Question 1

If U.S. exports are $300 billion and U.S. imports total $350 billion, which of the following is correct?

Accepted Answer

A)   The U.S. has a trade surplus of $350 billion.
B)   The U.S. has a trade surplus of $50 billion.
C)   The U.S. has a trade deficit of $350 billion.
D)   The U.S. has a trade deficit of $50 billion.E) All of the above
F) A) and B)

Question 2

Other things the same, an increase in domestic prices raises the real exchange rate.

Accepted Answer

A) True 
 B)False

Question 3

If U.S. consumers increase their demand for apples from New Zealand, then other things the same New Zealand's

Accepted Answer

A)   imports and net exports rise.
B)   imports rise and net exports fall.
C)   exports and net exports rise.
D)   exports rise and net exports fall.E) A) and D)
F) B) and C)

Question 4

Suppose that a country imports $75 million of goods and services and exports $100 million of goods and services. What is the value of net exports?

Accepted Answer

A)   $175 million
B)   $75 million
C)   $25 million
D)   -$25 millionE) A) and B)
F) B) and C)

Question 5

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.E) None of the above
F) A) and D)

Question 6

A country has net capital outflow of $20 billion. Which of the following is consistent with this net capital outflow?

Accepted Answer

A)   It has $20 billion of net exports.
B)   Purchases of domestic assets by foreigners exceed purchases of foreign assets by domestic residents by $20 billion.
C)   It's saving is $15 billion and its domestic investment is $5 billion.
D)   All of the above are consistent with a net capital outflow of $20 billion.E) B) and C)
F) A) and C)

Question 7

If U.S. residents purchase $500 billion of foreign assets and foreigners purchase $1300 billion of U.S. assets,

Accepted Answer

A)   U.S. net capital outflow is $800 billion; capital is flowing into the U.S.
B)   U.S. net capital outflow is $800 billion; capital is flowing out of the U.S.
C)   U.S. net capital outflow is -$800 billion; capital is flowing into the U.S.
D)   U.S. net capital outflow is -$800 billion; capital is flowing out of the U.S.E) A) and C)
F) A) and B)

Question 8

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

Accepted Answer

A)   S > I and it has a trade surplus.
B)   S > I and it has a trade deficit.
C)   S 
D)   S E) B) and C)
F) A) and D)

Question 9

According to purchasing power parity, if the same basket of goods costs $100 in the U.S. and 50 pounds in Britain, then what is the nominal exchange rate?

Accepted Answer

A)   2 pounds per dollar
B)   1 pound per dollar
C)   1/2 pound per dollar
D)   None of the above is correctE) A) and D)
F) A) and B)

Question 10

U.S. exports make up less than 20 percent of GDP.

Accepted Answer

A) True 
 B)False

Question 11

Movies are a major export of the U.S.

Accepted Answer

A) True 
 B)False

Question 12

If a U.S. dollar purchases 4 Argentinean pesos, and a gallon of milk costs $2 in the U.S. and 6 pesos in Argentina what is the real exchange rate?

Accepted Answer

A)   3
B)   4/3
C)   3/4
D)   1/3E) A) and B)
F) A) and C)

Question 13

Which of the following does purchasing-power parity imply?

Accepted Answer

A)   the foreign price level times the nominal exchange rate (given as amount of foreign currency per dollar)  equals the U.S. price level.
B)   The price of domestic goods relative to foreign goods cannot change.
C)   The nominal exchange rate is the ratio of foreign prices to U.S. prices.
D)   All of the above are correct.E) C) and D)
F) All of the above

Question 14

If a country has a trade deficit then

Accepted Answer

A)   S > I and Y > C + I + G.
B)   S > I and Y 
C)   S  C + I + G.
D)   S E) B) and D)
F) All of the above

Question 15

By itself, when a Japanese bank purchases a bond issued by a U.S. coporation, U.S. net capital outflow rises.

Accepted Answer

A) True 
 B)False

Question 16

The nominal exchange rate is about 2 Aruban florin per dollar. If a basket of goods in the United States costs $40, how many florins must a basket of goods in Aruba cost for purchasing power parity to hold?

Accepted Answer

A)   20 florin
B)   40 florin
C)   60 florin
D)   80 florinE) B) and D)
F) C) and D)

Question 17

One year a country has positive net exports. The next year it still has positive but larger net exports

Accepted Answer

A)   its trade surplus fell.
B)   its trade surplus rose.
C)   its trade deficit fell.
D)   its trade deficit roseE) C) and D)
F) A) and C)

Question 18

In an open economy, gross domestic product equals $1,850 billion, consumption expenditure equals $975 billion, government expenditure equals $225 billion, investment equals $500 billion, and net exports equals $150 billion. What is national savings?

Accepted Answer

A)   $0
B)   $500 billion
C)   $650 billion
D)   $975 billionE) All of the above
F) B) and D)

Question 19

If saving is greater than domestic investment, then

Accepted Answer

A)   there is a trade deficit and Y > C + I + G.
B)   there is a trade deficit and Y 
C)   there is a trade surplus and Y > C + I + G.
D)   there is a trade surplus and Y E) B) and C)
F) None of the above

Question 20

Other things the same, an increase in the foreign price level leads to an increase in the real exchange rate.

Accepted Answer

A) True 
 B)False

Exam 13: Open-Economy Macroeconomic Models

Other things the same, an increase in domestic prices raises the real exchange rate.

Correct AnswerverifiedShow Answer

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'

Correct AnswerverifiedShow Answer

According to purchasing power parity, if the same basket of goods costs $100 in the U.S. and 50 pounds in Britain, then what is the nominal exchange rate?

Correct AnswerverifiedShow Answer

A country has net capital outflow of $20 billion. Which of the following is consistent with this net capital outflow?

Correct AnswerverifiedShow Answer

Which of the following does purchasing-power parity imply?

Correct AnswerverifiedShow Answer

If a U.S. dollar purchases 4 Argentinean pesos, and a gallon of milk costs $2 in the U.S. and 6 pesos in Argentina what is the real exchange rate?

Correct AnswerverifiedShow Answer

Suppose that a country imports $75 million of goods and services and exports $100 million of goods and services. What is the value of net exports?

Correct AnswerverifiedShow Answer

If U.S. exports are $300 billion and U.S. imports total $350 billion, which of the following is correct?

Correct AnswerverifiedShow Answer

The nominal exchange rate is about 2 Aruban florin per dollar. If a basket of goods in the United States costs $40, how many florins must a basket of goods in Aruba cost for purchasing power parity to hold?

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One year a country has positive net exports. The next year it still has positive but larger net exports

Correct AnswerverifiedShow Answer

Movies are a major export of the U.S.

Correct AnswerverifiedShow Answer

If a country has a trade deficit then

Correct AnswerverifiedShow Answer

If U.S. consumers increase their demand for apples from New Zealand, then other things the same New Zealand's

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

U.S. exports make up less than 20 percent of GDP.

Correct AnswerverifiedShow Answer

If saving is greater than domestic investment, then

Correct AnswerverifiedShow Answer

If U.S. residents purchase $500 billion of foreign assets and foreigners purchase $1300 billion of U.S. assets,

Correct AnswerverifiedShow Answer

Other things the same, an increase in the foreign price level leads to an increase in the real exchange rate.

Correct AnswerverifiedShow Answer

By itself, when a Japanese bank purchases a bond issued by a U.S. coporation, U.S. net capital outflow rises.

Correct AnswerverifiedShow Answer

In an open economy, gross domestic product equals $1,850 billion, consumption expenditure equals $975 billion, government expenditure equals $225 billion, investment equals $500 billion, and net exports equals $150 billion. What is national savings?

Correct AnswerverifiedShow Answer

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