Question 1

Which statement best defines the nominal exchange rate?

Accepted Answer

A)   It is the nominal interest rate in one country divided by the nominal interest rate in the other country.
B)   It is the rate at which a person can trade the currency of one country for the currency of another.
C)   It is the price of a good in one country divided by the price of the same good in another.
D)   It is the number of goods a person can trade for a similar good in another country.E) B) and C)
F) All of the above

Question 2

What is the formula for a closed economy's GDP?

Accepted Answer

A)   Y = C + I + G
B)   Y = (C - T)  + I + G
C)   Y = C + I + G + S
D)   Y = C + I + G + NXE) A) and B)
F) A) and C)

Question 3

Exchange rates are 0.75 U.S. dollars per Canadian dollar, 170 yen per Canadian dollar, 0.8 euro per Canadian dollar, and 20 pesos per Canadian dollar. A bottle of beer in New York costs 6 U.S. dollars, 1200 yen in Tokyo, 7 euros in Munich, and 100 pesos in Cancun. Where is the most expensive beer?

Accepted Answer

A)   Cancun
B)   New York
C)   Tokyo
D)   MunichE) A) and B)
F) B) and C)

Question 4

-Refer to the Table 12-1. What currency(ies)  is(are)  more valuable than predicted by the doctrine of purchasing-power parity?

Accepted Answer

A)   the boliviano and dinar
B)   the yen, kroner, and baht
C)   the yen and dinar
D)   the bahtE) B) and D)
F) A) and D)

Question 5

-Refer to the Table 12-1. What countries' goods are more expensive than Canadian goods?

Accepted Answer

A)   Bolivia and Morocco
B)   Japan, Norway, and Thailand
C)   Japan and Morocco
D)   Thailand and NorwayE) B) and D)
F) All of the above

Question 6

Jill, a Canadian citizen, uses some previously obtained euros to purchase a bond issued by a French vineyard. How does this transaction affect Canadian net capital outflow?

Accepted Answer

A)   It increases Canadian net capital outflow by more than the value of the bond.
B)   It increases Canadian net capital outflow by the value of the bond.
C)   It does not change Canadian net capital outflow.
D)   It decreases Canadian net capital outflow.E) C) and D)
F) B) and D)

Question 7

A Canadian firm buys couscous from Morocco and pays for it with Canadian dollars. What are the effects of this transaction?

Accepted Answer

A)   Canadian net exports increase, and Canadian net capital outflow increases.
B)   Canadian net exports increase, and Canadian net capital outflow decreases.
C)   Canadian net exports decrease, and Canadian net capital outflow increases.
D)   Canadian net exports decrease, and Canadian net capital outflow decreases.E) A) and D)
F) B) and C)

Question 8

Martin, a Canadian citizen, uses some previously obtained ? HYPERLINK "http://en.wikipedia.org/wiki/Lithuanian_litas" ?Lithuanian? currency (litas)  to purchase a bond issued by a ? HYPERLINK "http://en.wikipedia.org/wiki/Lithuanian_litas" ?Lithuanian? company. How does this transaction affect Canadian net capital outflow?

Accepted Answer

A)   It increases Canadian net capital outflow by more than the value of the bond.
B)   It increases Canadian net capital outflow by the value of the bond.
C)   It does not change Canadian net capital outflow.
D)   It decreases Canadian net capital outflow.E) C) and D)
F) A) and C)

Question 9

What was an important change in the Canadian economy after 1999?

Accepted Answer

A)   National saving fell below investment, and net capital outflow was a large positive number.
B)   Net capital outflow turned positive.
C)   Investment equalled saving every year.
D)   Investment fell below saving, so net capital outflow was a large negative number.E) A) and D)
F) All of the above

Question 10

How did the real interest rates paid on long-term government debt in Canada and the United States compare with each other over the period from 1984 to 2015?

Accepted Answer

A)   The average real interest rate was 3.4 percent in Canada and 4.4 percent in the United States.
B)   The average real interest rate was 3.7 percent in Canada and 3.0 percent in the United States.
C)   The average real interest rate was 5.7 percent in Canada and 6.7 percent in the United States.
D)   The average real interest rate was 6.7 percent in Canada and 5.7 percent in the United States.E) B) and C)
F) A) and D)

Question 11

What does purchasing-power parity imply?

Accepted Answer

A)   that real incomes should be the same in all countries
B)   that the nominal exchange rates should be equal to 1 for all currencies
C)   that the price of a standard hamburger should be the same everywhere
D)   that the rent for an apartment should be the same everywhereE) B) and C)
F) All of the above

Question 12

Under what circumstances does purchasing-power parity explain how exchange rates are determined and why is it not completely accurate?

Accepted Answer

Purchasing-power parity works well in he...

Question 13

Over the past 50 years, what has happened to Canadian imports as a percentage of GDP?

Accepted Answer

A)   They have approximately stayed constant.
B)   They have approximately doubled.
C)   They have approximately tripled.
D)   They have approximately quadrupled.E) None of the above
F) A) and D)

Question 14

What equation is the GDP identity in an open economy?

Accepted Answer

A)   Y = C + I + G + NCO
B)   NX = - NCO
C)   NCO = S - I + NX
D)   Y = C + I + G - NXE) A) and B)
F) C) and D)

Question 15

Which of the following shows that any trade transaction must have a financial counterpart?

Accepted Answer

A)   NCO = NX
B)   NCO + I = NX
C)   NX + NCO = Y
D)   Y = NCO - IE) C) and D)
F) None of the above

Question 16

Starting from a trade surplus, what would create a trade deficit?

Accepted Answer

A)   a decline in saving and investment
B)   a rise in saving and investment
C)   a decline in saving and a rise in investment
D)   a rise in saving and a decline in investmentE) A) and D)
F) A) and B)

Question 17

Assume the exchange rate is about 153 Kazakhstan tenge per dollar. According to purchasing-power parity, when would this exchange rate rise?

Accepted Answer

A)   if the price level in either Canada or Kazakhstan rose
B)   if the price level in either Canada or Kazakhstan fell
C)   if the price level in Canada rose or the price level in Kazakhstan fell
D)   if the price level in Canada fell or the price level in Kazakhstan roseE) None of the above
F) All of the above

Question 18

What would a depreciation of the Canadian real exchange rate induce Canadian consumers to buy?

Accepted Answer

A)   fewer domestic goods and foreign goods
B)   more domestic goods, but fewer foreign goods
C)   fewer domestic goods, but more foreign goods
D)   more domestic goods and foreign goodsE) B) and C)
F) None of the above

Question 19

As an open economy, Canadian national saving can be less than Canadian investment.

Accepted Answer

A) True 
 B)False

Question 20

Suppose that a country has $120 billion of national saving and $80 billion of domestic investment. Is this possible? Where did the other $40 billion of national saving go?

Accepted Answer

This is possible for an open economy. Th...

Exam 12: Open-Economy Macroeconomics: Basic Concepts

What would a depreciation of the Canadian real exchange rate induce Canadian consumers to buy?

Correct Answer
verified

What was an important change in the Canadian economy after 1999?

Correct Answer
verified

Correct Answer
verified

As an open economy, Canadian national saving can be less than Canadian investment.

Correct Answer
verified

A Canadian firm buys couscous from Morocco and pays for it with Canadian dollars. What are the effects of this transaction?

Correct Answer
verified

-Refer to the Table 12-1. What currency(ies) is(are) more valuable than predicted by the doctrine of purchasing-power parity?

Correct Answer
verified

What is the formula for a closed economy's GDP?

Correct Answer
verified

What does purchasing-power parity imply?

Correct Answer
verified

-Refer to the Table 12-1. What countries' goods are more expensive than Canadian goods?

Correct Answer
verified

What equation is the GDP identity in an open economy?

Correct Answer
verified

Suppose that a country has $120 billion of national saving and $80 billion of domestic investment. Is this possible? Where did the other $40 billion of national saving go?

Correct Answer
verified
This is possible for an open economy. Th...
View Answer

Assume the exchange rate is about 153 Kazakhstan tenge per dollar. According to purchasing-power parity, when would this exchange rate rise?

Correct Answer
verified

Which of the following shows that any trade transaction must have a financial counterpart?

Correct Answer
verified

Under what circumstances does purchasing-power parity explain how exchange rates are determined and why is it not completely accurate?

Correct Answer
verified
Purchasing-power parity works well in he...
View Answer

Jill, a Canadian citizen, uses some previously obtained euros to purchase a bond issued by a French vineyard. How does this transaction affect Canadian net capital outflow?

Correct Answer
verified

Which statement best defines the nominal exchange rate?

Correct Answer
verified

Exchange rates are 0.75 U.S. dollars per Canadian dollar, 170 yen per Canadian dollar, 0.8 euro per Canadian dollar, and 20 pesos per Canadian dollar. A bottle of beer in New York costs 6 U.S. dollars, 1200 yen in Tokyo, 7 euros in Munich, and 100 pesos in Cancun. Where is the most expensive beer?

Correct Answer
verified

Over the past 50 years, what has happened to Canadian imports as a percentage of GDP?

Correct Answer
verified

How did the real interest rates paid on long-term government debt in Canada and the United States compare with each other over the period from 1984 to 2015?

Correct Answer
verified

Starting from a trade surplus, what would create a trade deficit?

Correct Answer
verified

Exam 12: Open-Economy Macroeconomics: Basic Concepts

What would a depreciation of the Canadian real exchange rate induce Canadian consumers to buy?

Correct AnswerverifiedShow Answer

What was an important change in the Canadian economy after 1999?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

As an open economy, Canadian national saving can be less than Canadian investment.

Correct AnswerverifiedShow Answer

A Canadian firm buys couscous from Morocco and pays for it with Canadian dollars. What are the effects of this transaction?

Correct AnswerverifiedShow Answer

-Refer to the Table 12-1. What currency(ies) is(are) more valuable than predicted by the doctrine of purchasing-power parity?

Correct AnswerverifiedShow Answer

What is the formula for a closed economy's GDP?

Correct AnswerverifiedShow Answer

What does purchasing-power parity imply?

Correct AnswerverifiedShow Answer

-Refer to the Table 12-1. What countries' goods are more expensive than Canadian goods?

Correct AnswerverifiedShow Answer

What equation is the GDP identity in an open economy?

Correct AnswerverifiedShow Answer

Suppose that a country has $120 billion of national saving and $80 billion of domestic investment. Is this possible? Where did the other $40 billion of national saving go?

Correct AnswerverifiedThis is possible for an open economy. Th...View AnswerShow Answer

Assume the exchange rate is about 153 Kazakhstan tenge per dollar. According to purchasing-power parity, when would this exchange rate rise?

Correct AnswerverifiedShow Answer

Which of the following shows that any trade transaction must have a financial counterpart?

Correct AnswerverifiedShow Answer

Under what circumstances does purchasing-power parity explain how exchange rates are determined and why is it not completely accurate?

Correct AnswerverifiedPurchasing-power parity works well in he...View AnswerShow Answer

Jill, a Canadian citizen, uses some previously obtained euros to purchase a bond issued by a French vineyard. How does this transaction affect Canadian net capital outflow?

Correct AnswerverifiedShow Answer

Which statement best defines the nominal exchange rate?

Correct AnswerverifiedShow Answer

Exchange rates are 0.75 U.S. dollars per Canadian dollar, 170 yen per Canadian dollar, 0.8 euro per Canadian dollar, and 20 pesos per Canadian dollar. A bottle of beer in New York costs 6 U.S. dollars, 1200 yen in Tokyo, 7 euros in Munich, and 100 pesos in Cancun. Where is the most expensive beer?

Correct AnswerverifiedShow Answer

Over the past 50 years, what has happened to Canadian imports as a percentage of GDP?

Correct AnswerverifiedShow Answer

How did the real interest rates paid on long-term government debt in Canada and the United States compare with each other over the period from 1984 to 2015?

Correct AnswerverifiedShow Answer

Starting from a trade surplus, what would create a trade deficit?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
This is possible for an open economy. Th...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Purchasing-power parity works well in he...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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