Question 1

If a nation produces less than it spends what do we know about:
A. its net exports?
B. its net capital outflow?
C. its saving in relation to its domestic investment?

Accepted Answer

A. Its net exports are negativ...

Question 2

Reduced barriers to trade help explain an increase in U.S. exports and imports relative to GDP since 1950.

Accepted Answer

A) True 
 B)False

Question 3

Last year a country had $700 billion of saving and $900 of investment. This year it had $1000 billion of saving and $800 billion of investment. By how much did net capital outflow change? By how much did net exports change? How is it possible for a country to have saving that is greater than investment?

Accepted Answer

Both net capital outflows and net export...

Question 4

A certain cell phone sells for 2400 yuan in China and for $300 in the U.S. The nominal exchange rate is 6.5 yuan per dollar.
A. Find the real exchange rate. Show your work.
B. In terms of dollars where is the cell phone cheaper?

Accepted Answer

The real exchange rate = $300 ...

Question 5

The purchase of U.S. government bonds by Japanese is an example of

Accepted Answer

A)  U.S.imports.
B)  U.S.exports.
C)  foreign portfolio investment by Japanese.
D)  foreign direct investment by Japanese.E) All of the above
F) A) and D)

Question 6

Which of the following equations is correct?

Accepted Answer

A)  S = I + C
B)  S = I − NX
C)  S = I + NCO
D)  S = NX − NCO .E) None of the above
F) B) and C)

Question 7

A country's trade balance will fall if either

Accepted Answer

A)  investment or saving rise.
B)  investment falls or saving rises.
C)  saving falls or investment rises.
D)  investment or saving fall.E) A) and B)
F) A) and C)

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

A company in Panama pays a U.S. architect to design a factory building. By itself this transaction

Accepted Answer

A)  increases Panama's imports and so decreases the Panama's trade balance.
B)  increases Panama's exports and so decreases the Panama's trade balance.
C)  decreases Panama's imports and so increases the Panama's trade balance.
D)  decreases Panama's exports and so increases the Panama's trade balance.E) A) and C)
F) All of the above

Question 10

Other things the same, if U.S. net capital outflow rises, so does U.S. saving.

Accepted Answer

A) True 
 B)False

Question 11

The large trade deficits in the U.S. during the 1990's were primarily associated with a rise in domestic investment spending rather than a rise in the budget deficit.

Accepted Answer

A) True 
 B)False

Question 12

If the real exchange rate for coal is 1.5, the price of coal in the United States is $50 per ton, and the price of coal in Britain is 20 British pounds per ton, what is the nominal exchange rate?

Accepted Answer

A)  15/4 or 3.75 pounds per dollar
B)  5/3 or 1.67 pounds per dollar
C)  3/5 or 0.6 pounds per dollar
D)  4/15 or 2.67 pounds per dollarE) B) and C)
F) A) and D)

Question 13

If the exchange rate is 80 yen per dollar, then a hotel room in Tokyo that costs 25,000 yen costs $200.

Accepted Answer

A) True 
 B)False

Question 14

Suppose that a U.S. dollar buys more gold in Australia than it buys in Russia. What does purchasing-power parity imply should happen?

Accepted Answer

People can make a profit by buying gold ...

Question 15

Purchasing-power parity theory does not hold at all times because

Accepted Answer

A)  many goods are not easily transported and the same goods produced in different countries may be imperfect substitutes.
B)  the same goods produced in different countries are perfect substitutes for each other.
C)  consumer preferences are different across countries.
D)  prices are different across countries.E) A) and C)
F) All of the above

Question 16

Under what circumstances does purchasing-power parity explain how exchange rates are determined, and why is it not completely accurate?

Accepted Answer

Purchasing-power parity works well in he...

Question 17

A pound of steak costs $10 in the U.S. and 56.25 riyals (the currency of Saudi Arabia) in Saudi Arabia. If the real exchange rate is 2/3, what is the nominal exchange rate? Show your work.

Accepted Answer

The real exchange rate 2/3 = $...

Question 18

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 ...

Question 19

Suppose that real interest rates in the U.S. rise relative to real interest rates in other countries. This increase would make foreigners

Accepted Answer

A)  more willing to purchase U.S.bonds, so U.S.net capital outflow would fall.
B)  more willing to purchase U.S.bonds, so U.S.net capital outflow would rise.
C)  less willing to purchase U.S.bonds, so U.S.net capital outflow would fall.
D)  less willing to purchase U.S.bonds, so U.S.net capital outflow would rise.E) None of the above
F) A) and D)

Question 20

The dollar is said to appreciate against the euro if the exchange rate

Accepted Answer

A)  rises.Other things the same, it will cost fewer euros to buy U.S.goods.
B)  falls.Other things the same, it will cost more euros to buy U.S.goods.
C)  falls.Other things the same, it will cost fewer euros to buy U.S.goods.
D)  rises.Other things the same, it will cost more euros to buy U.S.goods.E) A) and B)
F) B) and D)

Exam 31: Open-Economy Macroeconomics: Basic Concepts

Reduced barriers to trade help explain an increase in U.S. exports and imports relative to GDP since 1950.

Correct Answer
verified

If a nation produces less than it spends what do we know about: A. its net exports? B. its net capital outflow? C. its saving in relation to its domestic investment?

Correct Answer
verified
A. Its net exports are negativ...
View Answer

Suppose that real interest rates in the U.S. rise relative to real interest rates in other countries. This increase would make foreigners

Correct Answer
verified

Under what circumstances does purchasing-power parity explain how exchange rates are determined, and why is it not completely accurate?

Correct Answer
verified
Purchasing-power parity works well in he...
View Answer

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

Correct Answer
verified

Which of the following equations is correct?

Correct Answer
verified

The dollar is said to appreciate against the euro if the exchange rate

Correct Answer
verified

A pound of steak costs $10 in the U.S. and 56.25 riyals (the currency of Saudi Arabia) in Saudi Arabia. If the real exchange rate is 2/3, what is the nominal exchange rate? Show your work.

Correct Answer
verified
The real exchange rate 2/3 = $...
View Answer

Purchasing-power parity theory does not hold at all times because

Correct Answer
verified

The large trade deficits in the U.S. during the 1990's were primarily associated with a rise in domestic investment spending rather than a rise in the budget deficit.

Correct Answer
verified

If the exchange rate is 80 yen per dollar, then a hotel room in Tokyo that costs 25,000 yen costs $200.

Correct Answer
verified

Correct Answer
verified
Both net capital outflows and net export...
View Answer

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

If the real exchange rate for coal is 1.5, the price of coal in the United States is $50 per ton, and the price of coal in Britain is 20 British pounds per ton, what is the nominal exchange rate?

Correct Answer
verified

A company in Panama pays a U.S. architect to design a factory building. By itself this transaction

Correct Answer
verified

Suppose that a U.S. dollar buys more gold in Australia than it buys in Russia. What does purchasing-power parity imply should happen?

Correct Answer
verified
People can make a profit by buying gold ...
View Answer

The purchase of U.S. government bonds by Japanese is an example of

Correct Answer
verified

A certain cell phone sells for 2400 yuan in China and for $300 in the U.S. The nominal exchange rate is 6.5 yuan per dollar. A. Find the real exchange rate. Show your work. B. In terms of dollars where is the cell phone cheaper?

Correct Answer
verified
The real exchange rate = $300 ...
View Answer

Other things the same, if U.S. net capital outflow rises, so does U.S. saving.

Correct Answer
verified

A country's trade balance will fall if either

Correct Answer
verified

Exam 31: Open-Economy Macroeconomics: Basic Concepts

Reduced barriers to trade help explain an increase in U.S. exports and imports relative to GDP since 1950.

Correct AnswerverifiedShow Answer

If a nation produces less than it spends what do we know about: A. its net exports? B. its net capital outflow? C. its saving in relation to its domestic investment?

Correct AnswerverifiedA. Its net exports are negativ...View AnswerShow Answer

Suppose that real interest rates in the U.S. rise relative to real interest rates in other countries. This increase would make foreigners

Correct AnswerverifiedShow Answer

Under what circumstances does purchasing-power parity explain how exchange rates are determined, and why is it not completely accurate?

Correct AnswerverifiedPurchasing-power parity works well in he...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following equations is correct?

Correct AnswerverifiedShow Answer

The dollar is said to appreciate against the euro if the exchange rate

Correct AnswerverifiedShow Answer

A pound of steak costs $10 in the U.S. and 56.25 riyals (the currency of Saudi Arabia) in Saudi Arabia. If the real exchange rate is 2/3, what is the nominal exchange rate? Show your work.

Correct AnswerverifiedThe real exchange rate 2/3 = $...View AnswerShow Answer

Purchasing-power parity theory does not hold at all times because

Correct AnswerverifiedShow Answer

The large trade deficits in the U.S. during the 1990's were primarily associated with a rise in domestic investment spending rather than a rise in the budget deficit.

Correct AnswerverifiedShow Answer

If the exchange rate is 80 yen per dollar, then a hotel room in Tokyo that costs 25,000 yen costs $200.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedBoth net capital outflows and net export...View AnswerShow Answer

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

If the real exchange rate for coal is 1.5, the price of coal in the United States is $50 per ton, and the price of coal in Britain is 20 British pounds per ton, what is the nominal exchange rate?

Correct AnswerverifiedShow Answer

A company in Panama pays a U.S. architect to design a factory building. By itself this transaction

Correct AnswerverifiedShow Answer

Suppose that a U.S. dollar buys more gold in Australia than it buys in Russia. What does purchasing-power parity imply should happen?

Correct AnswerverifiedPeople can make a profit by buying gold ...View AnswerShow Answer

The purchase of U.S. government bonds by Japanese is an example of

Correct AnswerverifiedShow Answer

A certain cell phone sells for 2400 yuan in China and for $300 in the U.S. The nominal exchange rate is 6.5 yuan per dollar. A. Find the real exchange rate. Show your work. B. In terms of dollars where is the cell phone cheaper?

Correct AnswerverifiedThe real exchange rate = $300 ...View AnswerShow Answer

Other things the same, if U.S. net capital outflow rises, so does U.S. saving.

Correct AnswerverifiedShow Answer

A country's trade balance will fall if either

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
A. Its net exports are negativ...
View Answer

Correct Answer
verified

Correct Answer
verified
Purchasing-power parity works well in he...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The real exchange rate 2/3 = $...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Both net capital outflows and net export...
View Answer

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
People can make a profit by buying gold ...
View Answer

Correct Answer
verified

Correct Answer
verified
The real exchange rate = $300 ...
View Answer

Correct Answer
verified

Correct Answer
verified