Question 1

A country's saving is greater than its domestic investment. This difference means that its

Accepted Answer

A)  net capital outflow and net exports are positive.
B)  net capital outflow and net exports are negative.
C)  net capital outflow is positive and net exports are negative.
D)  net capital outflow is negative and net exports are positive.E) A) and B)
F) All of the above

Question 2

Other things the same, if the government reduced its budget deficit, the country's trade balance would rise.

Accepted Answer

A) True 
 B)False

Question 3

During some year a country had exports of $50 billion, imports of $70 billion, and domestic investment of $100 billion. What was its saving during the year?

Accepted Answer

A)  $80 billion
B)  $100 billion
C)  $120 billion
D)  $150 billionE) C) and D)
F) B) and C)

Question 4

A Turkish firm exchanges lira (Turkish currency) for dollars. It then uses these dollars to purchase computers from the U.S. These actions decrease U.S. net capital outflow and increase U.S. net exports.

Accepted Answer

A) True 
 B)False

Question 5

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.E) A) and B)
F) A) and C)

Question 6

A U.S. firm opens a factory that produces power tools in Korea.

Accepted Answer

A)  This increases U.S. net capital outflow and decreases Korean net capital outflow.
B)  This decreases U.S. net capital outflow and increases Korean net capital outflow.
C)  This increases only U.S. net capital outflow.
D)  This increases only Korean net capital outflow.E) B) and D)
F) A) and B)

Question 7

If Israel's domestic investment exceeds its national saving, then Israel 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) C) and D)
F) A) and C)

Question 8

A particular brand of toothpaste costs 4 British pounds in London. The nominal exchange rate is .80 and the real exchange rate is about 1.16. These numbers imply that the U.S. price of the same toothpaste is about

Accepted Answer

A)  $5.79
B)  $4.29
C)  $3.70
D)  $2.76E) None of the above
F) B) and C)

Question 9

Peru has exports of $31.5 million and imports of $30 million. Peru

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) A) and C)
F) C) and D)

Question 10

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

Question 11

An increase in U.S. sales of movies to other countries raises U.S.

Accepted Answer

A)  exports and so raises the U.S. trade balance.
B)  exports and so reduces the U.S. trade balance.
C)  imports and so raises the U.S. trade balance.
D)  imports and so reduces the U.S. trade balance.E) B) and C)
F) A) and B)

Question 12

Susan, a U.S. citizen, builds and operates a kennel in France. This action is an example of

Accepted Answer

A)  investment for Susan and U.S. foreign direct investment.
B)  investment for Susan and U.S. foreign portfolio investment.
C)  U.S. foreign direct investment and U.S. domestic investment.
D)  U.S. foreign portfolio investment and U.S. domestic investment.E) B) and D)
F) All of the above

Question 13

If over the next year the inflation rate in the euro area is higher than the inflation rate in Japan, then the euro should depreciate relative to the Japanese yen.

Accepted Answer

A) True 
 B)False

Question 14

If a dollar buys more corn in the U.S. than in Mexico, then

Accepted Answer

A)  the real exchange rate is greater than 1; a profit might be made by buying corn in the U.S. and selling it in Mexico.
B)  the real exchange rate is greater than 1; a profit might be made by buying corn in Mexico and selling it in the U.S.
C)  the real exchange rate is less than 1; a profit might be made by buying corn in the U.S. and selling it in Mexico.
D)  the real exchange rate is less than 1; a profit might be made by buying corn in Mexico and selling it in the U.S.E) All of the above
F) A) and D)

Question 15

Last year residents of Country A purchased $600 billion of foreign assets. Foreigners purchased $425 billion dollars of assets and $375 billion of goods and services from country A. What was the value of Country A's imports?

Accepted Answer

The value of Country...

Question 16

If a county has 25 billion euros of imports, 15 billion euros of exports, and sells 20 billion euros of assets to foreigners, how many foreign assets do domestic residents purchase?

Accepted Answer

A)  5 billion euros
B)  10 billion euros
C)  30 billion euros
D)  None of the above are correct.E) C) and D)
F) A) and B)

Question 17

If purchasing power parity holds, then if the price of a basket of goods in the U.S. rose from $1.000 to $1,200 and the price of the same basket in Poland rose from 6,400 Polish zloty to 8,000 zloty, then

Accepted Answer

A)  the nominal exchange rate would be unchanged and the real exchange rate would appreciate.
B)  the U.S. dollar would appreciate and the real exchange rate would stay the same.
C)  the nominal exchange rate would be unchanged and the real exchange rate would depreciate.
D)  the U.S. dollar would depreciate and the real exchange rate would be unchanged.E) C) and D)
F) B) and D)

Question 18

In the 1970s and 1980s the U.S. dollar depreciated against the German mark and appreciated against the Italian lira because U.S. inflation was lower than in Germany but higher than in Italy.

Accepted Answer

A) True 
 B)False

Question 19

If Germany purchased more goods and services abroad than it sold abroad last year, then it had

Accepted Answer

A)  positive net exports which is a trade surplus.
B)  positive net exports which is a trade deficit.
C)  negative net exports which is a trade surplus.
D)  negative net exports which is a trade deficit.E) B) and C)
F) None of the above

Question 20

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

Accepted Answer

A)  Disney builds a new amusement park near Barcelona, Spain.
B)  A U.S. citizen buys bonds issued by the British government.
C)  A Dutch hotel chain opens a new hotel in the United States.
D)  A citizen of Singapore buys a bond issued by a U.S. corporation.E) All of the above
F) B) and D)

Exam 31: Open-Economy Macroeconomics: Basic Concepts

A U.S. firm opens a factory that produces power tools in Korea.

Correct AnswerverifiedShow Answer

An increase in U.S. sales of movies to other countries raises U.S.

Correct AnswerverifiedShow Answer

If a dollar buys more corn in the U.S. than in Mexico, then

Correct AnswerverifiedShow Answer

If Germany purchased more goods and services abroad than it sold abroad last year, then it had

Correct AnswerverifiedShow Answer

Last year residents of Country A purchased $600 billion of foreign assets. Foreigners purchased $425 billion dollars of assets and $375 billion of goods and services from country A. What was the value of Country A's imports?

Correct AnswerverifiedThe value of Country...View AnswerShow Answer

A country's saving is greater than its domestic investment. This difference means that its

Correct AnswerverifiedShow Answer

Which of the following is always correct?

Correct AnswerverifiedShow Answer

If purchasing power parity holds, then if the price of a basket of goods in the U.S. rose from $1.000 to $1,200 and the price of the same basket in Poland rose from 6,400 Polish zloty to 8,000 zloty, then

Correct AnswerverifiedShow Answer

In the 1970s and 1980s the U.S. dollar depreciated against the German mark and appreciated against the Italian lira because U.S. inflation was lower than in Germany but higher than in Italy.

Correct AnswerverifiedShow Answer

A Turkish firm exchanges lira (Turkish currency) for dollars. It then uses these dollars to purchase computers from the U.S. These actions decrease U.S. net capital outflow and increase U.S. net exports.

Correct AnswerverifiedShow Answer

Other things the same, if the government reduced its budget deficit, the country's trade balance would rise.

Correct AnswerverifiedShow Answer

During some year a country had exports of $50 billion, imports of $70 billion, and domestic investment of $100 billion. What was its saving during the year?

Correct AnswerverifiedShow Answer

If the U.S. real exchange rate appreciates, U.S. exports

Correct AnswerverifiedShow Answer

If Israel's domestic investment exceeds its national saving, then Israel has

Correct AnswerverifiedShow Answer

If over the next year the inflation rate in the euro area is higher than the inflation rate in Japan, then the euro should depreciate relative to the Japanese yen.

Correct AnswerverifiedShow Answer

Susan, a U.S. citizen, builds and operates a kennel in France. This action is an example of

Correct AnswerverifiedShow Answer

Peru has exports of $31.5 million and imports of $30 million. Peru

Correct AnswerverifiedShow Answer

A particular brand of toothpaste costs 4 British pounds in London. The nominal exchange rate is .80 and the real exchange rate is about 1.16. These numbers imply that the U.S. price of the same toothpaste is about

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If a county has 25 billion euros of imports, 15 billion euros of exports, and sells 20 billion euros of assets to foreigners, how many foreign assets do domestic residents purchase?

Correct AnswerverifiedShow Answer

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The value of Country...
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