Question 1

Other things the same, if the exchange rate changes from .8 euros per dollar to .9 euros per dollar, the dollar

Accepted Answer

A)   depreciates so U.S. goods become less expensive relative to foreign goods.
B)   depreciates so U.S. goods become more expensive relative to foreign goods.
C)   appreciates so U.S. goods become less expensive relative to foreign goods.
D)   appreciates so U.S. goods become more expensive relative to foreign goods.E) None of the above
F) A) and C)

Question 2

Mike, a U.S. citizen, buys $1,000 worth of olives from Greece. By itself this purchase

Accepted Answer

A)   increases U.S. imports by $1,000 and increases U.S. net exports by $1,000.
B)   increases U.S. imports by $1,000 and decreases U.S. net exports by $1,000.
C)   increases U.S. exports by $1,000 and increases U.S. net exports by $1,000.
D)   increases U.S. exports by $1,000 and decreases U.S. net exports by $1,000.E) B) and C)
F) A) and D)

Question 3

According to purchasing-power parity, if it took 55 Indian rupees to buy a dollar today, but it took 58 to buy it a year ago, then the dollar has

Accepted Answer

A)   appreciated, indicating inflation was higher in the U.S. than in India.
B)   appreciated, indicating inflation was lower in the U.S. than in India.
C)   depreciated, indicating inflation was higher in the U.S. than in India.
D)   depreciated, indicating inflation was lower in the U.S. than in India.E) B) and D)
F) All of the above

Question 4

How do we find the real exchange rate from the nominal exchange rate?

Accepted Answer

Real Exchange Rate =...

Question 5

According to purchasing-power parity, if two countries have the same price level because they have the same prices for all goods and services, then which of the following would equal 1?

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

Question 6

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 7

Which of the following both reduce net exports?

Accepted Answer

A)   exports rise, imports rise
B)   exports rise, imports fall
C)   exports fall, imports rise
D)   exports fall, imports fallE) All of the above
F) A) and B)

Question 8

John, a U.S. citizen, opens up a Sports bar in Tokyo. This is an example of U.S.

Accepted Answer

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

Question 9

A bushel of apples costs $15.00 in the U.S. The same apples cost 1,600 yen in Japan. If the exchange rate is 80 yen per dollar, is there a possibility for arbitrage? Explain and defend your answer. As part of your defense, find the real exchange rate.

Accepted Answer

There is a possibility for profit by buy...

Question 10

If domestic residents of other countries purchase $600 billion of U.S. assets and U.S residents purchase $500 billion of foreign assets, then U.S. net capital outflow is

Accepted Answer

A)   $100 billion and the U.S. has a trade surplus.
B)   $100 billion and the U.S has a trade deficit.
C)   -$100 billion and the U.S. has a trade surplus.
D)   -$100 billion and the U.S. has a trade deficit.E) A) and C)
F) B) and C)

Question 11

An American retailer sells dollars to obtain euros. It then uses the euros to buy ready-to-assemble furniture from Sweden. These transactions

Accepted Answer

A)   increase U.S. net capital outflow because foreigners obtain U.S. assets.
B)   decrease U.S. net capital outflow because foreigners obtain U.S. assets.
C)   increase U.S. net capital outflow because the U.S. buys capital goods.
D)   decrease U.S. net capital outflow because the U.S. buys capital goods.E) A) and B)
F) A) and D)

Question 12

Table 31-2 
-Refer to Table 31-2. In real terms, U.S. goods are more expensive than goods in which country(ies) ?

Accepted Answer

A)   Britain
B)   Germany and Japan
C)   Japan
D)   Germany and VenezuelaE) C) and D)
F) B) and D)

Question 13

If the unit of foreign currency is the peso, in which case is the real exchange rate 1.2?

Accepted Answer

A)   the U.S. price is $2, the foreign price is 5 pesos, and the exchange rate is 3 pesos per dollar.
B)   the U.S. price is $3, the foreign price is 18 pesos, and the exchange rate is 5 pesos per dollar.
C)   the U.S. price is $5, the foreign price 12 pesos, and the exchange rate is 2 pesos per dollar.
D)   the U.S. price is $10, the foreign price is 3 pesos, and the exchange rate is 4 pesos per dollar.E) A) and B)
F) B) and D)

Question 14

A U.S. citizen buys bonds issued by a construction equipment manufacturer in Poland. Her 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) A) and B)
F) C) and D)

Question 15

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

Accepted Answer

A)   $60 billion
B)   $35 billion
C)   $40 billion
D)   None of the above are correct.E) A) and B)
F) All of the above

Question 16

If the exchange rate is 12.5 pesos per U.S. dollar, it is also 1/12.5 U.S. dollars per peso.

Accepted Answer

A) True 
 B)False

Question 17

According to purchasing power parity, the nominal exchange rate between the U.S. and another country should equal the price level of foreign goods divided by the price level of U.S. goods.

Accepted Answer

A) True 
 B)False

Question 18

According to purchasing-power parity what should the nominal exchange rate between the U.S. and another country be equal to?

Accepted Answer

A)   1
B)   the real exchange rate between the U.S. and that country
C)   the price level in the U.S. divided by the price level in the other country
D)   the price level in the other country divided by the price level in the U.S.E) None of the above
F) B) and C)

Question 19

Suppose the real exchange rate is 5/4 of a Canadian textbook per U.S. textbook , a U.S. textbook costs $150, and a Canadian one costs 120 Canadian dollars. To the nearest penny, what is the nominal exchange rate?

Accepted Answer

A)   .64 Canadian dollars per U.S. dollar
B)   1 Canadian dollar per U.S. dollar
C)   1.56 Canadian dollars per U.S. dollar
D)   None of the above is correct.E) B) and D)
F) None of the above

Question 20

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) A) and B)
F) A) and C)

Exam 31: Open-Economy Macroeconomics: Basic Concepts

Table 31-2 -Refer to Table 31-2. In real terms, U.S. goods are more expensive than goods in which country(ies) ?

Correct AnswerverifiedShow Answer

According to purchasing-power parity what should the nominal exchange rate between the U.S. and another country be equal to?

Correct AnswerverifiedShow Answer

If the exchange rate is 12.5 pesos per U.S. dollar, it is also 1/12.5 U.S. dollars per peso.

Correct AnswerverifiedShow Answer

How do we find the real exchange rate from the nominal exchange rate?

Correct AnswerverifiedReal Exchange Rate =...View AnswerShow Answer

An American retailer sells dollars to obtain euros. It then uses the euros to buy ready-to-assemble furniture from Sweden. These transactions

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to purchasing power parity, the nominal exchange rate between the U.S. and another country should equal the price level of foreign goods divided by the price level of U.S. goods.

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

Mike, a U.S. citizen, buys $1,000 worth of olives from Greece. By itself this purchase

Correct AnswerverifiedShow Answer

A bushel of apples costs $15.00 in the U.S. The same apples cost 1,600 yen in Japan. If the exchange rate is 80 yen per dollar, is there a possibility for arbitrage? Explain and defend your answer. As part of your defense, find the real exchange rate.

Correct AnswerverifiedThere is a possibility for profit by buy...View AnswerShow Answer

John, a U.S. citizen, opens up a Sports bar in Tokyo. This is an example of U.S.

Correct AnswerverifiedShow Answer

Other things the same, if the exchange rate changes from .8 euros per dollar to .9 euros per dollar, the dollar

Correct AnswerverifiedShow Answer

Which of the following both reduce net exports?

Correct AnswerverifiedShow Answer

A U.S. citizen buys bonds issued by a construction equipment manufacturer in Poland. Her expenditures are U.S.

Correct AnswerverifiedShow Answer

According to purchasing-power parity, if it took 55 Indian rupees to buy a dollar today, but it took 58 to buy it a year ago, then the dollar has

Correct AnswerverifiedShow Answer

If domestic residents of other countries purchase $600 billion of U.S. assets and U.S residents purchase $500 billion of foreign assets, then U.S. net capital outflow is

Correct AnswerverifiedShow 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

If the unit of foreign currency is the peso, in which case is the real exchange rate 1.2?

Correct AnswerverifiedShow Answer

Suppose the real exchange rate is 5/4 of a Canadian textbook per U.S. textbook , a U.S. textbook costs $150, and a Canadian one costs 120 Canadian dollars. To the nearest penny, what is the nominal exchange rate?

Correct AnswerverifiedShow Answer

According to purchasing-power parity, if two countries have the same price level because they have the same prices for all goods and services, then which of the following would equal 1?

Correct AnswerverifiedShow Answer

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Real Exchange Rate =...
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There is a possibility for profit by buy...
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