Question 1

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 2

Suppose that Bill, a resident of the U.S., buys software from a company in Japan. Explain why and in what directions this changes U.S. net exports and U.S. net capital outflow.

Accepted Answer

The purchase of a foreign good by a U.S....

Question 3

The nominal exchange rate is 3 Malaysian ringgits per dollar. The real exchange rate is 8/5. If a Big Mac costs 7.5 ringgits in Malaysia, how much does a Big Mac cost in the U.S.? Show your work.

Accepted Answer

The real exchange rate = 8/5 =...

Question 4

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

Accepted Answer

A)   $60 billion
B)   $35 billion
C)   $10 billion
D)   None of the above are correct.E) C) and D)
F) A) and D)

Question 5

U.S. exports are $300 billion, U.S. imports are $500 billion. Which of the following are consistent with the level of net exports?

Accepted Answer

A)   The U.S has a trade surplus. The U.S. purchases $800 billion worth of foreign assets and foreign countries purchase $600 billion worth of U.S. assets.
B)   The U.S. has a trade surplus. The U.S. purchases $600 billion worth of foreign assets and foreign countries purchase $800 billion worth of U.S. assets.
C)   The U.S has a trade deficit. The U.S. purchases $800 billion worth of foreign assets and foreign countries purchase $600 billion worth of U.S. assets.
D)   The U.S. has a trade deficit. The U.S. purchases $600 billion worth of foreign assets and foreign countries purchase $800 billion worth of U.S. asset.E) B) and C)
F) All of the above

Question 6

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

Question 7

If a German firm buys goods from a U.S. firm with dollars it obtains by exchanging euros for dollars, both U.S. net exports and U.S. net capital outflow increase.

Accepted Answer

A) True 
 B)False

Question 8

The price of a basket of goods and services in the U.S. is $600. In Canada the same basket of goods costs 700 Canadian dollars. If the nominal exchange rate were 1.2 Canadian dollars per U.S. dollar, what would be the real exchange rate?

Accepted Answer

A)   700/600
B)   600/700
C)   700/720
D)   None of the above is correct.E) None of the above
F) A) and B)

Question 9

If a country exports more than it imports, then it has

Accepted Answer

A)   positive net exports and positive net capital outflows.
B)   positive net exports and negative net capital outflows.
C)   negative net exports and positive net capital outflows.
D)   negative net exports and negative net capital outflows.E) C) and D)
F) A) and D) A

Question 10

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 11

Suppose a Starbucks tall latte cost $4.00 in the United States, 5.00 euros in the euro area and $2.50 Australian dollars in Australia. Nominal exchange rates are .80 euros per dollar and 1.4 Australian dollars per U.S. dollar. Where does purchasing-power parity hold?

Accepted Answer

A)   both the euro area and Australia
B)   the euro area but not Australia
C)   Australia but not the euro area
D)   neither the euro area or AustraliaE) None of the above
F) B) and C)

Question 12

Reductions in transportation costs help explain the increase in U.S. trade flows.

Accepted Answer

A) True 
 B)False

Question 13

If the U.S. real exchange rate appreciates, U.S. exports to Europe

Accepted Answer

A)   and European exports to the U.S. both rise.
B)   and European exports to the U.S. both fall.
C)   rise, and European exports to the U.S. fall.
D)   fall, and European exports to the U.S. rise.E) A) and D)
F) A) and C)

Question 14

Suppose that U.S. citizens purchase more cars made in Korea, and Koreans purchase more bonds issued by U.S. corporations. Other things the same, these actions

Accepted Answer

A)   raise both U.S. net exports and U.S. net capital outflows.
B)   raise U.S. net exports and lower U.S. net capital outflows.
C)   lower both U.S. net exports and U.S. net capital outflows.
D)   lower U.S. net exports and raise U.S. net capital outflows.E) B) and C)
F) A) and D)

Question 15

According to purchasing-power parity, if the price of a basket of goods in the U.S. rose from $2,000 to $2,104 and the price of the same basket of goods rose from 800 units to 832 units of some other country's currency, then the

Accepted Answer

A)   nominal exchange rate would appreciate.
B)   nominal exchange rate would depreciate.
C)   real exchange rate would appreciate.
D)   real exchange rate would depreciate.E) All of the above
F) A) and C)

Question 16

In an open economy, gross domestic product equals $1,650 billion, government expenditure equals $250 billion, and savings equals $550 billion. What is consumption expenditure?

Accepted Answer

A)   $250 billion
B)   $300 billion
C)   $550 billion
D)   $850 billionE) None of the above
F) B) and C) D

Question 17

A Guatemalan company exchanges quetzal Guatemalan currency)  for dollars and then uses the dollars to purchase construction equipment from a U.S. company. These transactions

Accepted Answer

A)   increase Guatemalan net capital outflow, and increases U.S. net exports.
B)   increase Guatemalan capital outflow, and decreases U.S. net exports.
C)   decrease Guatemalan net capital outflow, and increases U.S. net exports.
D)   decrease Guatemalan net capital outflow, and decreases U.S. net exports.E) B) and C)
F) None of the above

Question 18

Eric, a resident of Sweden, purchases a book printed in the U.S. Which country's exports increase?

Accepted Answer

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

Question 19

If a lobster in Maine costs $10 and that the same type of lobster in Massachusetts costs $30, then people could make a profit by

Accepted Answer

A)   buying lobsters in Maine and selling them in Massachusetts. This action would increase the price of lobster in Massachusetts.
B)   buying lobsters in Maine and selling them in Massachusetts. This action would decrease the price of lobster in Massachusetts.
C)   buying lobsters in Massachusetts and selling them in Maine. This action would increase the price of lobster in Massachusetts.
D)   buying lobsters in Massachusetts and selling them in Maine. This action would decrease the price of lobster in Massachusetts.E) B) and D)
F) B) and C)

Question 20

If a bushel of wheat costs $6.40 in the United States, costs 40 pesos in Mexico, and the nominal exchange rate is 10 pesos per dollar, then the real exchange rate is

Accepted Answer

A)   1.60
B)   1.25
C)   .625
D)   None of the above is correct.E) A) and D)
F) A) and C) A

Exam 13: Open-Economy Macroeconomics: Basic Concepts

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

Suppose that Bill, a resident of the U.S., buys software from a company in Japan. Explain why and in what directions this changes U.S. net exports and U.S. net capital outflow.

Correct AnswerverifiedThe purchase of a foreign good by a U.S....View AnswerShow Answer

The nominal exchange rate is 3 Malaysian ringgits per dollar. The real exchange rate is 8/5. If a Big Mac costs 7.5 ringgits in Malaysia, how much does a Big Mac cost in the U.S.? Show your work.

Correct AnswerverifiedThe real exchange rate = 8/5 =...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

U.S. exports are $300 billion, U.S. imports are $500 billion. Which of the following are consistent with the level of net exports?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If a German firm buys goods from a U.S. firm with dollars it obtains by exchanging euros for dollars, both U.S. net exports and U.S. net capital outflow increase.

Correct AnswerverifiedShow Answer

The price of a basket of goods and services in the U.S. is $600. In Canada the same basket of goods costs 700 Canadian dollars. If the nominal exchange rate were 1.2 Canadian dollars per U.S. dollar, what would be the real exchange rate?

Correct AnswerverifiedShow Answer

If a country exports more than it imports, then it has

Correct AnswerverifiedA

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

Suppose a Starbucks tall latte cost $4.00 in the United States, 5.00 euros in the euro area and $2.50 Australian dollars in Australia. Nominal exchange rates are .80 euros per dollar and 1.4 Australian dollars per U.S. dollar. Where does purchasing-power parity hold?

Correct AnswerverifiedShow Answer

Reductions in transportation costs help explain the increase in U.S. trade flows.

Correct AnswerverifiedShow Answer

If the U.S. real exchange rate appreciates, U.S. exports to Europe

Correct AnswerverifiedShow Answer

Suppose that U.S. citizens purchase more cars made in Korea, and Koreans purchase more bonds issued by U.S. corporations. Other things the same, these actions

Correct AnswerverifiedShow Answer

According to purchasing-power parity, if the price of a basket of goods in the U.S. rose from $2,000 to $2,104 and the price of the same basket of goods rose from 800 units to 832 units of some other country's currency, then the

Correct AnswerverifiedShow Answer

In an open economy, gross domestic product equals $1,650 billion, government expenditure equals $250 billion, and savings equals $550 billion. What is consumption expenditure?

Correct AnswerverifiedD

A Guatemalan company exchanges quetzal Guatemalan currency) for dollars and then uses the dollars to purchase construction equipment from a U.S. company. These transactions

Correct AnswerverifiedShow Answer

Eric, a resident of Sweden, purchases a book printed in the U.S. Which country's exports increase?

Correct AnswerverifiedShow Answer

If a lobster in Maine costs $10 and that the same type of lobster in Massachusetts costs $30, then people could make a profit by

Correct AnswerverifiedShow Answer

If a bushel of wheat costs $6.40 in the United States, costs 40 pesos in Mexico, and the nominal exchange rate is 10 pesos per dollar, then the real exchange rate is

Correct AnswerverifiedA

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