Question 1

Other things the same, if a country saves less, then

Accepted Answer

A)   net capital outflow rises, so net exports rise.
B)   net capital outflow rises, so net exports fall.
C)   net capital outflow falls, so net exports rise.
D)   net capital outflow falls, so net exports fall.E) A) and B)
F) None of the above

Question 2

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) All of the above
F) A) and B)

Question 3

Colonial America had little industry and so had mostly raw materials to export. At the same time, there were many opportunities to purchase capital goods and earn a high rate of return because there was little existing capital so that the marginal product of capital was relatively high. What does this suggest about net exports and net capital outflow in colonial America?

Accepted Answer

Net exports were negative because the va...

Question 4

Other things the same, if the U.S. real exchange rate appreciates, U.S. net exports

Accepted Answer

A)   increase and U.S. net capital outflow decreases.
B)   decrease and U.S. net capital outflow increases.
C)   and U.S. net capital outflow both increase.
D)   and U.S. net capital outflow both decrease.E) A) and B)
F) None of the above

Question 5

If a dollar currently purchases 12.5 pesos and someone forecasts that in a year it will be 14 pesos, then the forecast is given in

Accepted Answer

A)   real terms and implies the dollar will appreciate.
B)   real terms and implies the dollar will depreciate.
C)   nominal terms and implies the dollar will appreciate.
D)   nominal terms and implies the dollar will depreciate.E) B) and C)
F) None of the above

Question 6

Other things the same, which of the following could explain a rise in Sweden's net capital outflow?

Accepted Answer

A)   interest rates on Swedish bonds rise
B)   the probability of default on Swedish bonds rises
C)   Sweden enacts a law reducing taxes on income earned by foreign-owned businesses operating in Sweden
D)   None of the above are correct.E) All of the above
F) A) and D)

Question 7

Other things the same, the real exchange rate between U.S. and Belgian goods would be higher if

Accepted Answer

A)   prices in the U.S. were higher, or the number of euro the dollar purchased were higher.
B)   prices in the U.S. were higher, or the number of euro the dollar purchased were lower.
C)   prices in the U.S. were lower, or the number of euro the dollar purchased were higher.
D)   prices in the U.S. were lower, or the number of euro the dollar purchased were lower.E) None of the above
F) B) and C)

Question 8

If business opportunities in a country become relatively less attractive relative to those of other countries, then

Accepted Answer

A)   both its net exports and net capital outflows fall.
B)   both its net exports and net capital outflows rise.
C)   its net exports fall and its net capital outflows fall.
D)   its net exports rise and its net capital outflows fallE) None of the above
F) All of the above

Question 9

If the U.S. real exchange rate is greater than 1, then there is the possiblity of arbitraging by buying foreign goods to sell in the U.S.

Accepted Answer

A) True 
 B)False

Question 10

Suppose a McDonalds Big Mac cost $4.00 in the United States and 3.20 euros in the euro area and 5.20 Australian dollars in Australia. If exchange rates are .75 euros per dollar and 1.3 Australian dollars per dollar, where does purchasing power parity hold?

Accepted Answer

A)   Both the euro area and Australia.
B)   Neither the euro area or Australia.
C)   The euro area but not Australia.
D)   Australia but not the euro area.E) A) and C)
F) A) and B)

Question 11

From 1970 to 1998 the U.S. dollar

Accepted Answer

A)   gained value compared to the Italian lira because inflation was higher in Italy.
B)   gained value compared to the Italian lira because inflation was lower in Italy.
C)   lost value compared to the Italian lira because inflation was higher in Italy.
D)   lost value compared to the Italian lira because inflation was lower in Italy.E) A) and B)
F) B) and D)

Question 12

You are staying in London over the summer and you have a number of dollars with you. If the dollar depreciates relative to the British pound, then other things the same,

Accepted Answer

A)   the dollar would buy more pounds. The depreciation would discourage you from buying as many British goods and services.
B)   the dollar would buy more pounds. The depreciation would encourage you to buy more British goods and services.
C)   the dollar would buy fewer pounds. The depreciation would discourage you from buying as many British goods and services.
D)   the dollar would buy fewer pounds. The depreciation would encourage you to buy more British goods and services.E) None of the above
F) All of the above

Question 13

Juan lives in Ecuador and purchases a motorcycle manufactured in the United States. The motorcycle is

Accepted Answer

A)   both a U.S. and Ecuadorian export.
B)   both a U.S. and Ecuadorian import.
C)   a U.S. import and an Ecuadorian export.
D)   a U.S. export and an Ecuadorian import.E) None of the above
F) A) and B)

Question 14

What does purchasing-power parity imply about the real exchange rate?

Accepted Answer

That it is equal to one. The n...

Question 15

Suppose that foreign citizens decide to purchase more U.S. pharmaceuticals and U.S. citizens decide to buy more stock in foreign corporations. Other things the same, these actions

Accepted Answer

A)   raise both U.S. net exports and U.S. net capital outflows.
B)   raise U.S. net exports and lower U.S. net capital outflows.
C)   lower both U.S. net exports and U.S. net capital outflows.
D)   lower U.S. net exports and raise U.S. net capital outflows.E) A) and B)
F) A) and C)

Question 16

Which of the following events would be consistent with purchasing-power parity?

Accepted Answer

A)   The price level in the United States rises more rapidly than that in Ireland and the real exchange rate defined as Irish goods per unit of U.S. goods stays the same.
B)   The money supply in the United States rises more rapidly than in Egypt and the nominal exchange rate defined as Egyptian pounds per dollar falls.
C)   Earl, a worldwide traveler, looks at exchange rates and worldwide breakfast prices one morning and finds that whatever country he decides to go to he can convert $15 into enough local currency to buy the same breakfast.
D)   All of the above are correct.E) C) and D)
F) B) and D)

Question 17

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

Question 18

Table 13-1
 
-Refer to Table 13-1. What are Bolivia's net exports?

Accepted Answer

A)   $30 billion
B)   $5 billion
C)   -$5 billion
D)   -$25 billionE) A) and B)
F) A) and D)

Question 19

According to purchasing power parity, inflation in the U.S. causes the dollar to

Accepted Answer

A)   depreciate relative to all other currencies.
B)   depreciate relative to currencies of countries that have lower inflation rates.
C)   appreciate relative to all other countries.
D)   appreciate relative to currencies of countries that have lower inflation rates.E) A) and D)
F) B) and C)

Question 20

The exchange rate is 1.5 Bosnian markas per U.S. dollar. The price of a refrigerator in Bosnia is 1,200 markas while in the U.S. it is $1,000. The real exchange rate is

Accepted Answer

A)   9/5
B)   5/4
C)   4/5
D)   None of the above are correct.E) B) and D)
F) B) and C)

Exam 13: Open-Economy Macroeconomic Models

If business opportunities in a country become relatively less attractive relative to those of other countries, then

Correct Answer
verified

Juan lives in Ecuador and purchases a motorcycle manufactured in the United States. The motorcycle is

Correct Answer
verified

Which of the following events would be consistent with purchasing-power parity?

Correct Answer
verified

You are staying in London over the summer and you have a number of dollars with you. If the dollar depreciates relative to the British pound, then other things the same,

Correct Answer
verified

If the U.S. real exchange rate is greater than 1, then there is the possiblity of arbitraging by buying foreign goods to sell in the U.S.

Correct Answer
verified

From 1970 to 1998 the U.S. dollar

Correct Answer
verified

Other things the same, the real exchange rate between U.S. and Belgian goods would be higher if

Correct Answer
verified

Other things the same, if a country saves less, then

Correct Answer
verified

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

Suppose a McDonalds Big Mac cost $4.00 in the United States and 3.20 euros in the euro area and 5.20 Australian dollars in Australia. If exchange rates are .75 euros per dollar and 1.3 Australian dollars per dollar, where does purchasing power parity hold?

Correct Answer
verified

If a dollar currently purchases 12.5 pesos and someone forecasts that in a year it will be 14 pesos, then the forecast is given in

Correct Answer
verified

Other things the same, which of the following could explain a rise in Sweden's net capital outflow?

Correct Answer
verified

Correct Answer
verified
Net exports were negative because the va...
View Answer

What does purchasing-power parity imply about the real exchange rate?

Correct Answer
verified
That it is equal to one. The n...
View Answer

The exchange rate is 1.5 Bosnian markas per U.S. dollar. The price of a refrigerator in Bosnia is 1,200 markas while in the U.S. it is $1,000. The real exchange rate is

Correct Answer
verified

According to purchasing power parity, inflation in the U.S. causes the dollar to

Correct Answer
verified

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 Answer
verified

Other things the same, if the U.S. real exchange rate appreciates, U.S. net exports

Correct Answer
verified

Suppose that foreign citizens decide to purchase more U.S. pharmaceuticals and U.S. citizens decide to buy more stock in foreign corporations. Other things the same, these actions

Correct Answer
verified

Table 13-1 -Refer to Table 13-1. What are Bolivia's net exports?

Correct Answer
verified

Exam 13: Open-Economy Macroeconomic Models

If business opportunities in a country become relatively less attractive relative to those of other countries, then

Correct AnswerverifiedShow Answer

Juan lives in Ecuador and purchases a motorcycle manufactured in the United States. The motorcycle is

Correct AnswerverifiedShow Answer

Which of the following events would be consistent with purchasing-power parity?

Correct AnswerverifiedShow Answer

You are staying in London over the summer and you have a number of dollars with you. If the dollar depreciates relative to the British pound, then other things the same,

Correct AnswerverifiedShow Answer

If the U.S. real exchange rate is greater than 1, then there is the possiblity of arbitraging by buying foreign goods to sell in the U.S.

Correct AnswerverifiedShow Answer

From 1970 to 1998 the U.S. dollar

Correct AnswerverifiedShow Answer

Other things the same, the real exchange rate between U.S. and Belgian goods would be higher if

Correct AnswerverifiedShow Answer

Other things the same, if a country saves less, then

Correct AnswerverifiedShow 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

Suppose a McDonalds Big Mac cost $4.00 in the United States and 3.20 euros in the euro area and 5.20 Australian dollars in Australia. If exchange rates are .75 euros per dollar and 1.3 Australian dollars per dollar, where does purchasing power parity hold?

Correct AnswerverifiedShow Answer

If a dollar currently purchases 12.5 pesos and someone forecasts that in a year it will be 14 pesos, then the forecast is given in

Correct AnswerverifiedShow Answer

Other things the same, which of the following could explain a rise in Sweden's net capital outflow?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedNet exports were negative because the va...View AnswerShow Answer

What does purchasing-power parity imply about the real exchange rate?

Correct AnswerverifiedThat it is equal to one. The n...View AnswerShow Answer

The exchange rate is 1.5 Bosnian markas per U.S. dollar. The price of a refrigerator in Bosnia is 1,200 markas while in the U.S. it is $1,000. The real exchange rate is

Correct AnswerverifiedShow Answer

According to purchasing power parity, inflation in the U.S. causes the dollar to

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

Other things the same, if the U.S. real exchange rate appreciates, U.S. net exports

Correct AnswerverifiedShow Answer

Suppose that foreign citizens decide to purchase more U.S. pharmaceuticals and U.S. citizens decide to buy more stock in foreign corporations. Other things the same, these actions

Correct AnswerverifiedShow Answer

Table 13-1 -Refer to Table 13-1. What are Bolivia's net exports?

Correct AnswerverifiedShow Answer

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Net exports were negative because the va...
View Answer

Correct Answer
verified
That it is equal to one. The n...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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