Question 1

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 = $...

Question 2

When the Sykes Corporation (an American company) buys shares of Audi stock (a German company) for its pension fund,U.S.net capital outflow

Accepted Answer

A)   increases because an American company makes a portfolio investment in Germany.
B)   declines because an American company makes a portfolio investment in Germany.
C)   increases because an American company makes a direct investment in Germany.
D)   declines because an American company makes a direct investment in Germany.E) All of the above
F) A) and B)

Question 3

If the nominal exchange rate e is foreign currency per dollar,the domestic price is P,and the foreign price is P*,then the real exchange rate is defined as

Accepted Answer

A)   e(P*/P) .
B)   e(P/P*) .
C)   e + P*/P.
D)   e - P/P*.E) B) and C)
F) All of the above

Question 4

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 D)
F) All of the above

Question 5

A Japanese bank buys U.S.government bonds this purchase

Accepted Answer

A)   increases U.S.net capital outflow and has no affect on Japanese net capital outflow.
B)   increases U.S.net capital outflow and increases Japanese net capital outflow.
C)   increases U.S.net capital outflow,but decreases Japanese net capital outflow.
D)   decreases U.S.net capital outflow,but increases Japanese net capital outflow.E) A) and C)
F) A) and B)

Question 6

One year a country has negative net exports.The next year it still has negative net exports and imports have risen more than exports.

Accepted Answer

A)   its trade surplus fell.
B)   its trade surplus rose.
C)   its trade deficit fell.
D)   its trade deficit roseE) C) and D)
F) A) and B)

Question 7

In the 1970s and 1980s the U.S.dollar depreciated against the German mark and appreciated against the Italian lira because U.S.inflation was lower than in Germany but higher than in Italy.

Accepted Answer

A) True 
 B)False

Question 8

If the price of a good in the U.S.is $10,the exchange rate is 2 units of foreign currency per dollar,and the foreign price of the same good is 30 units of foreign currency,then the real exchange rate is 2/3.

Accepted Answer

A) True 
 B)False

Question 9

Suppose that a U.S.dollar buys more gold in Australia than it buys in Russia.What does purchasing-power parity imply should happen?

Accepted Answer

People can make a profit by buying gold ...

Question 10

If a country has positive net capital outflows,then its net exports are

Accepted Answer

A)   positive,and its saving is larger than its domestic investment.
B)   positive,and its saving is smaller than its domestic investment.
C)   negative,and its saving is larger than its domestic investment.
D)   negative,and its saving is smaller than its domestic investment.E) A) and B)
F) B) and C)

Question 11

U.S.exports make up less than 20 percent of GDP.

Accepted Answer

A) True 
 B)False

Question 12

When a French vineyard establishes a distribution center in the U.S. ,U.S.net capital outflow

Accepted Answer

A)   increases because the foreign company makes a portfolio investment in the U.S.
B)   declines because the foreign company makes a portfolio investment in the U.S.
C)   increases because the foreign company makes a direct investment in capital in the U.S.
D)   declines because the foreign company makes a direct investment in capital in the U.S.E) All of the above
F) B) and D)

Question 13

Suppose that the nominal exchange rate is 80 yen 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 Japan is 50,000 yen.Suppose that these values change to 100 yen per dollar,$600,and 70,000 yen.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) All of the above

Question 14

If a country changes its corporate tax laws so that foreign businesses build and manage more business in that country,then the net capital outflow of that country

Accepted Answer

A)   and the net capital outflow of other countries rise.
B)   rises and the net capital outflow of other countries fall.
C)   falls and the net capital outflow of other countries rise.
D)   None of the above are correct.E) C) and D)
F) B) and D)

Question 15

If a country had a trade surplus of $50 billion and then its exports rose by $30 billion and its imports rose by $20 billion,its net exports would now be

Accepted Answer

A)   $0 billion.
B)   $20 billion.
C)   $40 billion.
D)   $60 billion.E) A) and B)
F) All of the above

Question 16

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

Question 17

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) A) and D)
F) C) and D)

Question 18

For an economy as a whole,net exports must equal minus one times net capital outflow.

Accepted Answer

A) True 
 B)False

Question 19

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 D)
F) A) and B)

Question 20

Bob,a Greek citizen,opens a restaurant in Chicago.His expenditures

Accepted Answer

A)   increase U.S.net capital outflow and have no affect on Greek net capital outflow.
B)   increase U.S.net capital outflow and increase Greek net capital outflow.
C)   increase U.S.net capital outflow,but decrease Greek net capital outflow.
D)   decrease U.S.net capital outflow,but increase Greek net capital outflow.E) All of the above
F) None of the above

Exam 31: Open-Economy Macroeconomic Models

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

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

If the nominal exchange rate e is foreign currency per dollar,the domestic price is P,and the foreign price is P*,then the real exchange rate is defined as

Correct AnswerverifiedShow Answer

Suppose that the nominal exchange rate is 80 yen 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 Japan is 50,000 yen.Suppose that these values change to 100 yen per dollar,$600,and 70,000 yen.Then the real exchange rate would

Correct AnswerverifiedShow Answer

Suppose that a U.S.dollar buys more gold in Australia than it buys in Russia.What does purchasing-power parity imply should happen?

Correct AnswerverifiedPeople can make a profit by buying gold ...View AnswerShow Answer

One year a country has negative net exports.The next year it still has negative net exports and imports have risen more than exports.

Correct AnswerverifiedShow Answer

U.S.exports make up less than 20 percent of GDP.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Bob,a Greek citizen,opens a restaurant in Chicago.His expenditures

Correct AnswerverifiedShow Answer

For an economy as a whole,net exports must equal minus one times net capital outflow.

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

If a country has positive net capital outflows,then its net exports are

Correct AnswerverifiedShow Answer

In the 1970s and 1980s the U.S.dollar depreciated against the German mark and appreciated against the Italian lira because U.S.inflation was lower than in Germany but higher than in Italy.

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

When the Sykes Corporation (an American company) buys shares of Audi stock (a German company) for its pension fund,U.S.net capital outflow

Correct AnswerverifiedShow Answer

If a country had a trade surplus of $50 billion and then its exports rose by $30 billion and its imports rose by $20 billion,its net exports would now be

Correct AnswerverifiedShow Answer

When a French vineyard establishes a distribution center in the U.S. ,U.S.net capital outflow

Correct AnswerverifiedShow Answer

A Japanese bank buys U.S.government bonds this purchase

Correct AnswerverifiedShow Answer

If a country changes its corporate tax laws so that foreign businesses build and manage more business in that country,then the net capital outflow of that country

Correct AnswerverifiedShow Answer

If the price of a good in the U.S.is $10,the exchange rate is 2 units of foreign currency per dollar,and the foreign price of the same good is 30 units of foreign currency,then the real exchange rate is 2/3.

Correct AnswerverifiedShow Answer

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The real exchange rate 5/4 = $...
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People can make a profit by buying gold ...
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