Question 1

According to purchasing-power parity which of the following would happen if a country raised its money supply growth rate?

Accepted Answer

A)   its nominal exchange rate would fall
B)   its real exchange rate would fall
C)   its real net exports would rise
D)   All of the above would happen.E) None of the above
F) All of the above

Question 2

A country has $40 billion of domestic investment and net capital outflows of -$20 billion. What is the country's saving?

Accepted Answer

A)   -$60 billion
B)   -$20 billion
C)   $20 billion
D)   $60 billionE) All of the above
F) C) and D)

Question 3

If purchasing-power parity between France and the U.S. holds, but then U.S. prices rise,

Accepted Answer

A)   the real exchange rate is above its purchasing-power parity value. An increase in the nominal exchange rate can move it back.
B)   the real exchange rate is above its purchasing-power parity value. A decrease in the nominal exchange rate can move it back.
C)   the real exchange rate is below its purchasing-power parity value. An increase in the nominal exchange rate can move it back.
D)   the real exchange rate is below its purchasing-power parity value. A decrease in the nominal exchange rate can move it back.E) None of the above
F) B) and D)

Question 4

A country has a trade deficit. Which of the following must also be true?

Accepted Answer

A)   net capital outflow is positive and domestic investment is larger than saving
B)   net capital outflow is positive and saving is larger than domestic investment
C)   net capital outflow is negative and domestic investment is larger than saving
D)   net capital outflow is negative and saving is larger than domestic investmentE) B) and D)
F) B) and C)

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

Other things the same, a country could move from having a trade surplus to having a trade deficit if either

Accepted Answer

A)   saving rose or domestic investment rose.
B)   saving rose or domestic investment fell.
C)   saving fell or domestic investment rose.
D)   saving fell or domestic investment fell.E) A) and D)
F) None of the above

Question 7

Which of the following is correct? Since 1950

Accepted Answer

A)   U.S. exports and U.S. imports each about doubled.
B)   U.S. exports and U.S. imports each about tripled.
C)   U.S. exports about doubled and U.S. imports about tripled.
D)   U.S. exports about tripled and U.S. imports about doubled.E) C) and D)
F) None of the above

Question 8

A pair of jeans cost $25 in the U.S. and 1600 dinar in Algeria. If the nominal exchange rate is 75 dinar per U.S. dollar, then the real exchange rate is

Accepted Answer

A)   more than one, so a profit could be made by buying jeans in Algeria and selling them in the U.S.
B)   more than one, so a profit could be made by buying jeans in the U.S. and selling them in Algeria.
C)   less than one, so a profit could be made by buying jeans in Algeria and selling them in the U.S.
D)   less than one, so a profit could be made by buying jeans in the U.S. and selling them in Algeria.E) All of the above
F) A) and D)

Question 9

A pair of running shoes costs $70 in the U.S. If the price of the same shoes is 4500 rupees in India and the exchange rate is 60 rupees per dollar, than the real exchange rate is

Accepted Answer

A)   more than 1, so a profit could be made by buying these shoes in the U.S. and selling them in India.
B)   more than 1, so a profit could be made by buying these shoes in India and selling them in the U.S.
C)   less than 1, so a profit could be made by buying these shoes in the U.S. and selling them in India.
D)   less than 1, so a profit could be made by buying these shoes in India and selling them in the U.S.E) B) and D)
F) None of the above

Question 10

Matt and Melinda are American residents. Matt buys stock issued by a German corporation. Melinda opens a shoe factory in Panama. Whose purchase, by itself, increases the U.S.'s net capital outflow?

Accepted Answer

A)   Matt's
B)   Melinda's
C)   both Matt's and Melinda's
D)   neither Matt's nor Melinda'sE) A) and B)
F) C) and D)

Question 11

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) None of the above
F) All of the above

Question 12

Both foreign direct investment and foreign portfolio investment by U.S. residents increase U.S. net capital outflow.

Accepted Answer

A) True 
 B)False

Question 13

If a country has business opportunities that are relatively attractive to other countries, we would expect it to have

Accepted Answer

A)   both positive net exports and positive net capital outflow.
B)   both negative net exports and negative net capital outflow.
C)   positive net exports and negative net capital outflow.
D)   negative net exports and positive net capital outflow.E) All of the above
F) A) and C)

Question 14

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?

Accepted Answer

The answer of A country recently had a trade deficit...

Question 15

U.S. exports make up less than 20 percent of GDP.

Accepted Answer

A) True 
 B)False

Question 16

Gabrielle, an Italian citizen, uses some previously obtained dollars to purchase a bond issued by a U.S. company. This transaction

Accepted Answer

A)   decreases U.S. net capital outflow.
B)   does not change U.S. net capital outflow.
C)   increases U.S. net capital outflow by more than the value of the bond.
D)   increases U.S. net capital outflow by the value of the bond.E) B) and C)
F) B) and D)

Question 17

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

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) None of the above
F) C) and D)

Question 18

A nation with a trade surplus will necessarily have saving that is greater than domestic investment.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements is correct for an open economy with a trade surplus?

Accepted Answer

A)   The trade surplus cannot last for very many years.
B)   The trade surplus must be offset by negative net capital outflow.
C)   The trade surplus implies that the country's national saving is greater than domestic investment.
D)   None of the above is correct.E) None of the above
F) B) and C)

Question 20

From 1970 to 1998 the U.S. dollar

Accepted Answer

A)   gained value compared to the German mark because inflation was higher in Germany.
B)   gained value compared to the German mark because inflation was lower in Germany.
C)   lost value compared to the German mark because inflation was higher in Germany.
D)   lost value compared to the German mark because inflation was lower in Germany.E) None of the above
F) All of the above

Exam 31: Open-Economy Macroeconomics: Basic Concepts

A country has $40 billion of domestic investment and net capital outflows of -$20 billion. What is the country's saving?

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According to purchasing-power parity which of the following would happen if a country raised its money supply growth rate?

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From 1970 to 1998 the U.S. dollar

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Which of the following statements is correct for an open economy with a trade surplus?

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A pair of jeans cost $25 in the U.S. and 1600 dinar in Algeria. If the nominal exchange rate is 75 dinar per U.S. dollar, then the real exchange rate is

Correct AnswerverifiedShow Answer

Gabrielle, an Italian citizen, uses some previously obtained dollars to purchase a bond issued by a U.S. company. This transaction

Correct AnswerverifiedShow Answer

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?

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

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A country has a trade deficit. Which of the following must also be true?

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Both foreign direct investment and foreign portfolio investment by U.S. residents increase U.S. net capital outflow.

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Which of the following is correct? Since 1950

Correct AnswerverifiedShow Answer

A nation with a trade surplus will necessarily have saving that is greater than domestic investment.

Correct AnswerverifiedShow Answer

A pair of running shoes costs $70 in the U.S. If the price of the same shoes is 4500 rupees in India and the exchange rate is 60 rupees per dollar, than the real exchange rate is

Correct AnswerverifiedShow Answer

If a country has business opportunities that are relatively attractive to other countries, we would expect it to have

Correct AnswerverifiedShow Answer

Table 31-2 -Refer to Table 31-2. In real terms, U.S. goods are less expensive than goods in which country(ies) ?

Correct AnswerverifiedShow Answer

Matt and Melinda are American residents. Matt buys stock issued by a German corporation. Melinda opens a shoe factory in Panama. Whose purchase, by itself, increases the U.S.'s net capital outflow?

Correct AnswerverifiedShow Answer

Other things the same, a country could move from having a trade surplus to having a trade deficit if either

Correct AnswerverifiedShow Answer

If purchasing-power parity between France and the U.S. holds, but then U.S. prices rise,

Correct AnswerverifiedShow Answer

U.S. exports make up less than 20 percent of GDP.

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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 Japan, then which of the following falls?

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