Question 1

Suppose that the nominal exchange rate is .80 euro per dollar, that the price of a basket of goods in the U.S. is $500 and the price of a basket of goods in Germany is 400 Euro. Suppose that these values change to .90 euro per dollar, $600, and 600 euro. Then the real exchange rate would

Accepted Answer

A)   appreciate which by itself would make U.S. net exports fall.
B)   appreciate which by itself would make U.S. net exports rise.
C)   depreciate which by itself would make U.S. net exports fall.
D)   depreciate which by itself would make U.S. net exports rise.E) B) and C)
F) A) and D)

Question 2

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

Question 3

If domestic residents of France purchase 1.2 trillion euros of foreign assets and foreigners purchase 1.5 trillion euros of French assets, then France's net capital outflow is

Accepted Answer

A)   -.3 trillion euros, so it must have a trade deficit.
B)   -.3 trillion euros, so it must have a trade surplus.
C)   .3 trillion euros, so it must have a trade deficit.
D)   .3 trillion euros, so it must have a trade surplus.E) A) and B)
F) All of the above

Question 4

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) A) and B)
F) B) and D)

Question 5

Oceania buys $100 of wine from Escudia and Escudia buys $80 of wool from Oceania. Suppose this is the only trade that these countries do. What are the net exports of Oceania and Escudia, in that order?

Accepted Answer

A)   $80 and $100
B)   $-20 and $20
C)   $20 and -$20
D)   None of the above is correct.E) A) and D)
F) A) and B)

Question 6

A department store chain in Japan uses yen to purchase 500,000 U.S. dollars from a U.S. bank. It then uses these dollars to buy DVDs from a U.S. filmmaker. As a result of these transactions:
A. By how much and in what direction did U.S. net exports change?
B. By how much and in which direction did U.S. net capital outflow change?

Accepted Answer

A. U.S. net exports ...

Question 7

If the exchange rate is 8 Moroccan dirhams per U.S. dollars, a crate of oranges costs 400 dirhams in the Moroccan capital of Rabat, and a similar crate of oranges in Miami sells for $55 dollars, then

Accepted Answer

A)   the real exchange rate is greater than one and arbitrageurs could profit by buying oranges in the U.S. and selling them in Morocco.
B)   the real exchange rate is greater than one and arbitrageurs could profit by buying oranges in Morocco and selling them in the U.S.
C)   the real exchange rate is less than one and arbitrageurs could profit by buying oranges in the U.S. and selling them in Morocco.
D)   the real exchange rate is less than one and arbitrageurs could profit by buying oranges in Morocco and selling them in the U.S.E) A) and B)
F) A) and C)

Question 8

In 2011 the U.S. began with a trade deficit. During the year exports rose by more than imports. What should have happened to the U.S. trade deficit?

Accepted Answer

It should ...

Question 9

From 1970 to 1998 the U.S. dollar

Accepted Answer

A)   gained value compared to the German mark because inflation was higher in the U.S.
B)   gained value compared to the German mark because inflation was lower in the U.S.
C)   lost value compared to the German mark because inflation was higher in the U.S.
D)   lost value compared to the German mark because inflation was lower in the U.S.E) A) and B)
F) A) and C)

Question 10

A U.S. retailer buys shoes from an Italian company. The Italian firm then uses all of the revenues to buy leather from the U.S. These transactions

Accepted Answer

A)   increase both U.S. net exports and U.S. net capital outflow.
B)   decrease both U.S. net exports and U.S. net capital outflow.
C)   increase U.S. net exports and do not affect U.S. net capital outflow.
D)   None of the above is correct.E) A) and D)
F) All of the above

Question 11

Assuming purchasing-power parity holds and that over a period of five years the dollar had appreciated relative to the currency of Country X, what would explain the appreciation of the dollar?

Accepted Answer

Money growth, and so...

Question 12

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 C)
F) A) and B)

Question 13

If Norway sold more goods and services abroad than it purchased from abroad, then it had

Accepted Answer

A)   positive net exports which is a trade surplus.
B)   positive net exports which is a trade deficit.
C)   negative net exports which is a trade surplus.
D)   negative net exports which is a trade deficit.E) None of the above
F) B) and D)

Question 14

Since 1980 U.S. net capital outflow has been

Accepted Answer

A)   negative, meaning that foreigners were buying more capital assets from the United States than Americans were buying abroad.
B)   negative, meaning that Americans were buying more capital assets abroad than foreigners were buying from the United States.
C)   positive, meaning that foreigners were buying more capital assets from the United States than Americans were buying abroad.
D)   positive, meaning that Americans were buying more capital assets abroad than foreigners were buying from the United States.E) A) and B)
F) A) and C)

Question 15

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

Accepted Answer

A)   U.S. imports.
B)   U.S. exports.
C)   foreign portfolio investment by Egyptians.
D)   foreign direct investment by Egyptians.E) None of the above
F) B) and C)

Question 16

A U.S. firm called EcoWind produces windmills for households to generate electricity. It uses 25,000 recently obtained pesos to buy copper from a mining company in Argentina. As a result of this exchange, by how much, if at all, 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 17

Suppose a McDonalds Big Mac cost $4.40 in the United States and 3.30 euros in the euro area and 5.72 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)   the euro area but not Australia
C)   Australia but not the euro area
D)   neither the euro area nor AustraliaE) A) and B)
F) A) and C)

Question 18

When the central bank of some country prints large quantities of money, that county's currency loses value both in terms of the goods and services it buys and in terms of the amount of foreign currencies it can buy.

Accepted Answer

A) True 
 B)False

Question 19

If sales of Saudi Arabian oil to the rest of the world increase and Saudis use the proceeds to buy foreign goods, which of the following increases?

Accepted Answer

A)   Saudi Arabian net exports but not Saudi Arabian net capital outflow
B)   Saudi Arabian net capital outflow but not Saudi Arabian net exports
C)   both Saudi Arabian net exports and net capital outflow
D)   neither Saudi Arabian net exports nor net capital outflowE) None of the above
F) All of the above

Question 20

In the U.S. a box of tea costs $5. The same box of tea in Uganda costs 10,000 schillings (the currency of Uganda). If the real exchange rate is 5/4, what is the nominal exchange rate? Show your work.

Accepted Answer

The real exchange rate 5/4 = $...

Exam 31: Open-Economy Macroeconomics: Basic Concepts

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

In the U.S. a box of tea costs $5. The same box of tea in Uganda costs 10,000 schillings (the currency of Uganda). If the real exchange rate is 5/4, what is the nominal exchange rate? Show your work.

Correct Answer
verified
The real exchange rate 5/4 = $...
View Answer

A U.S. retailer buys shoes from an Italian company. The Italian firm then uses all of the revenues to buy leather from the U.S. These transactions

Correct Answer
verified

Assuming purchasing-power parity holds and that over a period of five years the dollar had appreciated relative to the currency of Country X, what would explain the appreciation of the dollar?

Correct Answer
verified
Money growth, and so...
View Answer

Since 1980 U.S. net capital outflow has been

Correct Answer
verified

Suppose a McDonalds Big Mac cost $4.40 in the United States and 3.30 euros in the euro area and 5.72 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

From 1970 to 1998 the U.S. dollar

Correct Answer
verified

Oceania buys $100 of wine from Escudia and Escudia buys $80 of wool from Oceania. Suppose this is the only trade that these countries do. What are the net exports of Oceania and Escudia, in that order?

Correct Answer
verified

In 2011 the U.S. began with a trade deficit. During the year exports rose by more than imports. What should have happened to the U.S. trade deficit?

Correct Answer
verified
It should ...
View Answer

When the central bank of some country prints large quantities of money, that county's currency loses value both in terms of the goods and services it buys and in terms of the amount of foreign currencies it can buy.

Correct Answer
verified

Suppose that the nominal exchange rate is .80 euro per dollar, that the price of a basket of goods in the U.S. is $500 and the price of a basket of goods in Germany is 400 Euro. Suppose that these values change to .90 euro per dollar, $600, and 600 euro. Then the real exchange rate would

Correct Answer
verified

If domestic residents of France purchase 1.2 trillion euros of foreign assets and foreigners purchase 1.5 trillion euros of French assets, then France's net capital outflow is

Correct Answer
verified

If Norway sold more goods and services abroad than it purchased from abroad, then it had

Correct Answer
verified

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

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

Correct Answer
verified

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

Correct Answer
verified

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

If sales of Saudi Arabian oil to the rest of the world increase and Saudis use the proceeds to buy foreign goods, which of the following increases?

Correct Answer
verified

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

If the exchange rate is 8 Moroccan dirhams per U.S. dollars, a crate of oranges costs 400 dirhams in the Moroccan capital of Rabat, and a similar crate of oranges in Miami sells for $55 dollars, then

Correct Answer
verified

Exam 31: Open-Economy Macroeconomics: Basic Concepts

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

In the U.S. a box of tea costs $5. The same box of tea in Uganda costs 10,000 schillings (the currency of Uganda). If the real exchange rate is 5/4, what is the nominal exchange rate? Show your work.

Correct AnswerverifiedThe real exchange rate 5/4 = $...View AnswerShow Answer

A U.S. retailer buys shoes from an Italian company. The Italian firm then uses all of the revenues to buy leather from the U.S. These transactions

Correct AnswerverifiedShow Answer

Assuming purchasing-power parity holds and that over a period of five years the dollar had appreciated relative to the currency of Country X, what would explain the appreciation of the dollar?

Correct AnswerverifiedMoney growth, and so...View AnswerShow Answer

Since 1980 U.S. net capital outflow has been

Correct AnswerverifiedShow Answer

Suppose a McDonalds Big Mac cost $4.40 in the United States and 3.30 euros in the euro area and 5.72 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

From 1970 to 1998 the U.S. dollar

Correct AnswerverifiedShow Answer

Oceania buys $100 of wine from Escudia and Escudia buys $80 of wool from Oceania. Suppose this is the only trade that these countries do. What are the net exports of Oceania and Escudia, in that order?

Correct AnswerverifiedShow Answer

In 2011 the U.S. began with a trade deficit. During the year exports rose by more than imports. What should have happened to the U.S. trade deficit?

Correct AnswerverifiedIt should ...View AnswerShow Answer

When the central bank of some country prints large quantities of money, that county's currency loses value both in terms of the goods and services it buys and in terms of the amount of foreign currencies it can buy.

Correct AnswerverifiedShow Answer

Suppose that the nominal exchange rate is .80 euro per dollar, that the price of a basket of goods in the U.S. is $500 and the price of a basket of goods in Germany is 400 Euro. Suppose that these values change to .90 euro per dollar, $600, and 600 euro. Then the real exchange rate would

Correct AnswerverifiedShow Answer

If domestic residents of France purchase 1.2 trillion euros of foreign assets and foreigners purchase 1.5 trillion euros of French assets, then France's net capital outflow is

Correct AnswerverifiedShow Answer

If Norway sold more goods and services abroad than it purchased from abroad, then it had

Correct AnswerverifiedShow Answer

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

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

If sales of Saudi Arabian oil to the rest of the world increase and Saudis use the proceeds to buy foreign goods, which of the following increases?

Correct AnswerverifiedShow Answer

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

If the exchange rate is 8 Moroccan dirhams per U.S. dollars, a crate of oranges costs 400 dirhams in the Moroccan capital of Rabat, and a similar crate of oranges in Miami sells for $55 dollars, then

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
The real exchange rate 5/4 = $...
View Answer

Correct Answer
verified

Correct Answer
verified
Money growth, and so...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
It should ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified