Question 1

A U.S. bakery buys wheat from Canada and pays for it with US dollars. This transaction

Accepted Answer

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

Question 2

The nominal exchange rate is 4 Saudi Arabian riyals, 8 Moroccan dirham, 60 Indian rupees, or .8 euros per U.S. dollar. A fast food breakfast costs $5 in the U.S., 30 riyals in Saudi Arabia, 40 Moroccan dirham in Morocco, 250 Indian rupees in India, and 5 euros in France. According to these numbers, where is the real exchange rate between American and foreign goods the lowest?

Accepted Answer

A)  Saudi Arabia
B)  Morocco
C)  India
D)  BritainE) A) and C)
F) A) and B)

Question 3

A Swiss watchmaker opens a factory in the United States. This is an example of Swiss

Accepted Answer

A)  exports.
B)  imports.
C)  foreign portfolio investment.
D)  foreign direct investment.E) A) and B)
F) A) and C)

Question 4

If the exchange rate is 1.25 New Zealand dollars per U.S dollar, the price of apples is $2 a pound in the U.S. and 1 New Zealand dollar per pound in New Zealand, what is the real exchange rate?

Accepted Answer

A)  2.50
B)  2
C)  1.25
D)  .75E) A) and B)
F) B) and C)

Question 5

A country has $45 million of domestic investment and net capital outflow of -$60 million. What is its saving?

Accepted Answer

A)  $15 million
B)  -$15 million
C)  $105 million
D)  -$105 millionE) A) and B)
F) A) and C)

Question 6

A country purchases more goods and services from residents of foreign countries than residents of foreign countries purchase from it. This country has

Accepted Answer

A)  a trade surplus and positive net exports.
B)  a trade surplus and negative net exports.
C)  a trade deficit and positive net exports.
D)  a trade deficit and negative net exports.E) B) and D)
F) None of the above

Question 7

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 8

If Walmart buys $50 million worth of consumer goods from China and sells them in the U.S., and China uses the $50 million to purchase U.S. bonds, U.S. net exports and U.S. net capital outflow both fall.

Accepted Answer

A) True 
 B)False

Question 9

A U.S. citizen buys bonds issued by a construction equipment manufacturer in Poland. Her expenditures are U.S.

Accepted Answer

A)  foreign portfolio investment that increase U.S. net capital outflow.
B)  foreign portfolio investment that decrease U.S. net capital outflow.
C)  foreign direct investment that increase U.S. net capital outflow.
D)  foreign direct investment that decrease U.S. net capital outflow.E) A) and C)
F) C) and D)

Question 10

A Swiss company sells chocolates to a retailer in the United States. These sales by themselves

Accepted Answer

A)  decrease U.S. net export and Swiss net exports.
B)  decrease U.S. net exports and increase Swiss net exports.
C)  increase U.S. and Swiss net exports.
D)  increase U.S. net exports and decrease Swiss net exports.E) A) and B)
F) A) and D)

Question 11

Last year a country purchased $1.5 trillion worth of goods and services from foreign countries, sold $2 trillion worth of goods and services to foreign countries and had national saving of $1.25 trillion. What was the value of its domestic investment? Show your work.

Accepted Answer

Net capital outflow = Net expo...

Question 12

A U.S. firm buys sardines from Morocco and pays for them with U.S. dollars. Other things the same, U.S. net exports

Accepted Answer

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

Question 13

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

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

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

Accepted Answer

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

Question 16

A U.S. purchase of oil from overseas paid for with foreign currency it already owned

Accepted Answer

A)  increases U.S. net exports, and increases U.S. net capital outflow.
B)  increases U.S. net exports, and decreases U.S. net capital outflow.
C)  decreases U.S. net exports, and increases U.S. net capital outflow.
D)  decreases U.S. net exports, and decreases U.S. net capital outflow.E) B) and D)
F) B) and C)

Question 17

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) B) and C)

Question 18

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) B) and C)

Question 19

U.S- based Dell sells computers to an Irish company that pays with previously obtained U.S. currency. This exchange

Accepted Answer

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

Question 20

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) C) and D)
F) A) and D)

Exam 31: Open-Economy Macroeconomics: Basic Concepts

Correct Answer
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A U.S. purchase of oil from overseas paid for with foreign currency it already owned

Correct Answer
verified

The law of one price states that

Correct Answer
verified

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

Correct Answer
verified

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?

Correct Answer
verified

Last year a country purchased $1.5 trillion worth of goods and services from foreign countries, sold $2 trillion worth of goods and services to foreign countries and had national saving of $1.25 trillion. What was the value of its domestic investment? Show your work.

Correct Answer
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Net capital outflow = Net expo...
View Answer

A U.S. citizen buys bonds issued by a construction equipment manufacturer in Poland. Her expenditures are U.S.

Correct Answer
verified

A U.S. firm buys sardines from Morocco and pays for them with U.S. dollars. Other things the same, U.S. net exports

Correct Answer
verified

A U.S. bakery buys wheat from Canada and pays for it with US dollars. This transaction

Correct Answer
verified

A country purchases more goods and services from residents of foreign countries than residents of foreign countries purchase from it. This country has

Correct Answer
verified

U.S- based Dell sells computers to an Irish company that pays with previously obtained U.S. currency. This exchange

Correct Answer
verified

A country has $45 million of domestic investment and net capital outflow of -$60 million. What is its saving?

Correct Answer
verified

A Swiss watchmaker opens a factory in the United States. This is an example of Swiss

Correct Answer
verified

If the exchange rate is 1.25 New Zealand dollars per U.S dollar, the price of apples is $2 a pound in the U.S. and 1 New Zealand dollar per pound in New Zealand, what is the real exchange rate?

Correct Answer
verified

If Walmart buys $50 million worth of consumer goods from China and sells them in the U.S., and China uses the $50 million to purchase U.S. bonds, U.S. net exports and U.S. net capital outflow both fall.

Correct Answer
verified

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 Answer
verified
The real exchange rate = 8/5 =...
View Answer

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

Correct Answer
verified

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 Answer
verified

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

Correct Answer
verified

A Swiss company sells chocolates to a retailer in the United States. These sales by themselves

Correct Answer
verified

Exam 31: Open-Economy Macroeconomics: Basic Concepts

Correct AnswerverifiedShow Answer

A U.S. purchase of oil from overseas paid for with foreign currency it already owned

Correct AnswerverifiedShow Answer

The law of one price states that

Correct AnswerverifiedShow Answer

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

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?

Correct AnswerverifiedShow Answer

Last year a country purchased $1.5 trillion worth of goods and services from foreign countries, sold $2 trillion worth of goods and services to foreign countries and had national saving of $1.25 trillion. What was the value of its domestic investment? Show your work.

Correct AnswerverifiedNet capital outflow = Net expo...View AnswerShow Answer

A U.S. citizen buys bonds issued by a construction equipment manufacturer in Poland. Her expenditures are U.S.

Correct AnswerverifiedShow Answer

A U.S. firm buys sardines from Morocco and pays for them with U.S. dollars. Other things the same, U.S. net exports

Correct AnswerverifiedShow Answer

A U.S. bakery buys wheat from Canada and pays for it with US dollars. This transaction

Correct AnswerverifiedShow Answer

A country purchases more goods and services from residents of foreign countries than residents of foreign countries purchase from it. This country has

Correct AnswerverifiedShow Answer

U.S- based Dell sells computers to an Irish company that pays with previously obtained U.S. currency. This exchange

Correct AnswerverifiedShow Answer

A country has $45 million of domestic investment and net capital outflow of -$60 million. What is its saving?

Correct AnswerverifiedShow Answer

A Swiss watchmaker opens a factory in the United States. This is an example of Swiss

Correct AnswerverifiedShow Answer

If the exchange rate is 1.25 New Zealand dollars per U.S dollar, the price of apples is $2 a pound in the U.S. and 1 New Zealand dollar per pound in New Zealand, what is the real exchange rate?

Correct AnswerverifiedShow Answer

If Walmart buys $50 million worth of consumer goods from China and sells them in the U.S., and China uses the $50 million to purchase U.S. bonds, U.S. net exports and U.S. net capital outflow both fall.

Correct AnswerverifiedShow 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

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

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

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

Correct AnswerverifiedShow Answer

A Swiss company sells chocolates to a retailer in the United States. These sales by themselves

Correct AnswerverifiedShow Answer

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Net capital outflow = Net expo...
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The real exchange rate = 8/5 =...
View Answer

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Correct Answer
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