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Exam 31: Open-Economy Macroeconomics: Basic Concepts

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Question 51

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Assuming all other things equal, what would happen to the U.S. dollar real exchange rate under each of the following circumstances? a.The U.S.nominal exchange rate depreciates. b.U.S.domestic prices increase. c.Prices in the rest of the world rise.

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a.
The U.S. dollar real exchan...

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Question 52

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If a country sells fewer goods and services abroad than it buys from other countries, it is said to have a trade

A) surplus and positive net exports.
B) surplus and negative net exports.
C) deficit and positive net exports.
D) deficit and negative net exports.

E) None of the above
F) All of the above

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Question 53

Multiple Choice

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When Jorge, a Spanish citizen, sells dresses he desings to Romania, the sale is

The price level in Country A is 250. The price level in Country B is 300. If purchasing-power parity holds, what is the nominal value of Country A's currency in the market for foreign exchange with Country B? Show your work.

Domestic saving must equal domestic investment in

Other things the same, if the government reduced its budget deficit, the country's trade balance would rise.

If a country's trade surplus falls, its net capital outflow rises.

If the nominal exchange rate is expressed as foreign currency per dollar, which of the following would both make Americans more willing to buy Italian goods? The nominal exchange rate

Other things the same, an increase in the foreign price level leads to an increase in the real exchange rate.

Other things the same, an increase in the nominal exchange rate raises the real exchange rate.

In the first quarter of 2015 the U.S. had a trade deficit. In the first quarter of 2016 exports fell and imports rose. According to these numbers what happened to net exports?

Other things the same, if the exchange rate changes from 35 Thai bhat per dollar to 21 Thai bhat per dollar, then the dollar has

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.

Last year a country sold $500 billion euros worth of goods to foreigners and had a trade deficit of $100 billion euros. What was the value of its imports?

Derive the relation between savings, domestic investment, and net capital outflow using the national income accounting identity.

A country recently had a trade deficit of $2.5 trillion and purchased $3 trillion of foreign assets. How many of its assets did foreigners purchase?

A dozen eggs cost $2 in the U.S. and 12 pesos in Argentina. If the real exchange rate is 5/6, what is the nominal exchange rate? Show your work.

A farm equipment retailer in Azerbaijan exchanges Azerbaijan manats (the currency of Azerbaijan) for $300,000 a bank in Azerbaijan was holding. It uses the $300,000 to buy farm equipment from a U.S. company. The U.S. company deposits half of these funds in a U.S. bank and exchanges the other half for euros from a bank in London. As a result of these transactions, by how much, if at all, and in which direction did: A. U.S. net exports change? B. U.S. net capital outflow change?

Suppose a Starbucks tall latte costs $4.00 in the United States and 2.50 euros in the Euro area. Also, suppose a McDonald's Big Mac costs $4.50 in the United States and 3.60 euros in the Euro area. If the nominal exchange rate is 0.80 euros per dollar, which goods have prices that are consistent with purchasing-power parity?

If the exchange rate is expressed as euros/dollar, the dollar is said to depreciate against the euro if the exchange rate