Question 1

Which of the following is the formula for national saving?

Accepted Answer

A)  S = I + C
B)  S = I - NX
C)  S = I + NCO
D)  S = NX - NCOE) A) and C)
F) A) and D)

Question 2

Suppose Canada sells chocolate to the United States. Which of the following correctly identifies the effects of this transaction?

Accepted Answer

A)  U.S. net exports increase, and U.S. net capital outflow increases.
B)  U.S. net exports increase, and U.S. net capital outflow decreases.
C)  U.S. net exports decrease, and U.S. net capital outflow increases.
D)  U.S. net exports decrease, and U.S. net capital outflow decreases.E) A) and B)
F) A) and C)

Question 3

Ivan, a Russian citizen, sells several hundred cases of Russian caviar to a restaurant chain in Canada. Which of the following correctly identifies the effects of this transaction?

Accepted Answer

A)  It increases Canadian net exports and has no effect on Russian net exports.
B)  It increases Canadian net exports and decreases Russian net exports.
C)  It decreases Canadian net exports and has no effect on Russian net exports.
D)  It decreases Canadian net exports and increases Russian net exports.E) A) and B)
F) None of the above

Question 4

According to purchasing-power parity, if prices in Canada increase by a smaller percentage than prices in Algeria, how does the exchange rate change?

Accepted Answer

A)  The real exchange rate, defined as Algerian goods per unit of Canadian goods, rises.
B)  The real exchange rate, defined as Algerian goods per unit of Canadian goods, falls.
C)  The nominal exchange rate, defined as Algerian currency per dollar, rises.
D)  The nominal exchange rate, defined as Algerian currency per dollar, falls.E) C) and D)
F) B) and D)

Question 5

Net capital outflow is the purchase of domestic assets purchased by foreign residents minus the purchase of foreign assets by domestic residents.

Accepted Answer

A) True 
 B)False

Question 6

What does purchasing-power parity explain?

Accepted Answer

A)  It explains prices in the short run.
B)  It explains prices in the long run.
C)  It explains exchange rates in the short run.
D)  It explains exchange rates in the long run.E) All of the above
F) A) and C)

Question 7

Which of the following best defines the nominal exchange rate?

Accepted Answer

A)  It is the nominal interest rate in one country divided by the nominal interest rate in the other country.
B)  It is the rate at which a person can trade the currency of one country for the currency of another.
C)  It is the price of a good in one country divided by the price of the same good in another.
D)  It is the number of goods a person can trade for a similar good in another country.E) C) and D)
F) B) and D)

Question 8

For many questions in macroeconomics, international issues are peripheral.

Accepted Answer

A) True 
 B)False

Question 9

A Canadian computer maker sells computers to a German firm. This company uses all of the revenues from this sale to purchase automobiles from German firms. Which of the following best describes the effects of these transactions?

Accepted Answer

A)  They will increase both Canadian net exports and Canadian net foreign investment.
B)  They will decrease both Canadian net exports and Canadian net foreign investment.
C)  They will increase Canadian net exports and will not affect Canadian net foreign investment.
D)  They will not affect Canadian net exports or Canadian net foreign investment.E) B) and C)
F) A) and D)

Question 10

A British pharmacy buys drugs from a Canadian company and pays for them with British pounds. Which of the following correctly identifies the effects of this transaction?

Accepted Answer

A)  It increases British net exports and increases Canadian capital outflow.
B)  It increases British net exports and decreases Canadian capital outflow.
C)  It decreases British net exports and increases Canadian capital outflow.
D)  It decreases British net exports and decreases Canadian capital outflow.E) A) and B)
F) B) and C)

Question 11

Many economists believe that the theory of purchasing-power parity describes the forces that determine exchange rates in the long run.

Accepted Answer

A) True 
 B)False

Question 12

From 1970 to 1998, the Canadian dollar depreciated against the German mark and appreciated against the Italian lira because Canada experienced more inflation than Germany but less inflation than Italy.

Accepted Answer

A) True 
 B)False

Question 13

Suppose inflation is higher in Canada over the next few months than in foreign countries, and exchange rates are given in terms of how much foreign currency a dollar buys or how many foreign goods Canadian goods buy. According to purchasing-power parity, which of the following should we expect to see?

Accepted Answer

A)  Only the nominal exchange rate depreciates.
B)  Both the real and nominal exchange rates appreciate.
C)  Both the real and nominal exchange rates depreciate.
D)  Only the real exchange rate appreciates.E) All of the above
F) A) and B)

Question 14

Which of the following does a trade deficit imply?

Accepted Answer

A)  saving is greater than domestic investment and Y > C + I + G
B)  saving is greater than domestic investment and Y 
C)  saving is less than domestic investment and Y > C + I + G
D)  saving is less than domestic investment and Y < C + I + GE) C) and D)
F) A) and B)

Question 15

Suppose that a country exports $200 million of goods and services and imports $80 million of goods and services. What is the value of that country's net exports?

Accepted Answer

A)  $280 million
B)  $200 million
C)  $120 million
D)  -$200 millionE) B) and C)
F) A) and D)

Question 16

Other things the same, which of the following would induce a trade deficit?

Accepted Answer

A)  a decline in saving, but not a rise in investment
B)  a rise in investment, but not a decline in saving
C)  both a decline in saving and a rise in investment
D)  neither a decline in saving nor a rise in investmentE) B) and D)
F) A) and B)

Question 17

Which of the following was an important change in Canadian economy after 1999?

Accepted Answer

A)  National saving fell below investment, and net capital outflow was a large positive number.
B)  Net capital outflow turned positive.
C)  Investment equalled saving every year.
D)  Investment fell below saving, so net capital outflow was a large negative number.E) B) and C)
F) A) and D)

Question 18

How do nominal exchange rates change over time?

Accepted Answer

A)  They vary little over time.
B)  They vary substantially over time.
C)  They appreciate over time for most countries.
D)  They depreciate over time for most countries.E) A) and D)
F) A) and C)

Question 19

Which of the following is an identity that always holds in an open economy?

Accepted Answer

A)  NCO + C = NX
B)  NCO = NX
C)  NX - NCO = C
D)  NX + NCO = CE) B) and C)
F) A) and C)

Question 20

Table 31-1
 
-Refer to Table 31-1. In real terms, Canadian goods are less expensive than goods in which of the following countries?

Accepted Answer

A)  Bolivia and Morocco
B)  Japan, Norway, and Thailand
C)  Japan and Norway
D)  ThailandE) A) and B)
F) None of the above

Exam 12: Open-Economy Macroeconomics: Basic Concepts

Other things the same, which of the following would induce a trade deficit?

Correct Answer
verified

Table 31-1 -Refer to Table 31-1. In real terms, Canadian goods are less expensive than goods in which of the following countries?

Correct Answer
verified

Suppose that a country exports $200 million of goods and services and imports $80 million of goods and services. What is the value of that country's net exports?

Correct Answer
verified

A British pharmacy buys drugs from a Canadian company and pays for them with British pounds. Which of the following correctly identifies the effects of this transaction?

Correct Answer
verified

From 1970 to 1998, the Canadian dollar depreciated against the German mark and appreciated against the Italian lira because Canada experienced more inflation than Germany but less inflation than Italy.

Correct Answer
verified

Many economists believe that the theory of purchasing-power parity describes the forces that determine exchange rates in the long run.

Correct Answer
verified

Net capital outflow is the purchase of domestic assets purchased by foreign residents minus the purchase of foreign assets by domestic residents.

Correct Answer
verified

Which of the following best defines the nominal exchange rate?

Correct Answer
verified

Which of the following is the formula for national saving?

Correct Answer
verified

Which of the following was an important change in Canadian economy after 1999?

Correct Answer
verified

A Canadian computer maker sells computers to a German firm. This company uses all of the revenues from this sale to purchase automobiles from German firms. Which of the following best describes the effects of these transactions?

Correct Answer
verified

Suppose Canada sells chocolate to the United States. Which of the following correctly identifies the effects of this transaction?

Correct Answer
verified

What does purchasing-power parity explain?

Correct Answer
verified

Ivan, a Russian citizen, sells several hundred cases of Russian caviar to a restaurant chain in Canada. Which of the following correctly identifies the effects of this transaction?

Correct Answer
verified

How do nominal exchange rates change over time?

Correct Answer
verified

For many questions in macroeconomics, international issues are peripheral.

Correct Answer
verified

Which of the following does a trade deficit imply?

Correct Answer
verified

According to purchasing-power parity, if prices in Canada increase by a smaller percentage than prices in Algeria, how does the exchange rate change?

Correct Answer
verified

Correct Answer
verified

Which of the following is an identity that always holds in an open economy?

Correct Answer
verified

Exam 12: Open-Economy Macroeconomics: Basic Concepts

Other things the same, which of the following would induce a trade deficit?

Correct AnswerverifiedShow Answer

Table 31-1 -Refer to Table 31-1. In real terms, Canadian goods are less expensive than goods in which of the following countries?

Correct AnswerverifiedShow Answer

Suppose that a country exports $200 million of goods and services and imports $80 million of goods and services. What is the value of that country's net exports?

Correct AnswerverifiedShow Answer

A British pharmacy buys drugs from a Canadian company and pays for them with British pounds. Which of the following correctly identifies the effects of this transaction?

Correct AnswerverifiedShow Answer

From 1970 to 1998, the Canadian dollar depreciated against the German mark and appreciated against the Italian lira because Canada experienced more inflation than Germany but less inflation than Italy.

Correct AnswerverifiedShow Answer

Many economists believe that the theory of purchasing-power parity describes the forces that determine exchange rates in the long run.

Correct AnswerverifiedShow Answer

Net capital outflow is the purchase of domestic assets purchased by foreign residents minus the purchase of foreign assets by domestic residents.

Correct AnswerverifiedShow Answer

Which of the following best defines the nominal exchange rate?

Correct AnswerverifiedShow Answer

Which of the following is the formula for national saving?

Correct AnswerverifiedShow Answer

Which of the following was an important change in Canadian economy after 1999?

Correct AnswerverifiedShow Answer

A Canadian computer maker sells computers to a German firm. This company uses all of the revenues from this sale to purchase automobiles from German firms. Which of the following best describes the effects of these transactions?

Correct AnswerverifiedShow Answer

Suppose Canada sells chocolate to the United States. Which of the following correctly identifies the effects of this transaction?

Correct AnswerverifiedShow Answer

What does purchasing-power parity explain?

Correct AnswerverifiedShow Answer

Ivan, a Russian citizen, sells several hundred cases of Russian caviar to a restaurant chain in Canada. Which of the following correctly identifies the effects of this transaction?

Correct AnswerverifiedShow Answer

How do nominal exchange rates change over time?

Correct AnswerverifiedShow Answer

For many questions in macroeconomics, international issues are peripheral.

Correct AnswerverifiedShow Answer

Which of the following does a trade deficit imply?

Correct AnswerverifiedShow Answer

According to purchasing-power parity, if prices in Canada increase by a smaller percentage than prices in Algeria, how does the exchange rate change?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is an identity that always holds in an open economy?

Correct AnswerverifiedShow Answer

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