Question 1

In the U.S. a digital camera costs $200. The same camera in London sells for 90 pounds. If the exchange rate were .50 pounds per dollar, then which of the following would be correct?

Accepted Answer

A)   The real exchange rate is greater than 1. A person in London with $200 could exchange them for pounds and have more than enough to buy the camera there.
B)   The real exchange rate is greater than 1. A person in London with $200 could exchange them for pounds but then wouldn't have enough to buy the camera there.
C)   The real exchange rate is less than 1. A person in London with $200 could exchange them for pounds and have more than enough to buy the camera there.
D)   The real exchange rate is less than 1. A person in London with $200 could exchange them for pounds but then wouldn't have enough to buy the camera.E) C) and D)
F) B) and C)

Question 2

If U.S. consumers decrease their demand for cellphones from Finland, then other things the same Finland's

Accepted Answer

A)   exports and net exports fall.
B)   exports fall and net exports rise.
C)   imports and net exports fall.
D)   imports fall and net exports rise.E) None of the above
F) C) and D)

Question 3

Table 13-2
 
-Refer to Table 13-2. In real terms, U.S. goods are more expensive than goods in which country(ies) ?

Accepted Answer

A)   Bolovia and Morocco
B)   Japan, Norway, and Thailand
C)   Japan and Norway
D)   ThailandE) None of the above
F) B) and C)

Question 4

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) C) and D)

Question 5

If a dollar buys more potatoes in the U.S. than in France, then

Accepted Answer

A)   the real exchange rate is greater than 1; a profit might be made by buying potatoes in the U.S. and selling them in France.
B)   the real exchange rate is greater than 1; a profit might be made by buying potatoes in France. and selling them in the U.S.
C)   the real exchange rate is less than 1; a profit might be made by buying potatoes in the U.S. and selling them in France.
D)   the real exchange rate is less than 1; a profit might be made by buying potatoes in France and selling them in the U.S.E) B) and D)
F) A) and B)

Question 6

Suppose a lobster supper in Maine costs fewer dollars than a Lobster supper in Paris, France. Explain why this is inconsistent with purchasing-power parity and explain why the inconsistency may exist.

Accepted Answer

According to purchasing-power parity, a ...

Question 7

Table 13-2
 
-Refer to Table 13-2. Which currency(ies)  is(are)  less valuable than predicted by the doctrine of purchasing-power parity?

Accepted Answer

A)   boloviano and dinar
B)   yen and kroner
C)   baht and kroner
D)   bahtE) B) and C)
F) A) and D)

Question 8

If the exchange rate is 3 units of Peruvian currency per dollar and a hotel room in Lima costs 300 units of Peruvian currency, then how many dollars do you need to get a room?

Accepted Answer

A)   900 and your purchase will increase Peru's net exports.
B)   100 and your purchase will increase Peru's net exports.
C)   900 and your purchase will have no effect on Peru's net exports.
D)   100 and your purchase will have no effect on Peru's net exports.E) B) and D)
F) A) and D)

Question 9

Reductions in transportation costs help explain the increase in U.S. trade flows.

Accepted Answer

A) True 
 B)False

Question 10

A country has $60 million of saving and domestic investment of $40 million. Net exports are

Accepted Answer

A)   $20 million.
B)   -$20 million.
C)   $100 million.
D)   -$100 million.E) A) and D)
F) All of the above

Question 11

If a Dutch firm buys goods from a U.S. firm with dollars it obtains by exchanging euros for dollars, both U.S. net exports and U.S. net capital outflow increase.

Accepted Answer

A) True 
 B)False

Question 12

In the 1970s and 1980s the U.S. dollar depreciated against the German mark and appreciated against the Italian lira because U.S. inflation was lower than in Germany but higher than in Italy.

Accepted Answer

A) True 
 B)False

Question 13

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 14

Which of the following could be a consequence of a depreciation of the U.S. real exchange rate?

Accepted Answer

A)   John, a French citizen, decides that Iowa pork has become too expensive and cancels his order.
B)   Nick, a U.S. citizen, decides that the trip to Nepal he's been thinking about is now made affordable by the depreciation.
C)   Roberta, a U.S. citizen, decides to import fewer windshield wipers for her auto parts company.
D)   All of the above are correct.E) All of the above
F) B) and C)

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

If a country changes its corporate tax laws so that domestic businesses build and manage more business in other countries, then the net capital outflow of that country

Accepted Answer

A)   and the net capital outflow of other countries rise.
B)   rises and the net capital outflow of other countries fall.
C)   falls and the net capital outflow of other countries rise.
D)   None of the above are correct.E) A) and D)
F) C) and D)

Question 17

How do the nominal exchange rate and the real exchange rate differ?

Accepted Answer

The nominal exchange rate is the rate at...

Question 18

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

Accepted Answer

A)   gains value both in terms of the domestic goods and services it can buy and in terms of the foreign currency it can buy.
B)   gains value in terms of the domestic goods and services it can buy, but loses value in terms of the foreign currency it can buy.
C)   loses value in terms of the domestic goods and services it can buy, but gains value in terms of the foreign currency it can buy.
D)   loses value both in terms of the domestic goods and services it can buy and in terms of the foreign currency it can buy.E) A) and B)
F) A) and C)

Question 19

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

Question 20

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

Accepted Answer

A)   A Swedish car manufacturer opens a plant in Tennessee.
B)   A Dutch citizen buys shares of stock in a U.S. company.
C)   A U.S. based restaurant chain opens new restaurants in India.
D)   A U.S. citizen buys stock in companies located in Japan.E) C) and D)
F) A) and C)

Exam 13: Open-Economy Macroeconomic Models

If U.S. consumers decrease their demand for cellphones from Finland, then other things the same Finland's

Correct AnswerverifiedShow Answer

If a dollar buys more potatoes in the U.S. than in France, then

Correct AnswerverifiedShow Answer

Table 13-2 -Refer to Table 13-2. Which currency(ies) is(are) less valuable than predicted by the doctrine of purchasing-power parity?

Correct AnswerverifiedShow Answer

Which of the following could be a consequence of a depreciation of the U.S. real exchange rate?

Correct AnswerverifiedShow Answer

From 1970 to 1998 the U.S. dollar

Correct AnswerverifiedShow Answer

If the exchange rate is 3 units of Peruvian currency per dollar and a hotel room in Lima costs 300 units of Peruvian currency, then how many dollars do you need to get a room?

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

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

Correct AnswerverifiedShow Answer

Suppose a lobster supper in Maine costs fewer dollars than a Lobster supper in Paris, France. Explain why this is inconsistent with purchasing-power parity and explain why the inconsistency may exist.

Correct AnswerverifiedAccording to purchasing-power parity, a ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If a Dutch firm buys goods from a U.S. firm with dollars it obtains by exchanging euros for dollars, both U.S. net exports and U.S. net capital outflow increase.

Correct AnswerverifiedShow Answer

In the 1970s and 1980s the U.S. dollar depreciated against the German mark and appreciated against the Italian lira because U.S. inflation was lower than in Germany but higher than in Italy.

Correct AnswerverifiedShow Answer

Table 13-2 -Refer to Table 13-2. In real terms, U.S. goods are more expensive than goods in which country(ies) ?

Correct AnswerverifiedShow Answer

A country has $60 million of saving and domestic investment of $40 million. Net exports are

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

How do the nominal exchange rate and the real exchange rate differ?

Correct AnswerverifiedThe nominal exchange rate is the rate at...View AnswerShow Answer

In the U.S. a digital camera costs $200. The same camera in London sells for 90 pounds. If the exchange rate were .50 pounds per dollar, then which of the following would be correct?

Correct AnswerverifiedShow Answer

If a country changes its corporate tax laws so that domestic businesses build and manage more business in other countries, then the net capital outflow of that country

Correct AnswerverifiedShow Answer

Reductions in transportation costs help explain the increase in U.S. trade flows.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Start from the national income accountin...
View Answer

Correct Answer
verified

Correct Answer
verified
According to purchasing-power parity, a ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The nominal exchange rate is the rate at...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified