Question 1

Catherine,a citizen of Spain,decides to purchase bonds issued by Chile instead of ones issued by the United States even though the Chilean bonds have a higher risk of default.An economic reason for her decision might be that

Accepted Answer

A)   she dislikes U.S.foreign policy.
B)   the Chilean bonds pay a higher rate of interest.
C)   the U.S.government is more stable than the Chilean government.
D)   None of the above provide an economic reason for buying the riskier bond.E) A) and B)
F) None of the above

Question 2

If the U.S.has a trade deficit and the nominal exchange rate depreciates,then other things the same

Accepted Answer

A)   the trade deficit rises and net capital outflow rises.
B)   the trade deficit rises and net capital outflow falls.
C)   the trade deficit falls and net capital outflows rise.
D)   the trade deficit falls and net capital outflows fall.E) A) and D)
F) None of the above

Question 3

When U.S.national saving rises,domestic investment also necessarily rises.

Accepted Answer

A) True 
 B)False

Question 4

If Ireland's domestic investment exceeds national saving,then Ireland has

Accepted Answer

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

Question 5

According to purchasing power parity,if the Federal Reserve increased the money supply

Accepted Answer

A)   U.S.prices would rise and the nominal exchange rate would rise.
B)   U.S.prices would rise and the nominal exchange rate would fall.
C)   U.S.prices would fall and the nominal exchange rate would rise.
D)   U.S.prices and the nominal exchange rate would fall.E) A) and B)
F) A) and C)

Question 6

Which of the following is correct? Over about the last fifty years

Accepted Answer

A)   U.S.exports and U.S.imports each about doubled.
B)   U.S.exports and U.S.imports each about tripled.
C)   U.S.exports about doubled and U.S.imports about tripled.
D)   U.S.exports about tripled and U.S.imports about doubled.E) B) and C)
F) C) and D)

Question 7

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

Accepted Answer

A)   A Polish company opens a shipbuilding plant in the United States.
B)   A Bolivian bank buys U.S.corporate bonds.
C)   A U.S.bank buys Bolivian corporate bonds.
D)   A U.S.furniture maker opens a plant in Mexico.E) All of the above
F) B) and C)

Question 8

A U.S.firm buys wool from Australia with U.S.currency.The Australia firm then uses this money to buy electric shears from a U.S.firm.Which of the following increases?

Accepted Answer

A)   Australian net capital outflow and Australian net exports
B)   only Australian net exports
C)   only Australian net capital outflow
D)   neither Australian net exports nor Australian capital outflowE) A) and C)
F) A) and B)

Question 9

U.S.based Dell sells computers to an Irish company that pays with previously obtained U.S.currency.This exchange

Accepted Answer

A)   increases U.S.net capital outflow because the U.S.acquires foreign-owned assets.
B)   decreases U.S.net capital outflow because the U.S.acquires foreign-owned assets.
C)   increases U.S.net capital outflow because the U.S.sells capital goods.
D)   decreases U.S.net capital outflow because the U.S.sells capital goods.E) None of the above
F) All of the above

Question 10

If you are vacationing in France and the dollar depreciates relative to the euro,then

Accepted Answer

A)   the dollar buys more euros.It will take fewer dollars to buy a good that costs 50 euros.
B)   the dollar buys more euros.It will take more dollars to buy a good that costs 50 euros.
C)   the dollar buys fewer euros.It will take fewer dollars to buy a good that costs 50 euros.
D)   the dollar buys fewer euros.It will take more dollars to buy a good that costs 50 euros.E) None of the above
F) B) and D)

Question 11

If a dollar buys more potatoes in the U.S.than in France,then

Accepted Answer

A)   the real exchange rate is greater than 1;a profit might be made by buying potatoes in the U.S.and selling them in France.
B)   the real exchange rate is greater than 1;a profit might be made by buying potatoes in France.and selling them in the U.S.
C)   the real exchange rate is less than 1;a profit might be made by buying potatoes in the U.S.and selling them in France.
D)   the real exchange rate is less than 1;a profit might be made by buying potatoes in France and selling them in the U.S.E) B) and D)
F) B) and C)

Question 12

Mike,a U.S.citizen,buys $1,000 worth of olives from Greece.By itself this purchase

Accepted Answer

A)   increases U.S.imports by $1,000 and increases U.S.net exports by $1,000.
B)   increases U.S.imports by $1,000 and decreases U.S.net exports by $1,000.
C)   increases U.S.exports by $1,000 and increases U.S.net exports by $1,000.
D)   increases U.S.exports by $1,000 and decreases U.S.net exports by $1,000.E) A) and B)
F) A) and C)

Question 13

Suppose that the nominal exchange rate is 120 yen per dollar,that the price of a basket of goods in the U.S.is $500 and the price of a basket of goods in Japan is 50,000 yen.Suppose that these values change to 100 yen per dollar,$600,and 70,000 yen.Then the real exchange rate would

Accepted Answer

A)   appreciate which by itself would make U.S.net exports fall.
B)   appreciate which by itself would make U.S.net exports rise.
C)   depreciate which by itself would make U.S.net exports fall.
D)   depreciate which by itself would make U.S.net exports rise.E) A) and B)
F) B) and C)

Question 14

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 15

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

Question 16

A country has a trade deficit.Its

Accepted Answer

A)   net capital outflow must be positive,and saving is larger than investment.
B)   net capital outflow must be positive and saving is smaller than investment.
C)   net capital outflow must be negative and saving is larger than investment.
D)   net capital outflow must be negative and saving is smaller than investment.E) All of the above
F) A) and D)

Question 17

The country of Wiknam has net capital outflow of $1,000,government purchases of $5,000 and consumption of $20,000.Which of the following is correct?

Accepted Answer

A)   If its domestic investment is $1,000,its GDP is $26,000.
B)   If its domestic investment is $2,000,its GDP is $28,000.
C)   If its domestic investment is $5,000,its GDP is $29,000.
D)   None of the above are correct.E) A) and B)
F) All of the above

Question 18

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

Question 19

If a country has Y > C + I + G,then it has

Accepted Answer

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

Question 20

According to purchasing power parity,if over the course of a year the price level in the U.S.rises more than in Canada,then which of the following rises?

Accepted Answer

A)   the U.S.real exchange rate,but not the U.S.nominal exchange rate
B)   the U.S.nominal exchange rate,but not the U.S.real exchange rate
C)   the U.S.nominal exchange rate and the U.S.real exchange rate
D)   neither the real exchange rate nor the nominal exchange rateE) All of the above
F) B) and D)

Exam 31: Open-Economy Macroeconomics: Basic Concepts

U.S.based Dell sells computers to an Irish company that pays with previously obtained U.S.currency.This exchange

Correct AnswerverifiedShow Answer

Suppose that the nominal exchange rate is 120 yen per dollar,that the price of a basket of goods in the U.S.is $500 and the price of a basket of goods in Japan is 50,000 yen.Suppose that these values change to 100 yen per dollar,$600,and 70,000 yen.Then the real exchange rate would

Correct AnswerverifiedShow Answer

If a dollar buys more potatoes in the U.S.than in France,then

Correct AnswerverifiedShow Answer

If a country has Y > C + I + G,then it has

Correct AnswerverifiedShow Answer

If Ireland's domestic investment exceeds national saving,then Ireland has

Correct AnswerverifiedShow Answer

Mike,a U.S.citizen,buys $1,000 worth of olives from Greece.By itself this purchase

Correct AnswerverifiedShow Answer

A country has a trade deficit.Its

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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

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The country of Wiknam has net capital outflow of $1,000,government purchases of $5,000 and consumption of $20,000.Which of the following is correct?

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According to purchasing power parity,if the Federal Reserve increased the money supply

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If you are vacationing in France and the dollar depreciates relative to the euro,then

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Catherine,a citizen of Spain,decides to purchase bonds issued by Chile instead of ones issued by the United States even though the Chilean bonds have a higher risk of default.An economic reason for her decision might be that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is correct? Over about the last fifty years

Correct AnswerverifiedShow Answer

When U.S.national saving rises,domestic investment also necessarily rises.

Correct AnswerverifiedShow Answer

According to purchasing power parity,if over the course of a year the price level in the U.S.rises more than in Canada,then which of the following rises?

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A U.S.firm buys wool from Australia with U.S.currency.The Australia firm then uses this money to buy electric shears from a U.S.firm.Which of the following increases?

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If the U.S.has a trade deficit and the nominal exchange rate depreciates,then other things the same

Correct AnswerverifiedShow Answer

Net exports measures the difference between a country's

Correct AnswerverifiedShow Answer

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