Question 1

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 B)
F) B) and D)

Question 2

In the U.S. a delivery van costs $30,000. In Uruguay the same delivery van costs 720,000 pesos. The nominal exchange rate is 20 pesos per dollar.
A. Find the real exchange rate. Show your work.
B. In terms of dollars where is the television cheaper?

Accepted Answer

The real exchange rate = 30,00...

Question 3

Which of the following is an example of U.S. foreign direct investment and by itself increases U.S. net capital outflow?

Accepted Answer

A)  A Swedish bank buys a bond issued by the U.S. government.
B)  A German company builds a car factory in the U.S.
C)  A U.S. mutual fund purchases stock issued by a corporation in Bolivia.
D)  A U.S. grocery chain builds and operates a new warehouse in Honduras.E) B) and C)
F) None of the above

Question 4

If a country's saving rises, then either its investment or its net capital outflow rises (or both).

Accepted Answer

A) True 
 B)False

Question 5

A country had a net capital outflow of 300 billion euros and exports of 400 billion euros. What was the value of its imports?

Accepted Answer

The answer of A country had a net capital outflow...

Question 6

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

Question 7

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)

Question 8

If the exchange rate changes from 148 Kazakhstan tenge per dollar to 155 Kazakhstan tenge per dollar, the dollar has

Accepted Answer

A)  appreciated. Other things the same, it now takes fewer dollars to buy Kazakhstani goods.
B)  appreciated. Other things the same, it now takes more dollars to buy Kazakhstani goods.
C)  depreciated. Other things the same, it now takes fewer dollars to buy Kazakhstani goods.
D)  depreciated. Other things the same, it now takes more dollars to buy Kazakhstani goods.E) A) and B)
F) B) and C)

Question 9

A country has $100 million of net exports and $170 million of saving. Net capital outflow is

Accepted Answer

A)  $70 million and domestic investment is $170 million.
B)  $70 million and domestic investment is $270 million.
C)  $100 million and domestic investment is $70 million.
D)  None of the above is correct.E) All of the above
F) A) and B)

Question 10

Suppose that the real exchange rate between the United States and Kenya is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate (that is increase the number of baskets of Kenyan goods a basket of U.S. goods buys) ?

Accepted Answer

A)  an increase in the number of Kenyan shillings that can be purchased with a dollar
B)  an increase in the price of U.S. goods
C)  a decrease in the price in Kenyan shillings of Kenyan goods
D)  All of the above are correct.E) A) and D)
F) A) and C)

Question 11

If a country has saving of $2 trillion and investment of $1.5 trillion, then it has

Accepted Answer

A)  a trade surplus and its net capital outflow = $.5 trillion.
B)  a trade surplus and its net capital outflow = -$.5 trillion.
C)  a trade deficit and its net capital outflow = $.5 trillion.
D)  a trade deficit and its net capital outflow = -$.5 trillion.E) A) and B)
F) A) and C)

Question 12

Which of the following does purchasing-power parity imply?

Accepted Answer

A)  the foreign price level times the nominal exchange rate (given as amount of foreign currency per dollar)  equals the U.S. price level.
B)  The price of domestic goods relative to foreign goods cannot change.
C)  The nominal exchange rate is the ratio of foreign prices to U.S. prices.
D)  All of the above are correct.E) All of the above
F) A) and B)

Question 13

Bob traps lobsters in Maine and sells them to a restaurant in Mexico. Other things the same, these sales

Accepted Answer

A)  increase U.S. net exports and have no effect on Mexican net exports.
B)  increase U.S. net exports and decrease Mexican net exports.
C)  decrease U.S. net exports and have no effect on Mexican net exports.
D)  decrease U.S. net exports and increase Mexican net exports.E) A) and B)
F) All of the above

Question 14

It is possible for a country to have domestic investment that exceeds national saving.

Accepted Answer

A) True 
 B)False

Question 15

A quality men's suit in the U.S. costs $400. The same suit costs 300 British pounds in the U.K. The nominal exchange rate is .60 pounds per dollar.
A. Find the real exchange rate. Show your work.
B. In terms of dollars where is the suit cheaper?

Accepted Answer

The real exchange rate = $400 ...

Question 16

A country has $3 billion of domestic investment and net exports of -$2 billion. What is its saving?

Accepted Answer

A)  -$1 billion
B)  -$2 billion
C)  $1 billion
D)  $2 billionE) A) and D)
F) A) and B)

Question 17

From 2000 to 2012 the U.S. had a trade

Accepted Answer

A)  surplus and a large net capital inflow.
B)  surplus and a large net capital outflow.
C)  deficit and a large net capital inflow.
D)  deficit and a large net capital outflow.E) A) and C)
F) None of the above

Question 18

If a country's imports exceed its exports it has a trade surplus.

Accepted Answer

A) True 
 B)False

Question 19

If a country's net exports fall, then its net capital outflow falls by the same amount.

Accepted Answer

A) True 
 B)False

Question 20

A farmer in Mexico purchases a tractor made in the U.S. This purchase is an example of

Accepted Answer

A)  a U.S. import and a Mexican export
B)  a U.S. export and a Mexican import
C)  an export for both the U.S. and Mexico
D)  an import for both Mexico and the U.S.E) A) and B)
F) C) and D)

Exam 31: Open-Economy Macroeconomics: Basic Concepts

In the U.S. a delivery van costs $30,000. In Uruguay the same delivery van costs 720,000 pesos. The nominal exchange rate is 20 pesos per dollar. A. Find the real exchange rate. Show your work. B. In terms of dollars where is the television cheaper?

Correct AnswerverifiedThe real exchange rate = 30,00...View AnswerShow Answer

A quality men's suit in the U.S. costs $400. The same suit costs 300 British pounds in the U.K. The nominal exchange rate is .60 pounds per dollar. A. Find the real exchange rate. Show your work. B. In terms of dollars where is the suit cheaper?

Correct AnswerverifiedThe real exchange rate = $400 ...View AnswerShow Answer

Which of the following does purchasing-power parity imply?

Correct AnswerverifiedShow Answer

A country has $100 million of net exports and $170 million of saving. Net capital outflow is

Correct AnswerverifiedShow Answer

A country has $3 billion of domestic investment and net exports of -$2 billion. What is its saving?

Correct AnswerverifiedShow Answer

It is possible for a country to have domestic investment that exceeds national saving.

Correct AnswerverifiedShow Answer

From 2000 to 2012 the U.S. had a trade

Correct AnswerverifiedShow Answer

If a country's imports exceed its exports it has a trade surplus.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If a country has saving of $2 trillion and investment of $1.5 trillion, then it has

Correct AnswerverifiedShow Answer

Bob traps lobsters in Maine and sells them to a restaurant in Mexico. Other things the same, these sales

Correct AnswerverifiedShow Answer

If the exchange rate changes from 148 Kazakhstan tenge per dollar to 155 Kazakhstan tenge per dollar, the dollar has

Correct AnswerverifiedShow Answer

A farmer in Mexico purchases a tractor made in the U.S. This purchase is an example of

Correct AnswerverifiedShow Answer

A country had a net capital outflow of 300 billion euros and exports of 400 billion euros. What was the value of its imports?

Correct AnswerverifiedShow Answer

If a country's saving rises, then either its investment or its net capital outflow rises (or both).

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is an example of U.S. foreign direct investment and by itself increases U.S. net capital outflow?

Correct AnswerverifiedShow Answer

If a country's net exports fall, then its net capital outflow falls by the same amount.

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 that the real exchange rate between the United States and Kenya is defined in terms of baskets of goods. Other things the same, which of the following will increase the real exchange rate (that is increase the number of baskets of Kenyan goods a basket of U.S. goods buys) ?

Correct AnswerverifiedShow Answer

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The real exchange rate = 30,00...
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The real exchange rate = $400 ...
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