question 3

Can purchasing-power parity be used to explain the fact that the U.S.dollar has depreciated by more than 50 percent against the German mark between 1970 and 1998,but appreciated by more than 100 percent against the Italian lira during the same period? Defend your answer.

Accepted Answer

The answer of Can purchasing-power parity be used to explain...

Question 4

A U.S.company uses U.K.pounds it already owned to purchase bonds issued by a company in the U.K.Which of these countries has an increase in net capital outflow?

Accepted Answer

A)  The U.S.and the U.K. 
B)  The U.S.but not the U.K. 
C)  The U.K.but not the U.S. 
D)  Neither the U.S.nor the U.K.

Question 5

If the Kenyan nominal exchange rate declines,and prices are unchanged in Kenya and abroad,then the Keynan real exchange rate

Accepted Answer

A)  does not change. 
B)  rises. 
C)  declines 
D)  None of the above is necessarily correct.

Question 6

Table 31-1
 
-Refer to Table 31-1.What are Argentina's imports?

Accepted Answer

A)  $60 billion 
B)  $35 billion 
C)  $40 billion 
D)  None of the above are correct.

Question 7

Consider an identical basket of goods in both the U.S.and India.For a given nominal exchange rate,in which case is it certain that the U.S.real exchange rate with India falls?

Accepted Answer

A)  the price of the basket of goods rises in the U.S.and India. 
B)  the price of the basket of goods rises in the U.S.and falls in India. 
C)  the price of the basket of goods falls in the U.S.and rises in India. 
D)  the price of the basket of goods falls in both India and the U.S..

Question 8

Since 1950 U.S.imports as a percentage of GDP have approximately

Accepted Answer

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

Question 9

Suppose that because of legal and financial reforms in the country of Belats,foreigners find business opportunities there more attractive.We would expect the more attractive opportunities would cause Belats'

Accepted Answer

A)  net exports and net capital outflows to increase. 
B)  net exports to increase and its net capital outflows to decrease. 
C)  net exports and net capital outflow to decrease. 
D)  net exports to decrease and its net capital outflow to increase.

Question 10

The theory of purchasing-power parity primarily explains

Accepted Answer

A)  why trade deficits tend to move to zero over time. 
B)  how foreign prices affect domestic prices. 
C)  the determination of the real exchange rate. 
D)  why a change in the real exchange rate changes a country's net exports.

Question 11

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.

Question 12

A U.S.based company sells semiconductors to an Italian firm.The U.S.company uses all of the revenues from this sale to purchase automobiles from Italian firms.These transactions

Accepted Answer

A)  increase both U.S.net exports and U.S.net capital outflow. 
B)  decrease both U.S.net exports and U.S.net capital outflow. 
C)  increase U.S.net exports and do not affect U.S.net capital outflow. 
D)  None of the above is correct.

Question 13

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

Question 14

An American farm equipment dealer sells dollars to obtain euros.It then uses the euros to buy farm equipment from a German company.This exchange

Accepted Answer

A)  increases U.S.net capital outflow because Germans obtain U.S.assets. 
B)  decreases U.S.net capital outflow because Germans obtain U.S.assets. 
C)  increases U.S.net capital outflow because the U.S.buys capital goods. 
D)  decreases U.S.net capital outflow because the U.S.buys capital goods.

Question 15

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

Accepted Answer

A)  the real exchange defined as Polish goods per unit of U.S.goods rises. 
B)  the real exchange defined as Polish goods per unit of U.S.goods falls. 
C)  the nominal exchange rate defined as Polish currency per dollar rises. 
D)  the nominal exchange rate defined as Polish currency per dollar falls.

Question 16

Net exports of a country are the value of

Accepted Answer

A)  goods and services imported minus the value of goods and services exported. 
B)  goods and services exported minus the value of goods and services imported. 
C)  goods exported minus the value of goods imported. 
D)  goods imported minus the value of goods exported.

Question 17

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.

Question 18

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 19

Other things the same,if the exchange rate changes from .30 Kuwaiti dinar per dollar to .35 Kuwaiti dinar per dollar,then the dollar has

Accepted Answer

A)  appreciated and so buys more Kuwaiti goods. 
B)  appreciated and so buys fewer Kuwaiti goods. 
C)  depreciated and so buys more Kuwaiti goods. 
D)  depreciated and so buys fewer Kuwaiti goods.

Question 20

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.

Exam 31: Open-Economy Macroeconomics: Basic Concepts