Question 1

Greg, a U.S. citizen, opens an ice cream store in Bermuda. His expenditures are U.S.

Accepted Answer

A)   foreign portfolio investment that increase U.S. net capital outflow.
B)   foreign portfolio investment that decrease U.S. net capital outflow.
C)   foreign direct investment that increase U.S. net capital outflow.
D)   foreign direct investment that decrease U.S. net capital outflow.E) C) and D)
F) B) and C)

Question 2

When net capital outflow is negative, it means that on net the value of domestic assets purchased by foreigners exceeds the value of foreign assets purchased by domestic residents.

Accepted Answer

A) True 
 B)False

Question 3

Table 31-1
 
-Refer to Table 31-1. What are Bolivia's net exports?

Accepted Answer

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

Question 4

To increase domestic investment, a country must increase its saving.

Accepted Answer

A) True 
 B)False

Question 5

According to purchasing-power parity, which of the following necessarily equals the ratio of the foreign price level divided by the domestic price level?

Accepted Answer

A)   the real exchange rate, but not the nominal exchange rate
B)   the nominal exchange rate, but not the real exchange rate
C)   the real exchange rate and the nominal exchange rate
D)   neither the real exchange rate nor the nominal exchange rateE) B) and D)
F) All of the above

Question 6

Suppose the world had only two countries and domestic residents of country A purchased $50 billion of assets from country B and country B purchased $30 billion of assets from country A. What would the net capital outflows of both countries be?

Accepted Answer

A)   $50 billion for country A and $30 billion for country B
B)   $30 billion for country A and $50 billion for country B
C)   $20 billion for country A and -$20 billion for country B
D)   -$20 billion for country A and $20 billion for country BE) None of the above
F) A) and D)

Question 7

If purchasing-power parity holds, then the value of the

Accepted Answer

A)   real exchange rate is equal to one.
B)   nominal exchange rate is equal to one.
C)   real exchange rate is equal to the nominal exchange rate.
D)   real exchange rate is equal to the difference in inflation rates between the two countries.E) A) and D)
F) C) and D)

Question 8

Which of the following is correct?

Accepted Answer

A)   NCO + C = NX
B)   NCO = NX
C)   NX - NCO = S
D)   NX + NCO = CE) B) and D)
F) None of the above

Question 9

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 10

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) A) and B)
F) None of the above

Question 11

If a nation produces more 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 positiv...

Question 12

If a country has a trade deficit then

Accepted Answer

A) S > I and Y > C + I + G. B) S > I and Y C) S C + I + G. D) S < I and Y < C + I + G.E) B) and C) F) A) and C)

Question 13

Why are net exports and net capital outflow always equal?

Accepted Answer

Net exports and net capital outflow are ...

Question 14

If over the next six months inflation is higher in the U.S. than in foreign countries, then according to purchasing- power parity

Accepted Answer

A)   only the nominal exchange rate depreciates.
B)   both the real and nominal exchange rate appreciate.
C)   both the real and nominal exchange rate depreciate.
D)   only the real exchange rate appreciates.E) B) and C)
F) A) and D)

Question 15

A country has $60 million of saving and domestic investment of $40 million. Net exports are

Accepted Answer

A)   $20 million.
B)   -$20 million.
C)   $100 million.
D)   -$100 million.E) A) and D)
F) B) and D)

Question 16

A U.S. corporation builds a restaurant in China. Its expenditures are U.S.

Accepted Answer

A)   foreign portfolio investment that increase U.S. net capital outflow.
B)   foreign portfolio investment that decrease U.S. net capital outflow.
C)   foreign direct investment that increase U.S. net capital outflow.
D)   foreign direct investment that decrease U.S. net capital outflow.E) B) and C)
F) A) and C)

Question 17

If a U.S. dollar purchases 4 Argentinean pesos, and a gallon of milk costs $3 in the U.S. and 6 pesos in Argentina what is the real exchange rate?

Accepted Answer

A)   2
B)   3/2
C)   2/3
D)   1/2E) B) and D)
F) All of the above

Question 18

Over the past six decades, the U.S. economy has experienced a dramatic increase in the relative importance of international trade and finance.

Accepted Answer

A) True 
 B)False

Question 19

From 1960 to about 1980 the net capital outflow of the U.S. was typically

Accepted Answer

A)   small but always positive.
B)   small and sometimes negative and sometimes positive.
C)   large and positive.
D)   large but sometimes negative and sometimes positive.E) A) and D)
F) B) and D)

Question 20

If a dollar buys more corn in the U.S. than in Mexico, then

Accepted Answer

A)   the real exchange rate is greater than 1; a profit might be made by buying corn in the U.S. and selling it in Mexico.
B)   the real exchange rate is greater than 1; a profit might be made by buying corn in Mexico and selling it in the U.S.
C)   the real exchange rate is less than 1; a profit might be made by buying corn in the U.S. and selling it in Mexico.
D)   the real exchange rate is less than 1; a profit might be made by buying corn in Mexico and selling it in the U.S.E) B) and C)
F) A) and D)

Exam 13: Open-Economy Macroeconomics: Basic Concepts

If purchasing-power parity holds, then the value of the

Correct AnswerverifiedShow Answer

From 1960 to about 1980 the net capital outflow of the U.S. was typically

Correct AnswerverifiedShow Answer

If a nation produces more 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 positiv...View AnswerShow Answer

A U.S. corporation builds a restaurant in China. Its expenditures are U.S.

Correct AnswerverifiedShow Answer

If over the next six months inflation is higher in the U.S. than in foreign countries, then according to purchasing- power parity

Correct AnswerverifiedShow Answer

According to purchasing-power parity, which of the following necessarily equals the ratio of the foreign price level divided by the domestic price level?

Correct AnswerverifiedShow Answer

If a country has a trade deficit then

Correct AnswerverifiedShow Answer

If a dollar buys more corn in the U.S. than in Mexico, then

Correct AnswerverifiedShow Answer

If a U.S. dollar purchases 4 Argentinean pesos, and a gallon of milk costs $3 in the U.S. and 6 pesos in Argentina what is the real exchange rate?

Correct AnswerverifiedShow Answer

Greg, a U.S. citizen, opens an ice cream store in Bermuda. His expenditures are U.S.

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Why are net exports and net capital outflow always equal?

Correct AnswerverifiedNet exports and net capital outflow are ...View AnswerShow Answer

When net capital outflow is negative, it means that on net the value of domestic assets purchased by foreigners exceeds the value of foreign assets purchased by domestic residents.

Correct AnswerverifiedShow Answer

Over the past six decades, the U.S. economy has experienced a dramatic increase in the relative importance of international trade and finance.

Correct AnswerverifiedShow Answer

To increase domestic investment, a country must increase its saving.

Correct AnswerverifiedShow Answer

A country has $60 million of saving and domestic investment of $40 million. Net exports are

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

Suppose the world had only two countries and domestic residents of country A purchased $50 billion of assets from country B and country B purchased $30 billion of assets from country A. What would the net capital outflows of both countries be?

Correct AnswerverifiedShow Answer

Table 31-1 -Refer to Table 31-1. What are Bolivia's net exports?

Correct AnswerverifiedShow Answer

Net capital outflow equals

Correct AnswerverifiedShow Answer

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A. Its net exports are positiv...
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Net exports and net capital outflow are ...
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The real exchange rate 2/3 = $...
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