Question 1

An appreciation of the U.S. real exchange rate induces U.S. consumers to buy

Accepted Answer

A)   fewer domestic goods and fewer foreign goods.
B)   more domestic goods and fewer foreign goods.
C)   fewer domestic goods and more foreign goods.
D)   more domestic goods and more foreign goods.E) None of the above
F) C) and D)

Question 2

Last year a country had exports of $100 billion, imports of $70 billion, and purchased $60 billion worth of foreign assets. What was the value of domestic assets purchased by foreigners?

Accepted Answer

A)   $70 billion
B)   $40 billion
C)   $30 billion
D)   $10 billionE) None of the above
F) B) and D)

Question 3

You are planning a graduation trip to Mexico. Other things the same, if the dollar depreciates relative to the peso, then

Accepted Answer

A)   the dollar buys fewer pesos. Your hotel room in Mexico will require fewer dollars.
B)   the dollar buys fewer pesos. Your hotel room in Mexico will require more dollars.
C)   the dollar buys more pesos. Your hotel room in Mexico will require fewer dollars.
D)   the dollar buys more pesos. Your hotel room in Mexico will require more dollars.E) B) and C)
F) C) and D)

Question 4

Movies are a major export of the U.S.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

Start from the national income accountin...

Question 6

The law of one price states that

Accepted Answer

A)   a good must sell at the price fixed by law.
B)   a good must sell at the same price at all locations.
C)   a good cannot sell for a price greater than the legal price ceiling.
D)   nominal exchange rates will not vary.E) A) and B)
F) A) and C)

Question 7

If U.S. exports are $300 billion and U.S. imports total $350 billion, which of the following is correct?

Accepted Answer

A)   The U.S. has a trade surplus of $350 billion.
B)   The U.S. has a trade surplus of $50 billion.
C)   The U.S. has a trade deficit of $350 billion.
D)   The U.S. has a trade deficit of $50 billion.E) B) and C)
F) A) and D)

Question 8

If purchasing-power parity holds, a dollar will buy

Accepted Answer

A)   one unit of each foreign currency.
B)   foreign currency equal to the U.S. price level divided by the foreign country's price level.
C)   enough foreign currency to buy as many goods as it does in the United States.
D)   None of the above is implied by purchasing-power parity.E) All of the above
F) B) and C)

Question 9

If the real exchange rate is 5/4 pounds of Chilean beef per pound of U.S. beef, a pound of U.S. beef costs $2 and the nominal exchange rate is 500 Chilean pesos per dollar, then Chilean beef costs

Accepted Answer

A)   1,250 pesos per pound.
B)   800 pesos per pound
C)   250 pesos per pound.
D)   None of the above is correct.E) B) and C)
F) All of the above

Question 10

If the exchange rate is 5 Egyptian pounds per U.S. dollar, a watch that costs $25 US dollars costs

Accepted Answer

A)   125 Egyptian pounds
B)   50 Egyptian pounds
C)   5 Egyptian pounds
D)   None of the above is correct.E) A) and B)
F) C) and D)

Question 11

If Israel's domestic investment exceeds its national saving, then Israel has

Accepted Answer

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

Question 12

A nation has a positive net capital outflow. Which of the following is correct?

Accepted Answer

A)   Purchases of foreign assets by domestic residents exceed purchases of domestic assets by foreigners
B)   It has positive net exports.
C)   Its savings exceeds its domestic investment.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 13

From 1980-1987, U.S. net capital outflow as a percent of GDP became a

Accepted Answer

A)   larger positive number.
B)   smaller positive number.
C)   larger negative number.
D)   smaller negative number.E) A) and B)
F) B) and C)

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Consider an identical basket of goods in both the U.S. and Taiwan. For a given nominal exchange rate, in which case is it certain that the U.S. real exchange rate with Taiwan falls?

Accepted Answer

A)   the price of the basket of goods rises in the U.S. and Taiwan.
B)   the price of the basket of goods rises in the U.S. and falls in Taiwan.
C)   the price of the basket of goods falls in the U.S. and rises in Taiwan.
D)   the price of the basket of goods falls in both the U.S. and Taiwan.E) B) and C)
F) All of the above

Question 16

As measured by the amount of trade it does, has the U.S. economy become more internationalized? Provide two reasons for this change.

Accepted Answer

Yes.
reduced transportation co...

Question 17

Last year residents of Country A purchased $600 billion of foreign assets. Foreigners purchased $425 billion dollars of assets and $375 billion of goods and services from country A. What was the value of Country A's imports?

Accepted Answer

The value of Country...

Question 18

If the U.S. real exchange rate is greater than 1, then there is the possibility of arbitraging by buying foreign goods to sell in the U.S.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Dave, a U.S. citizen buys a bicycle manufactured in China. Dave's purchase is

Accepted Answer

A)   both a U.S. and Chinese export.
B)   both a U.S. and Chinese import.
C)   a U.S. import and a Chinese export.
D)   a U.S. export and a Chinese import.E) All of the above
F) None of the above

Exam 31: Open-Economy Macroeconomics: Basic Concepts

Movies are a major export of the U.S.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

You are planning a graduation trip to Mexico. Other things the same, if the dollar depreciates relative to the peso, then

Correct AnswerverifiedShow Answer

From 1980-1987, U.S. net capital outflow as a percent of GDP became a

Correct AnswerverifiedShow Answer

As measured by the amount of trade it does, has the U.S. economy become more internationalized? Provide two reasons for this change.

Correct AnswerverifiedYes.reduced transportation co...View AnswerShow Answer

If Israel's domestic investment exceeds its national saving, then Israel has

Correct AnswerverifiedShow Answer

An appreciation of the U.S. real exchange rate induces U.S. consumers to buy

Correct AnswerverifiedShow Answer

Dave, a U.S. citizen buys a bicycle manufactured in China. Dave's purchase is

Correct AnswerverifiedShow Answer

Consider an identical basket of goods in both the U.S. and Taiwan. For a given nominal exchange rate, in which case is it certain that the U.S. real exchange rate with Taiwan falls?

Correct AnswerverifiedShow Answer

Last year a country had exports of $100 billion, imports of $70 billion, and purchased $60 billion worth of foreign assets. What was the value of domestic assets purchased by foreigners?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedStart from the national income accountin...View AnswerShow Answer

A nation has a positive net capital outflow. Which of the following is correct?

Correct AnswerverifiedShow Answer

If the real exchange rate is 5/4 pounds of Chilean beef per pound of U.S. beef, a pound of U.S. beef costs $2 and the nominal exchange rate is 500 Chilean pesos per dollar, then Chilean beef costs

Correct AnswerverifiedShow Answer

If the exchange rate is 5 Egyptian pounds per U.S. dollar, a watch that costs $25 US dollars costs

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If U.S. exports are $300 billion and U.S. imports total $350 billion, which of the following is correct?

Correct AnswerverifiedShow Answer

If purchasing-power parity holds, a dollar will buy

Correct AnswerverifiedShow Answer

Last year residents of Country A purchased $600 billion of foreign assets. Foreigners purchased $425 billion dollars of assets and $375 billion of goods and services from country A. What was the value of Country A's imports?

Correct AnswerverifiedThe value of Country...View AnswerShow Answer

The law of one price states that

Correct AnswerverifiedShow Answer

If the U.S. real exchange rate is greater than 1, then there is the possibility of arbitraging by buying foreign goods to sell in the U.S.

Correct AnswerverifiedShow Answer

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Yes.
reduced transportation co...
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Start from the national income accountin...
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The value of Country...
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