Question 1

If a country exports more than it imports,then it has

Accepted Answer

A)   positive net exports and positive net capital outflows.
B)   positive net exports and negative net capital outflows.
C)   negative net exports and positive net capital outflows.
D)   negative net exports and negative net capital outflows.E) A) and C)
F) A) and B)

Question 2

Suppose a Starbucks tall-latte cost $4.00 in the United States and 3.20 euros in the Euro area.Also,suppose a McDonald's Big Mac costs $3.50 in the United States and 2.45 euros in Euro area.If the nominal exchange rate is .80 euros per dollar,which goods have prices that are consistent with purchasing power parity?

Accepted Answer

A)   Both the tall-latte and the Big Mac.
B)   Neither the tall-latte nor the Big Mac.
C)   The tall-latte but not the Big Mac.
D)   The Big Mac but not the tall-latte.E) None of the above
F) A) and B)

Question 3

A U.S.firm buys bonds issued by a technology center in India.This purchase is an example of U.S.

Accepted Answer

A)   foreign portfolio investment.By itself it is an increase in U.S.holdings of foreign bonds and increases U.S.net capital outflow.
B)   foreign portfolio investment.By itself it is an increase in U.S.holdings of foreign bonds and decreases U.S.net capital outflow.
C)   foreign direct investment.By itself it is an increase in U.S.holdings of foreign bonds and increases U.S.net capital outflow.
D)   foreign direct investment.By itself it is an increase in U.S.holdings of foreign bonds and decreases U.S.net capital outflow.E) None of the above
F) A) and B)

Question 4

The law of one price states that

Accepted Answer

A)   a good must sell at the price fixed by law.
B)   a good must sell at the same price at all locations.
C)   a good cannot sell for a price greater than the legal price ceiling.
D)   nominal exchange rates will not vary.E) B) and D)
F) All of the above

Question 5

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

Accepted Answer

A)   Toni,a U.S.citizen,buys bonds issued by a Swedish corporation.
B)   Randall,a U.S.citizen,opens a cheesecake factory in Italy.
C)   Both A and B are examples of U.S.portfolio investment.
D)   Neither A nor B are examples of U.S.portfolio investment.E) All of the above
F) B) and C)

Question 6

A Swiss watchmaker opens a factory in the United States.This is an example of Swiss

Accepted Answer

A)   exports.
B)   imports.
C)   foreign portfolio investment.
D)   foreign direct investment.E) A) and B)
F) B) and C)

Question 7

The price of a basket of goods and services in the U.S.is $600.In Canada the same basket of goods costs 700 Canadian dollars.If the nominal exchange rate is 1.2 Canadian dollars per U.S.dollar,what is the real exchange rate?

Accepted Answer

A)   700/600
B)   600/700
C)   700/720
D)   None of the above is correct.E) B) and D)
F) None of the above

Question 8

If the U.S.has exports of $1.5 trillion and imports of $2.2 trillion,then the U.S.

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.E) All of the above
F) A) and B)

Question 9

A Mexican firm exchanges Pesos for U.S.dollars and then uses these dollars to purchase corn from the U.S.This transaction

Accepted Answer

A)   increases Mexican net capital outflow,and increases U.S.net exports.
B)   increases Mexican net capital outflow,and decreases U.S.net exports.
C)   decreases Mexican net capital outflow,and increases U.S.net exports.
D)   decreases Mexican net capital outflow,and decreases U.S.net exports.E) All of the above
F) A) and D)

Question 10

Reduced barriers to trade help explain an increase in U.S.exports and imports relative to GDP since 1950.

Accepted Answer

A) True 
 B)False

Question 11

Sonya,a citizen of Denmark,produces boots and shoes that she sells to department stores in the United States.Other things the same,these sales

Accepted Answer

A)   increase U.S.net exports and have no effect on Danish net exports.
B)   decrease U.S.net exports and have no effect on Danish net exports.
C)   increase U.S.net exports and decrease Danish net exports.
D)   decrease U.S.net exports and increase Danish net exports.E) B) and D)
F) B) and C)

Question 12

If prices in the U.S.rise faster than prices in the United Kingdom,then according to the doctrine of purchasing-power parity the U.S.nominal exchange rate should fall.

Accepted Answer

A) True 
 B)False

Question 13

John,a U.S.citizen,opens up a Sports bar in Tokyo.This is an example of U.S.

Accepted Answer

A)   exports.
B)   imports.
C)   foreign portfolio investment.
D)   foreign direct investment.E) A) and D)
F) A) and C)

Question 14

Other things the same,which of the following would both make foreigners more willing to engage in U.S.portfolio investment?

Accepted Answer

A)   U.S.interest rates rise,the default risk of U.S.assets rise
B)   U.S.interest rates rise,the default risk of U.S.assets fall
C)   U.S.interest rates fall,the default risk of U.S.assets rise
D)   U.S.interest rates fall,the default risk of U.S.assets fallE) A) and B)
F) A) and D)

Question 15

A country has $60 million of saving and domestic investment of $40 million.Net exports are

Accepted Answer

A)   $20 million.
B)   -$20 million.
C)   $100 million.
D)   -$100 million.E) A) and D)
F) B) and C)

Question 16

From 1960 to about 1975 in the United States,net capital outflow was

Accepted Answer

A)   small but always positive.
B)   small and sometimes negative and sometimes positive.
C)   large and positive.
D)   large but sometimes negative and sometimes positive.E) C) and D)
F) None of the above

Question 17

In Ireland,a pint of beer costs 2.2 Irish pounds.In Australia,a pint of beer costs 4 Australian dollars.If the exchange rate is .5 pounds per Australian dollar,what is the real exchange rate?

Accepted Answer

A)   .91 pints of Irish beer per pint of Australian beer
B)   1.1 pint of Irish beer per pint of Australian beer
C)   3.64 pints of Irish beer per pint of Australian beer
D)   4.4 pints of Irish beer per pint of Australian beerE) A) and B)
F) A) and C)

Question 18

Other things the same,the real exchange rate between U.S.and South African goods would be higher if

Accepted Answer

A)   prices in the U.S.were higher,or the number of South African rand the dollar purchased were higher.
B)   prices in the U.S.were higher,or the number of South African rand the dollar purchased were lower.
C)   prices in the U.S.were lower,or the number of South African rand the dollar purchased were higher.
D)   prices in the U.S.were lower,or the number of South African rand the dollar purchased were lower.E) B) and D)
F) None of the above

Question 19

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 savings go?

Accepted Answer

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

Question 20

Purchasing-power parity describes the forces that determine

Accepted Answer

A)   prices in the short run.
B)   prices in the long run.
C)   exchange rates in the short run.
D)   exchange rates in the long run.E) All of the above
F) C) and D)

Exam 31: Open-Economy Macroeconomics: Basic Concepts

John,a U.S.citizen,opens up a Sports bar in Tokyo.This is an example of U.S.

Correct Answer
verified

In Ireland,a pint of beer costs 2.2 Irish pounds.In Australia,a pint of beer costs 4 Australian dollars.If the exchange rate is .5 pounds per Australian dollar,what is the real exchange rate?

Correct Answer
verified

A Mexican firm exchanges Pesos for U.S.dollars and then uses these dollars to purchase corn from the U.S.This transaction

Correct Answer
verified

Other things the same,the real exchange rate between U.S.and South African goods would be higher if

Correct Answer
verified

The price of a basket of goods and services in the U.S.is $600.In Canada the same basket of goods costs 700 Canadian dollars.If the nominal exchange rate is 1.2 Canadian dollars per U.S.dollar,what is the real exchange rate?

Correct Answer
verified

If prices in the U.S.rise faster than prices in the United Kingdom,then according to the doctrine of purchasing-power parity the U.S.nominal exchange rate should fall.

Correct Answer
verified

If a country exports more than it imports,then it has

Correct Answer
verified

A Swiss watchmaker opens a factory in the United States.This is an example of Swiss

Correct Answer
verified

The law of one price states that

Correct Answer
verified

A country has $60 million of saving and domestic investment of $40 million.Net exports are

Correct Answer
verified

Reduced barriers to trade help explain an increase in U.S.exports and imports relative to GDP since 1950.

Correct Answer
verified

Sonya,a citizen of Denmark,produces boots and shoes that she sells to department stores in the United States.Other things the same,these sales

Correct Answer
verified

Other things the same,which of the following would both make foreigners more willing to engage in U.S.portfolio investment?

Correct Answer
verified

Correct Answer
verified

From 1960 to about 1975 in the United States,net capital outflow was

Correct Answer
verified

If the U.S.has exports of $1.5 trillion and imports of $2.2 trillion,then the U.S.

Correct Answer
verified

Purchasing-power parity describes the forces that determine

Correct Answer
verified

A U.S.firm buys bonds issued by a technology center in India.This purchase is an example of U.S.

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 savings go?

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

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

Correct Answer
verified

Exam 31: Open-Economy Macroeconomics: Basic Concepts

John,a U.S.citizen,opens up a Sports bar in Tokyo.This is an example of U.S.

Correct AnswerverifiedShow Answer

In Ireland,a pint of beer costs 2.2 Irish pounds.In Australia,a pint of beer costs 4 Australian dollars.If the exchange rate is .5 pounds per Australian dollar,what is the real exchange rate?

Correct AnswerverifiedShow Answer

A Mexican firm exchanges Pesos for U.S.dollars and then uses these dollars to purchase corn from the U.S.This transaction

Correct AnswerverifiedShow Answer

Other things the same,the real exchange rate between U.S.and South African goods would be higher if

Correct AnswerverifiedShow Answer

The price of a basket of goods and services in the U.S.is $600.In Canada the same basket of goods costs 700 Canadian dollars.If the nominal exchange rate is 1.2 Canadian dollars per U.S.dollar,what is the real exchange rate?

Correct AnswerverifiedShow Answer

If prices in the U.S.rise faster than prices in the United Kingdom,then according to the doctrine of purchasing-power parity the U.S.nominal exchange rate should fall.

Correct AnswerverifiedShow Answer

If a country exports more than it imports,then it has

Correct AnswerverifiedShow Answer

A Swiss watchmaker opens a factory in the United States.This is an example of Swiss

Correct AnswerverifiedShow Answer

The law of one price states that

Correct AnswerverifiedShow Answer

A country has $60 million of saving and domestic investment of $40 million.Net exports are

Correct AnswerverifiedShow Answer

Reduced barriers to trade help explain an increase in U.S.exports and imports relative to GDP since 1950.

Correct AnswerverifiedShow Answer

Sonya,a citizen of Denmark,produces boots and shoes that she sells to department stores in the United States.Other things the same,these sales

Correct AnswerverifiedShow Answer

Other things the same,which of the following would both make foreigners more willing to engage in U.S.portfolio investment?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

From 1960 to about 1975 in the United States,net capital outflow was

Correct AnswerverifiedShow Answer

If the U.S.has exports of $1.5 trillion and imports of $2.2 trillion,then the U.S.

Correct AnswerverifiedShow Answer

Purchasing-power parity describes the forces that determine

Correct AnswerverifiedShow Answer

A U.S.firm buys bonds issued by a technology center in India.This purchase is an example of U.S.

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 savings go?

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

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

Correct AnswerverifiedShow Answer

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This is possible for an open economy.The...
View Answer

Correct Answer
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