Question 1

A Portuguese company exchanges euros for $60,000 from a U.S. bank. The Portuguese firm then uses the dollars to purchase $60,000 of canning equipment from a U.S. company. As a result of these two transactions alone

Accepted Answer

A)   both U.S. net capital outflow and U.S. net exports rise.
B)   U.S. net capital outflow rose and U.S. net exports fall.
C)   U.S. net capital outflow fell and U.S. net exports rise.
D)   both U.S. net capital and U.S. net exports fall.E) A) and B)
F) All of the above

Question 2

A basket of goods costs $800 in the U.S. In Belgium the basket of goods costs 640 euros and the exchange rate is .80 euros per U.S. dollar. In Japan the basket of goods costs 90,000 yen and the exchange rate is 90 yen per dollar. Which country has purchasing-power parity with the U.S.?

Accepted Answer

A)   both Belgium and Japan
B)   Belgium but not Japan
C)   Japan but not Belgium
D)   neither Belgium nor JapanE) A) and D)
F) A) and C)

Question 3

The dollar is said to appreciate against the euro if

Accepted Answer

A)   the exchange rate falls. Other things the same, it will cost fewer euros to buy U.S. goods.
B)   the exchange rate falls. Other things the same, it will cost more euros to buy U.S. goods.
C)   the exchange rate rises. Other things the same, it will cost fewer euros to buy U.S. goods.
D)   the exchange rate rises. Other things the same, it will cost more euros to buy U.S. goods.E) All of the above
F) None of the above

Question 4

A Finnish corporation builds a factory the produces ceiling fans in the United States. This is an example of Finish

Accepted Answer

A)   foreign direct investment that increases Finnish net capital outflow.
B)   foreign direct investment that decreases Finnish net capital outflow.
C)   foreign portfolio investment that increases Finnish net capital outflow.
D)   foreign portfolio investment that decreases Finnish net capital outflow.E) B) and C)
F) A) and B)

Question 5

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 B)
F) A) and C)

Question 6

If a country's trade surplus falls, its net capital outflow rises.

Accepted Answer

A) True 
 B)False

Question 7

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) B) and C)

Question 8

If saving is less 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 < C + I + G.E) All of the above
F) A) and D)

Question 9

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 10

A nation's domestic investment is greater than its savings. Which of the following is correct?

Accepted Answer

A)   This nation has a negative net capital outflow.
B)   This nation has a trade surplus.
C)   Purchases of foreign assets by domestic residents exceed purchases of domestic assets by foreigners.
D)   All of the above are correct.E) None of the above
F) All of the above

Question 11

If Saudi Arabia had negative net exports last year, then it

Accepted Answer

A)   sold more abroad than it purchased abroad and had a trade surplus.
B)   sold more abroad than it purchased abroad and had a trade deficit.
C)   bought more abroad than it sold abroad and had a trade surplus.
D)   bought more abroad than it sold abroad and had a trade deficit.E) None of the above
F) C) and D)

Question 12

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) B) and D)
F) B) and C)

Question 13

Other things the same, an increase in the real exchange rate raises U.S. net exports.

Accepted Answer

A) True 
 B)False

Question 14

If a country changes its corporate tax laws so that foreign businesses build and manage more business in that country, then the net capital outflow of that country

Accepted Answer

A)   and the net capital outflow of other countries rise.
B)   rises and the net capital outflow of other countries fall.
C)   falls and the net capital outflow of other countries rise.
D)   None of the above are correct.E) None of the above
F) C) and D)

Question 15

You buy a new car built in Sweden. Other things the same, your purchase by itself

Accepted Answer

A)   raises both U.S. exports and U.S. net exports.
B)   raises U.S. exports and lowers U.S. net exports.
C)   raises both U.S. imports and U.S. net exports.
D)   raises U.S. imports and lowers U.S. net exports.E) A) and B)
F) A) and C)

Question 16

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 < I and it has a trade deficit.E) B) and C)
F) A) and D)

Question 17

How do we find the real exchange rate from the nominal exchange rate?

Accepted Answer

Real Exchange Rate =...

Question 18

If a country had a trade deficit of $10 billion and then its exports rose by $20 billion and its imports rose by $10 billion, its net exports would now be

Accepted Answer

A)   $0
B)   $10 billion.
C)   -$10 billion.
D)   -$20 billion.E) None of the above
F) B) and D)

Question 19

Over the last 5 years the amount of country A's currency it took to buy a unit of country B's currency more than doubled.
A. Did country A's currency depreciate or appreciate?
B. According to purchasing­power parity, what explains the change in the value of country B's currency?

Accepted Answer

A. It depreciated.
B...

Question 20

If the unit of foreign currency is the peso, in which case is the real exchange rate 1.2?

Accepted Answer

A)   the U.S. price is $2, the foreign price is 5 pesos, and the exchange rate is 3 pesos per dollar.
B)   the U.S. price is $3, the foreign price is 18 pesos, and the exchange rate is 5 pesos per dollar.
C)   the U.S. price is $5, the foreign price 12 pesos, and the exchange rate is 2 pesos per dollar.
D)   the U.S. price is $10, the foreign price is 3 pesos, and the exchange rate is 4 pesos per dollar.E) B) and D)
F) B) and C)

Exam 13: 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

A Portuguese company exchanges euros for $60,000 from a U.S. bank. The Portuguese firm then uses the dollars to purchase $60,000 of canning equipment from a U.S. company. As a result of these two transactions alone

Correct AnswerverifiedShow Answer

If a country had a trade deficit of $10 billion and then its exports rose by $20 billion and its imports rose by $10 billion, its net exports would now be

Correct AnswerverifiedShow Answer

If a country changes its corporate tax laws so that foreign businesses build and manage more business in that country, then the net capital outflow of that country

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The dollar is said to appreciate against the euro if

Correct AnswerverifiedShow Answer

Net exports measures the difference between a country's

Correct AnswerverifiedShow Answer

If a country's trade surplus falls, its net capital outflow rises.

Correct AnswerverifiedShow Answer

A nation's domestic investment is greater than its savings. Which of the following is correct?

Correct AnswerverifiedShow Answer

How do we find the real exchange rate from the nominal exchange rate?

Correct AnswerverifiedReal Exchange Rate =...View AnswerShow Answer

A basket of goods costs $800 in the U.S. In Belgium the basket of goods costs 640 euros and the exchange rate is .80 euros per U.S. dollar. In Japan the basket of goods costs 90,000 yen and the exchange rate is 90 yen per dollar. Which country has purchasing-power parity with the U.S.?

Correct AnswerverifiedShow Answer

Other things the same, an increase in the real exchange rate raises U.S. net exports.

Correct AnswerverifiedShow Answer

If the unit of foreign currency is the peso, in which case is the real exchange rate 1.2?

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

If Saudi Arabia had negative net exports last year, then it

Correct AnswerverifiedShow Answer

Over the last 5 years the amount of country A's currency it took to buy a unit of country B's currency more than doubled. A. Did country A's currency depreciate or appreciate? B. According to purchasing­power parity, what explains the change in the value of country B's currency?

Correct AnswerverifiedA. It depreciated.B...View AnswerShow 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

If saving is less than domestic investment, then

Correct AnswerverifiedShow Answer

You buy a new car built in Sweden. Other things the same, your purchase by itself

Correct AnswerverifiedShow Answer

A Finnish corporation builds a factory the produces ceiling fans in the United States. This is an example of Finish

Correct AnswerverifiedShow Answer

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Real Exchange Rate =...
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Over the last 5 years the amount of country A's currency it took to buy a unit of country B's currency more than doubled. A. Did country A's currency depreciate or appreciate? B. According to purchasingpower parity, what explains the change in the value of country B's currency?

Correct Answer
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A. It depreciated.
B...
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