Question 1

Net capital outflow equals the difference between a country's

Accepted Answer

A)  income and expenditure.
B)  investment and saving.
C)  purchases of foreign goods and services and sales of goods and services abroad.
D)  purchases of foreign assets and sales of domestic assets abroad.E) A) and B)
F) A) and C)

Question 2

A U.S.mutual fund buys stocks issued by a Columbian company.This purchase is an example of

Accepted Answer

A)  U.S.foreign direct investment.It increases Columbia's net capital outflow.
B)  U.S.foreign direct investment.It decreases Columbia's net capital outflow.
C)  U.S.foreign portfolio investment.It decreases Columbia's net capital outflow.
D)  U.S.foreign portfolio investment.It increases Columbia's net capital outflow.E) All of the above
F) None of the above

Question 3

A country has $3 billion of domestic investment and net exports of -$2 billion.What is its saving?

Accepted Answer

A)  -$1 billion
B)  -$2 billion
C)  $1 billion
D)  $2 billionE) C) and D)
F) B) and D)

Question 4

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) None of the above

Question 5

A country sells more goods and services to foreign countries than it buys from them.It 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) All of the above
F) B) and C)

Question 6

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

Question 7

If a country's purchases of foreign assets exceeds foreign purchases of domestic assets,that country 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) A) and D)
F) B) and C)

Question 8

If a country's government reduced corruption and reformed its tax system so that businesses found operating there less risky,it's likely that this country's

Accepted Answer

A)  net exports and net capital outflows would increase.
B)  net exports would increase and its net capital outflows would decrease.
C)  net exports and net capital outflow would decrease.
D)  net exports would decrease and its net capital outflow would increase.E) All of the above
F) A) and B)

Question 9

A U.S.retailer buys shoes from an Italian company.The Italian firm then uses all of the revenues to buy leather from the U.S.These transactions

Accepted Answer

A)  increase both U.S.net exports and U.S.net capital outflow.
B)  decrease both U.S.net exports and U.S.net capital outflow.
C)  increase U.S.net exports and do not affect U.S.net capital outflow.
D)  None of the above is correct.E) A) and B)
F) C) and D)

Question 10

A farmer in Mexico purchases a tractor made in the U.S.This purchase is an example of

Accepted Answer

A)  a U.S.import and a Mexican export
B)  a U.S.export and a Mexican import
C)  an export for both the U.S.and Mexico
D)  an import for both Mexico and the U.S.E) A) and D)
F) B) and C)

Question 11

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

Question 12

If U.S.residents purchase $600 billion worth of foreign assets and foreigners purchase $300 billion worth of U.S.assets,

Accepted Answer

A)  U.S.net capital outflow is $300 billion;capital is flowing into the U.S.
B)  U.S.net capital outflow is $300 billion;capital is flowing out of the U.S.
C)  U.S.net capital outflow is -$300 billion;capital is flowing into the U.S.
D)  U.S.net capital outflow is -$300 billion;capital is flowing out of the U.S.E) All of the above
F) C) and D)

Question 13

A U.S.firm opens a factory that produces power tools in Korea.

Accepted Answer

A)  This increases U.S.net capital outflow and decreases Korean net capital outflow.
B)  This decreases U.S.net capital outflow and increases Korean net capital outflow.
C)  This increases only U.S.net capital outflow.
D)  This increases only Korean net capital outflow.E) A) and B)
F) A) and C)

Question 14

Suppose a country's net capital outflow does not change,but its investment rises by $250 billion.

Accepted Answer

A)  Its saving must have risen by $250 billion so its net exports have risen.
B)  Its saving must have risen by $250 billion,but its net exports are unchanged.
C)  Its saving must have fallen by $250 billion,so its net exports have fallen.
D)  Its saving must have fallen by $250 billion,but its net exports are unchanged.E) A) and D)
F) None of the above

Question 15

If a U.S.shirt maker purchases cotton from Egypt,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) B) and C)
F) All of the above

Question 16

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) A) and B)
F) None of the above

Question 17

Suppose that more British decide to vacation in the U.S.and that the British purchase more U.S.Treasury bonds.Ignoring how payments are made for these purchases,

Accepted Answer

A)  the first action by itself raises U.S.net exports,the second action by itself raises U.S.net capital outflow.
B)  the first action by itself raises U.S.net exports,the second action by itself lowers U.S.net capital outflow.
C)  the first action by itself lowers U.S.net exports,the second action by itself raises U.S.net capital outflow.
D)  the first action by itself lowers U.S.net exports,the second action by itself lowers U.S.net capital outflow.E) A) and C)
F) A) and B)

Question 18

A country has net capital outflow of $40 billion.Which of the following is consistent with this net capital outflow?

Accepted Answer

A)  It has -$40 billion of net exports.
B)  Purchases of foreign assets by domestic residents exceed purchases of domestic assets by foreign residents by $40 billion.
C)  Its saving is $35 billion and its domestic investment is $5 billion.
D)  All of the above are consistent with a net capital outflow of $40 billion.E) None of the above
F) A) and B)

Question 19

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) A) and D)
F) All of the above

Question 20

In an open economy,gross domestic product equals $2,450 billion,consumption expenditure equals $1,390 billion,government expenditure equals $325 billion,investment equals $510 and net capital outflow equals $225 billion.What is national saving?

Accepted Answer

A)  $225 billion
B)  $510 billion
C)  $735 billion
D)  $1,390 billionE) C) and D)
F) A) and B)

Exam 18: Open Economy Macroeconomics Basic Concepts: The International Flows of Goods and Capital

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

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Suppose a country's net capital outflow does not change,but its investment rises by $250 billion.

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Which of the following is correct? Since 1950

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

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If a country's government reduced corruption and reformed its tax system so that businesses found operating there less risky,it's likely that this country's

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In an open economy,gross domestic product equals $2,450 billion,consumption expenditure equals $1,390 billion,government expenditure equals $325 billion,investment equals $510 and net capital outflow equals $225 billion.What is national saving?

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A country sells more goods and services to foreign countries than it buys from them.It has

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A country has $3 billion of domestic investment and net exports of -$2 billion.What is its saving?

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If U.S.residents purchase $600 billion worth of foreign assets and foreigners purchase $300 billion worth of U.S.assets,

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If a country's purchases of foreign assets exceeds foreign purchases of domestic assets,that country has

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Suppose that more British decide to vacation in the U.S.and that the British purchase more U.S.Treasury bonds.Ignoring how payments are made for these purchases,

Correct AnswerverifiedShow Answer

Net capital outflow equals the difference between a country's

Correct AnswerverifiedShow Answer

If a U.S.shirt maker purchases cotton from Egypt,U.S.net exports

Correct AnswerverifiedShow Answer

A U.S.mutual fund buys stocks issued by a Columbian company.This purchase is an example of

Correct AnswerverifiedShow Answer

A U.S.firm opens a factory that produces power tools in Korea.

Correct AnswerverifiedShow Answer

A country has net capital outflow of $40 billion.Which of the following is consistent with this net capital outflow?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A U.S.retailer buys shoes from an Italian company.The Italian firm then uses all of the revenues to buy leather from the U.S.These transactions

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A farmer in Mexico purchases a tractor made in the U.S.This purchase is an example of

Correct AnswerverifiedShow Answer

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