Question 1

When the Sykes Corporation (an American company)  buys shares of Audi stock (a German company)  for its pension fund, U.S. net capital outflow

Accepted Answer

A)  increases because an American company makes a portfolio investment in Germany.
B)  declines because an American company makes a portfolio investment in Germany.
C)  increases because an American company makes a direct investment in Germany.
D)  declines because an American company makes a direct investment in Germany.E) None of the above
F) All of the above

Question 2

If U.S. consumers decrease their demand for cell phones from Finland, then other things the same Finland's

Accepted Answer

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

Question 3

From 2008 to 2012 both U.S. saving and U.S. investment fell.

Accepted Answer

A) True 
 B)False

Question 4

The nominal exchange rate is 90 Pakistani rupees per dollar. The price of a shirt in Pakistan is 1800 rupees. The same shirt sells for $25 in the U.S.
A. What is the real exchange rate? Show your work.
B. Can arbitragers make a profit?
C. If your answer to C is yes, where would they buy and where would they sell?

Accepted Answer

A. The real exchange rate = $2...

Question 5

You are planning a graduation trip to Mexico. Other things the same, if the dollar depreciates relative to the peso, then

Accepted Answer

A)  the dollar buys fewer pesos. Your hotel room in Mexico will require fewer dollars.
B)  the dollar buys fewer pesos. Your hotel room in Mexico will require more dollars.
C)  the dollar buys more pesos. Your hotel room in Mexico will require fewer dollars.
D)  the dollar buys more pesos. Your hotel room in Mexico will require more dollars.E) A) and B)
F) A) and C)

Question 6

If a country had a trade deficit of $20 billion and then its exports rose by $7 billion and its imports fell by $10 billion, its net exports would now be

Accepted Answer

A)  $37 billion
B)  $3 billion
C)  -$3 billion
D)  -$37 billionE) B) and D)
F) A) and C)

Question 7

In France a loaf of bread costs 3 euros. In Great Britain a loaf of bread costs 4 pounds. If the exchange rate is .9 pounds per euro, what is the real exchange rate?

Accepted Answer

A)  4/2.7 loaves of British bread per loaf of French bread
B)  3.6/3 loaves of British bread per loaf of French bread
C)  3/3.6 loaves of British bread per loaf of French bread
D)  2.7/4 loaves of British bread per loaf of French breadE) None of the above
F) B) and C)

Question 8

Net capital outflow equals

Accepted Answer

A)  the value of domestic assets purchased by foreigners.
B)  the value of foreign assets purchased by domestic residents.
C)  the value of domestic assets purchased by foreigners - the value of foreign assets purchased by domestic residents.
D)  the value of foreign assets purchased by domestic residents - the value of domestic assets purchased by foreigners.E) None of the above
F) A) and C)

Question 9

Other things the same, if the exchange rate changes from 30 Thai bhat per dollar to 25 Thai bhat per dollar, then the dollar has

Accepted Answer

A)  appreciated and so buys more Thai goods.
B)  appreciated and so buys fewer Thai goods.
C)  depreciated and so buys more Thai goods.
D)  depreciated and so buys fewer Thai goods.E) A) and D)
F) A) and C)

Question 10

By itself, if a U.S. firm builds a new factory overseas, U.S. net capital outflow rises.

Accepted Answer

A) True 
 B)False

Question 11

A U.S. firm buys apples from New Zealand with New Zealand dollars it got in exchange for U.S. dollars. New Zealand residents then use these dollars to purchase oranges from the U.S. Which of the following increases?

Accepted Answer

A)  New Zealand's net capital outflow and New Zealand's net exports
B)  only New Zealand's net exports
C)  only New Zealand's net capital outflow
D)  neither New Zealand's net exports nor New Zealand's capital outflowE) B) and D)
F) A) and C)

Question 12

In an open economy, gross domestic product equals $1,650 billion, government expenditure equals $250 billion, and savings equals $550 billion. What is consumption expenditure?

Accepted Answer

A)  $250 billion
B)  $300 billion
C)  $550 billion
D)  $850 billionE) A) and B)
F) B) and D)

Question 13

If a country has net exports of $8 billion and sold $40 billion of goods and services abroad, then it has

Accepted Answer

A)  $48 billion of imports and $40 billion of exports.
B)  $48 billion of exports and $40 billion of imports.
C)  $40 billion of imports and $32 billion of exports.
D)  $40 billion of exports and $32 billion of imports.E) A) and B)
F) A) and C)

Question 14

While vacationing in Turkey you see a rug you consider purchasing. The seller tells you the rug costs 1,200 Turkish lire.
A. If the exchange rate is .60 lira per dollar, how many dollars does the rug cost?
B. If the dollar depreciates against the lira, will it take more or fewer dollars to buy the rug? Explain.

Accepted Answer

A. 1200 lire = $x times .60 li...

Question 15

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

Question 16

Last month a country sold more goods and services to residents of foreign countries than it purchased from them. What does this imply about this country's trade balance?

Accepted Answer

This count...

Question 17

A nation with a trade surplus will necessarily have saving that is greater than domestic investment.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Jen and Alica are both U.S. citizens. Jen opens a cafe in France. Alicia buys equipment from a company in Canada to use in her factory. Whose action is an example of U.S. foreign direct investment?

Accepted Answer

A)  Jen's and Alica's
B)  Jen's but not Alicia's
C)  Alicia's but not Jen's
D)  Neither Anthony's nor Tom's.E) C) and D)
F) B) and D)

Question 20

A U.S. grocery store chain bought $800,000 worth of Kenyan currency from a bank in Kenya. It then used these funds to buy $800,000 worth of coffee from Kenyan coffee growers.
As a result of this exchange, by how much and in which direction did:
A. U.S. net exports change?
B. U.S. net capital outflow change?

Accepted Answer

A. U.S. net exports ...

Exam 31: Open-Economy Macroeconomics: Basic Concepts

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 Answer
verified

Correct Answer
verified
A. 1200 lire = $x times .60 li...
View Answer

If U.S. consumers decrease their demand for cell phones from Finland, then other things the same Finland's

Correct Answer
verified

Correct Answer
verified
A. U.S. net exports ...
View Answer

Other things the same, if the exchange rate changes from 30 Thai bhat per dollar to 25 Thai bhat per dollar, then the dollar has

Correct Answer
verified

Jen and Alica are both U.S. citizens. Jen opens a cafe in France. Alicia buys equipment from a company in Canada to use in her factory. Whose action is an example of U.S. foreign direct investment?

Correct Answer
verified

If a country had a trade deficit of $20 billion and then its exports rose by $7 billion and its imports fell by $10 billion, its net exports would now be

Correct Answer
verified

From 2008 to 2012 both U.S. saving and U.S. investment fell.

Correct Answer
verified

In France a loaf of bread costs 3 euros. In Great Britain a loaf of bread costs 4 pounds. If the exchange rate is .9 pounds per euro, what is the real exchange rate?

Correct Answer
verified

When the Sykes Corporation (an American company) buys shares of Audi stock (a German company) for its pension fund, U.S. net capital outflow

Correct Answer
verified

By itself, if a U.S. firm builds a new factory overseas, U.S. net capital outflow rises.

Correct Answer
verified

If a country has net exports of $8 billion and sold $40 billion of goods and services abroad, then it has

Correct Answer
verified

Net capital outflow equals

Correct Answer
verified

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

Correct Answer
verified

A nation with a trade surplus will necessarily have saving that is greater than domestic investment.

Correct Answer
verified

In an open economy, gross domestic product equals $1,650 billion, government expenditure equals $250 billion, and savings equals $550 billion. What is consumption expenditure?

Correct Answer
verified

A U.S. firm buys apples from New Zealand with New Zealand dollars it got in exchange for U.S. dollars. New Zealand residents then use these dollars to purchase oranges from the U.S. Which of the following increases?

Correct Answer
verified

You are planning a graduation trip to Mexico. Other things the same, if the dollar depreciates relative to the peso, then

Correct Answer
verified

Last month a country sold more goods and services to residents of foreign countries than it purchased from them. What does this imply about this country's trade balance?

Correct Answer
verified
This count...
View Answer

Correct Answer
verified
A. The real exchange rate = $2...
View Answer

Exam 31: Open-Economy Macroeconomics: Basic Concepts

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

Correct AnswerverifiedA. 1200 lire = $x times .60 li...View AnswerShow Answer

If U.S. consumers decrease their demand for cell phones from Finland, then other things the same Finland's

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA. U.S. net exports ...View AnswerShow Answer

Other things the same, if the exchange rate changes from 30 Thai bhat per dollar to 25 Thai bhat per dollar, then the dollar has

Correct AnswerverifiedShow Answer

Jen and Alica are both U.S. citizens. Jen opens a cafe in France. Alicia buys equipment from a company in Canada to use in her factory. Whose action is an example of U.S. foreign direct investment?

Correct AnswerverifiedShow Answer

If a country had a trade deficit of $20 billion and then its exports rose by $7 billion and its imports fell by $10 billion, its net exports would now be

Correct AnswerverifiedShow Answer

From 2008 to 2012 both U.S. saving and U.S. investment fell.

Correct AnswerverifiedShow Answer

In France a loaf of bread costs 3 euros. In Great Britain a loaf of bread costs 4 pounds. If the exchange rate is .9 pounds per euro, what is the real exchange rate?

Correct AnswerverifiedShow Answer

When the Sykes Corporation (an American company) buys shares of Audi stock (a German company) for its pension fund, U.S. net capital outflow

Correct AnswerverifiedShow Answer

By itself, if a U.S. firm builds a new factory overseas, U.S. net capital outflow rises.

Correct AnswerverifiedShow Answer

If a country has net exports of $8 billion and sold $40 billion of goods and services abroad, then it has

Correct AnswerverifiedShow Answer

Net capital outflow equals

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A nation with a trade surplus will necessarily have saving that is greater than domestic investment.

Correct AnswerverifiedShow Answer

In an open economy, gross domestic product equals $1,650 billion, government expenditure equals $250 billion, and savings equals $550 billion. What is consumption expenditure?

Correct AnswerverifiedShow Answer

A U.S. firm buys apples from New Zealand with New Zealand dollars it got in exchange for U.S. dollars. New Zealand residents then use these dollars to purchase oranges from the U.S. Which of the following increases?

Correct AnswerverifiedShow Answer

You are planning a graduation trip to Mexico. Other things the same, if the dollar depreciates relative to the peso, then

Correct AnswerverifiedShow Answer

Last month a country sold more goods and services to residents of foreign countries than it purchased from them. What does this imply about this country's trade balance?

Correct AnswerverifiedThis count...View AnswerShow Answer

Correct AnswerverifiedA. The real exchange rate = $2...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified
A. 1200 lire = $x times .60 li...
View Answer

Correct Answer
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Correct Answer
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A. U.S. net exports ...
View Answer

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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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This count...
View Answer

Correct Answer
verified
A. The real exchange rate = $2...
View Answer