Question 1

A tall latte in China costs 30 yuan. The same latte in the U.S. costs 4 dollars. If the exchange rate is 6.5 yuan per dollar then, the real exchange rate is

Accepted Answer

A)  .867 so the good is more expensive in the U.S.
B)  .867 so the good is more expensive in China.
C)  1.154 so the god is more expensive in the U.S.
D)  1.154 so the good is more expensive in China.E) All of the above
F) A) and D)

Question 2

Other things the same, if a country saves more, then

Accepted Answer

A)  net capital outflow rises, so net exports rise.
B)  net capital outflow rises, so net exports fall.
C)  net capital outflow falls, so net exports rise.
D)  net capital outflow falls, so net exports fall.E) None of the above
F) All of the above

Question 3

If the number of Japanese yen a dollar buys falls, but neither country's price level changes, then the real exchange rate

Accepted Answer

A)  depreciates which causes U.S. net exports to increase.
B)  depreciates which causes U.S. net exports to decrease.
C)  appreciates which causes U.S. net exports to increase.
D)  appreciates, which causes U.S. net exports to decrease.E) A) and D)
F) B) and C)

Question 4

The dollar is said to depreciate against the euro if

Accepted Answer

A)  the exchange rate falls. Other things the same, it will cost fewer euros to buy U.S. goods.
B)  the exchange rate falls. Other things the same, it will cost more euros to buy U.S. goods.
C)  the exchange rate rises. Other things the same, it will cost fewer euros to buy U.S. goods.
D)  the exchange rate rises. Other things the same, it will cost more euros to buy U.S. goods.E) All of the above
F) A) and C)

Question 5

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) B) and C)
F) B) and D)

Question 6

A company in Panama pays for a U.S. architect to design a factory building. By itself this transaction

Accepted Answer

A)  increases U.S. exports and so increases the U.S. trade balance.
B)  increases U.S. exports and so decreases the U.S. trade balance.
C)  increases U.S. imports and so increases the U.S. trade balance.
D)  increases U.S. imports and so decreases the U.S. trade balance.E) All of the above
F) A) and C)

Question 7

If a country changes its corporate tax laws so that domestic businesses build and manage more business in other countries, 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) All of the above

Question 8

Use the (hypothetical)  information in the following table to answer the following questions.
Table 31-2 
-Refer to Table 31-2. In real terms, U.S. goods are less expensive than goods in which country(ies) ?

Accepted Answer

A)  Britain and Japan
B)  Germany and Saudi Arabia
C)  Germany and Venezuela
D)  JapanE) A) and D)
F) All of the above

Question 9

The dollar is said to appreciate against the euro if

Accepted Answer

A)  the exchange rate falls. Other things the same, it will cost fewer euros to buy U.S. goods.
B)  the exchange rate falls. Other things the same, it will cost more euros to buy U.S. goods.
C)  the exchange rate rises. Other things the same, it will cost fewer euros to buy U.S. goods.
D)  the exchange rate rises. Other things the same, it will cost more euros to buy U.S. goods.E) C) and D)
F) B) and D)

Question 10

If the Canadian nominal exchange rate does not change, but prices rise faster abroad than in Canada, then the Canadian real exchange rate

Accepted Answer

A)  does not change.
B)  rises.
C)  declines.
D)  None of the above is necessarily correct.E) A) and B)
F) All of the above

Question 11

If saving is greater than domestic investment, then

Accepted Answer

A)  there is a trade deficit and Y > C + I + G.
B)  there is a trade deficit and Y 
C)  there is a trade surplus and Y > C + I + G.
D)  there is a trade surplus and Y < C + I + G.E) B) and C)
F) A) and D)

Question 12

Other things the same, an increase in the real exchange rate raises U.S. net exports.

Accepted Answer

A) True 
 B)False

Question 13

According to purchasing-power parity, if over the course of a year the price level in the U.S. rises more than in Canada, then which of the following rises?

Accepted Answer

A)  the U.S. real exchange rate, but not the U.S. nominal exchange rate
B)  the U.S. nominal exchange rate, but not the U.S. real exchange rate
C)  the U.S. nominal exchange rate and the U.S. real exchange rate
D)  neither the real exchange rate nor the nominal exchange rateE) B) and D)
F) B) and C)

Question 14

If the price levels in the U.S and in Canada are unchanged, but the nominal exchange rate (Canadian dollars per U.S. dollar)  rises, then

Accepted Answer

A)  ​the U.S. dollar appreciates and so U.S. net exports rise.
B)  the U.S. dollar appreciates and so U.S. net exports fall.
C)  the U.S. dollar depreciates and so U.S. net exports rise.
D)  the U.S. dollar depreciates and so U.S. net exports fall.E) A) and B)
F) All of the above

Question 15

In Ireland, a pint of beer costs 3 euros. In Australia, a pint of beer costs 4 Australian dollars. If the exchange rate is .8 euros per Australian dollar, what is the real exchange rate?

Accepted Answer

A)  4/2.4 pints of Irish beer per pint of Australian beer
B)  3/3.2 pint of Irish beer per pint of Australian beer
C)  3.2/3 pints of Irish beer per pint of Australian beer
D)  2.4/4 pints of Irish beer per pint of Australian beerE) A) and B)
F) All of the above

Question 16

Goods that cost 1/5 of one dollar in the U.S. cost one kroner in Denmark, the real exchange rate would be computed as how many Danish goods per U.S. goods?

Accepted Answer

A)  five
B)  the amount of kroner that can be bought with twenty U.S. cents
C)  the amount of kroner that can be bought with 5 dollars
D)  None of the above is correct.E) A) and B)
F) A) and C)

Question 17

Movies are a major export of the U.S.

Accepted Answer

A) True 
 B)False

Question 18

If the exchange rate rises from .65 British pounds per dollar to .70 pounds per dollar, then compared to British goods, U.S. goods become

Accepted Answer

A)  relatively more expensive for both British and U.S. residents.
B)  relatively more expensive for British residents and relatively less expensive for U.S. residents.
C)  relatively less expensive for British residents and relatively more expensive for U.S. residents.
D)  relatively less expensive for both British and U.S. residents.E) B) and C)
F) C) and D)

Question 19

Bill, a U.S. citizen, pays a Spanish architect to design a metal casting factory. Which country's exports increase?

Accepted Answer

A)  Spain's
B)  the U.S.'s
C)  Spain's and the U.S.'s
D)  neither Spain's nor the U.S.'sE) C) and D)
F) A) and D)

Question 20

If prices in the U.S. rise faster than prices in the United Kingdom, then according to the doctrine of purchasing-power parity the U.S. nominal exchange rate should rise

Accepted Answer

A) True 
 B)False

Exam 31: Open-Economy Macroeconomics: Basic Concepts

Bill, a U.S. citizen, pays a Spanish architect to design a metal casting factory. Which country's exports increase?

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A tall latte in China costs 30 yuan. The same latte in the U.S. costs 4 dollars. If the exchange rate is 6.5 yuan per dollar then, the real exchange rate is

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

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Other things the same, an increase in the real exchange rate raises U.S. net exports.

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If the price levels in the U.S and in Canada are unchanged, but the nominal exchange rate (Canadian dollars per U.S. dollar) rises, then

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If the exchange rate rises from .65 British pounds per dollar to .70 pounds per dollar, then compared to British goods, U.S. goods become

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The dollar is said to appreciate against the euro if

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In Ireland, a pint of beer costs 3 euros. In Australia, a pint of beer costs 4 Australian dollars. If the exchange rate is .8 euros per Australian dollar, what is the real exchange rate?

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Use the (hypothetical) information in the following table to answer the following questions. Table 31-2 -Refer to Table 31-2. In real terms, U.S. goods are less expensive than goods in which country(ies) ?

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Goods that cost 1/5 of one dollar in the U.S. cost one kroner in Denmark, the real exchange rate would be computed as how many Danish goods per U.S. goods?

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The dollar is said to depreciate against the euro if

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If saving is greater than domestic investment, then

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According to purchasing-power parity, if over the course of a year the price level in the U.S. rises more than in Canada, then which of the following rises?

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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

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Other things the same, if a country saves more, then

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A company in Panama pays for a U.S. architect to design a factory building. By itself this transaction

Correct AnswerverifiedShow Answer

If the number of Japanese yen a dollar buys falls, but neither country's price level changes, then the real exchange rate

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Movies are a major export of the U.S.

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If the Canadian nominal exchange rate does not change, but prices rise faster abroad than in Canada, then the Canadian real exchange rate

Correct AnswerverifiedShow Answer

If prices in the U.S. rise faster than prices in the United Kingdom, then according to the doctrine of purchasing-power parity the U.S. nominal exchange rate should rise

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