Question 1

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

Question 2

The theory of purchasing-power parity states that a unit of a country's currency should be able to buy the same quantity of goods in foreign countries as it does domestically.

Accepted Answer

A) True 
 B)False

Question 3

Last year a country had $700 billion of saving and $900 of investment.What was its net capital outflow? How is it possible for a country to have investment that exceeds saving?

Accepted Answer

Net capital outflow was negati...

Question 4

Table 18-1
 
-Refer to Table 18-1.What are Bolivia's exports?

Accepted Answer

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

Question 5

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

Question 6

According to the theory of purchasing-power parity,the nominal exchange rate between two countries must reflect the differing

Accepted Answer

A)   price levels in those countries.
B)   resource endowments in those countries.
C)   income levels in those countries.
D)   standards of living between those countries.E) A) and B)
F) A) and C)

Question 7

If you are vacationing in France and the dollar depreciates relative to the euro,then

Accepted Answer

A)   the dollar buys more euros.It will take fewer dollars to buy a good that costs 50 euros.
B)   the dollar buys more euros.It will take more dollars to buy a good that costs 50 euros.
C)   the dollar buys fewer euros.It will take fewer dollars to buy a good that costs 50 euros.
D)   the dollar buys fewer euros.It will take more dollars to buy a good that costs 50 euros.E) B) and C)
F) A) and D)

Question 8

How do we find the real exchange rate from the nominal exchange rate?

Accepted Answer

Real Exchange Rate =...

Question 9

U.S.-based John Deere sells machinery to residents of South Africa who pay with South African currency (the rand) .

Accepted Answer

A)   This increases U.S.net capital outflow because the U.S.acquires foreign assets.
B)   This decreases U.S.net capital outflow because the U.S.acquires foreign assets.
C)   This increases U.S.net capital outflow because the U.S.sells capital goods.
D)   This decreases U.S.net capital outflow because the U.S.sells capital goods.E) A) and B)
F) C) and D)

Question 10

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

Question 11

Which of the following does purchasing-power parity imply?

Accepted Answer

A)   The purchasing power of the dollar is the same in the U.S.as in foreign countries.
B)   The price of domestic goods relative to foreign goods cannot change.
C)   The nominal exchange rate is the ratio of U.S.prices to foreign prices.
D)   All of the above are correct.E) None of the above
F) B) and C)

Question 12

If purchasing power parity holds,when a country's central bank increases the money supply,its

Accepted Answer

A)   price level rises and its currency appreciates relative to other currencies in the world.
B)   price level rises and its currency depreciates relative to other currencies in the world.
C)   price level falls and its currency appreciates relative to other currencies in the world.
D)   price level falls and its currency depreciates relative to other currencies in the world.E) All of the above
F) B) and C)

Question 13

From 2007 to 2009 the U.S.trade deficit fell as U.S.investment fell.

Accepted Answer

A) True 
 B)False

Question 14

A country has net capital outflow of $20 billion.Which of the following is consistent with this net capital outflow?

Accepted Answer

A)   It has $20 billion of net exports.
B)   Purchases of domestic assets by foreigners exceed purchases of foreign assets by domestic residents by $20 billion.
C)   It's saving is $15 billion and its domestic investment is $5 billion.
D)   All of the above are consistent with a net capital outflow of $20 billion.E) B) and C)
F) All of the above

Question 15

If purchasing-power parity holds,then the value of the

Accepted Answer

A)   real exchange rate is equal to one.
B)   nominal exchange rate is equal to one.
C)   real exchange rate is equal to the nominal exchange rate.
D)   real exchange rate is equal to the difference in inflation rates between the two countries.E) C) and D)
F) A) and C)

Question 16

Net capital outflow equals

Accepted Answer

A)   the purchase of foreign assets by domestic residents.
B)   the purchase of domestic assets by foreign residents.
C)   the purchase of domestic assets by foreign residents - the purchase of foreign assets by domestic residents
D)   the purchase of foreign assets by domestic residents - the purchase of domestic assets by foreign residentsE) A) and B)
F) A) and C)

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

From 1970 to 1998 the U.S.dollar

Accepted Answer

A)   gained value compared to the Italian lira because inflation was higher in Italy.
B)   gained value compared to the Italian lira because inflation was lower in Italy.
C)   lost value compared to the Italian lira because inflation was higher in Italy.
D)   lost value compared to the Italian lira because inflation was lower in Italy.E) All of the above
F) A) and D)

Question 19

Net capital outflow measures

Accepted Answer

A)   foreign assets held by domestic residents minus domestic assets held by foreign residents.
B)   the imbalance between the amount of foreign assets bought by domestic residents and the amount of domestic assets bought by foreigners.
C)   the imbalance between the amount of foreign assets bought by domestic residents and the amount of domestic goods and services sold to foreigners.
D)   None of the above is correct.E) C) and D)
F) A) and D)

Question 20

Which of the following is an example of U.S.foreign direct investment?

Accepted Answer

A)   A Greek company opens a cheese factory in the U.S.
B)   A German mutual fund buys stock issued by a U.S.corporation.
C)   A U.S.beverage company opens a bottling plant in Russia.
D)   A U.S.bank buys bonds issued by an Argentinean company.E) A) and C)
F) None of the above

Exam 31: Open-Economy Macroeconomic Models

U.S.-based John Deere sells machinery to residents of South Africa who pay with South African currency (the rand) .

Correct AnswerverifiedShow Answer

If purchasing power parity holds,when a country's central bank increases the money supply,its

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is an example of U.S.foreign direct investment?

Correct AnswerverifiedShow Answer

How do we find the real exchange rate from the nominal exchange rate?

Correct AnswerverifiedReal Exchange Rate =...View AnswerShow Answer

Last year a country had $700 billion of saving and $900 of investment.What was its net capital outflow? How is it possible for a country to have investment that exceeds saving?

Correct AnswerverifiedNet capital outflow was negati...View AnswerShow Answer

Net capital outflow equals

Correct AnswerverifiedShow Answer

If you are vacationing in France and the dollar depreciates relative to the euro,then

Correct AnswerverifiedShow Answer

Net capital outflow measures

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 AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

From 1970 to 1998 the U.S.dollar

Correct AnswerverifiedShow Answer

A country has net capital outflow of $20 billion.Which of the following is consistent with this net capital outflow?

Correct AnswerverifiedShow Answer

The theory of purchasing-power parity states that a unit of a country's currency should be able to buy the same quantity of goods in foreign countries as it does domestically.

Correct AnswerverifiedShow Answer

From 2007 to 2009 the U.S.trade deficit fell as U.S.investment fell.

Correct AnswerverifiedShow Answer

Table 18-1 -Refer to Table 18-1.What are Bolivia's exports?

Correct AnswerverifiedShow Answer

Which of the following does purchasing-power parity imply?

Correct AnswerverifiedShow Answer

If purchasing-power parity holds,then the value of the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to the theory of purchasing-power parity,the nominal exchange rate between two countries must reflect the differing

Correct AnswerverifiedShow Answer

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Real Exchange Rate =...
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Net capital outflow was negati...
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