Question 1

The real exchange rate is the nominal exchange rate, defined as foreign currency per dollar, times

Accepted Answer

A)   U.S. prices minus foreign prices.
B)   prices in the United States divided by foreign prices.
C)   foreign prices divided by U.S. prices.
D)   None of the above is correct.E) C) and D)
F) A) and B)

Question 2

If a country has a trade surplus

Accepted Answer

A)   it has positive net exports and positive net capital outflow.
B)   it has positive net exports and negative net capital outflow.
C)   it has negative net exports and positive net capital outflow.
D)   it has negative net exports and negative net capital outflow.E) None of the above
F) A) and C)

Question 3

A Japanese flour mill buys wheat from the United States and pays for it with pesos. Other things the same, Japanese

Accepted Answer

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

Question 4

It is possible for a country to have domestic investment that exceeds national saving.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A)   Joan, a U.S. citizen, buys bonds issued by a Swedish corporation.
B)   Russell, a U.S. citizen, opens a dairy in Italy.
C)   Both A and B are examples of U.S. portfolio investment.
D)   Neither A nor B are examples of U.S. portfolio investment.E) A) and B)
F) B) and C)

Question 6

When Ghana sells chocolate to the United States, 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 7

If the exchange rate changes from 148 Kazakhstan tenge per dollar to 155 Kazakhstan tenge per dollar, the dollar has

Accepted Answer

A)   appreciated. Other things the same, it now takes fewer dollars to buy Kazakhstani goods.
B)   appreciated. Other things the same, it now takes more dollars to buy Kazakhstani goods.
C)   depreciated. Other things the same, it now takes fewer dollars to buy Kazakhstani goods.
D)   depreciated. Other things the same, it now takes more dollars to buy Kazakhstani goods.E) None of the above
F) All of the above

Question 8

If a U.S. firm buys Chinese toys using previously obtained Chinese currency, then both U.S. net exports and U.S. net capital outflow decrease.

Accepted Answer

A) True 
 B)False

Question 9

Suppose that purchases of Irish assets by foreigners exceed Irish purchases of foreign assets. Ireland has

Accepted Answer

A)   positive net capital outflow and a trade surplus.
B)   positive net capital outflow and a trade deficit.
C)   negative net capital outflow and a trade surplus.
D)   negative net capital outflow and a trade deficit.E) B) and C)
F) C) and D)

Question 10

After the 1980s, U.S. net capital outflow was

Accepted Answer

A)   negative, meaning that foreigners were buying more capital assets from the United States than Americans were buying abroad.
B)   negative, meaning that Americans were buying more capital assets abroad than foreigners were buying from the United States.
C)   positive, meaning that foreigners were buying more capital assets from the United States than Americans were buying abroad.
D)   positive, meaning that Americans were buying more capital assets abroad than foreigners were buying from the United States.E) B) and C)
F) A) and D)

Question 11

A country's trade balance

Accepted Answer

A)   must be zero.
B)   must be greater than zero.
C)   is greater than zero only if exports are greater than imports.
D)   is greater than zero only if imports are greater than exports.E) B) and C)
F) A) and B)

Question 12

If a country has $2.4 billion of net exports and purchases $4.8 billion of goods and services from foreign countries, then it has

Accepted Answer

A)   $7.2 billion of exports and $4.8 billion of imports.
B)   $7.2 billion of imports and $4.8 billion of exports.
C)   $4.8 billion of exports and $2.4 billion of imports.
D)   $4.8 billion of imports and $2.4 billion of exports.E) None of the above
F) B) and D)

Question 13

U.S. exports are $400 billion, U.S. imports are $900 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 of foreign assets and foreign countries purchase $300 of U.S. assets.
B)   The U.S. has a trade surplus. The U.S. purchases $300 of foreign assets and foreign countries purchase $800 of U.S. assets.
C)   The U.S has a trade deficit. The U.S. purchases $800 of foreign assets and foreign countries purchase $300 of U.S. assets.
D)   The U.S. has a trade deficit. The U.S. purchases $300 of foreign assets and foreign countries purchase $800 of U.S. asset.E) A) and D)
F) A) and C)

Question 14

If the U.S. price level is increasing by 3 percent annually and the Swiss price level is increasing by 2 percent annually, by about what percent would the price of a dollar in terms of Swiss francs need to change according to purchasing power parity?

Accepted Answer

A)   decrease by 5 percent
B)   decrease by 1 percent
C)   increase by 5 percent
D)   increase by 1 percentE) B) and C)
F) B) and D)

Question 15

When U.S. national saving rises, domestic investment also necessarily rises.

Accepted Answer

A) True 
 B)False

Question 16

Most of the change from 1980 to 1987 in U.S. net capital outflow as a percent of GDP was due to a(n)

Accepted Answer

A)   decrease in U.S. investment.
B)   decrease in U.S. national saving.
C)   increase in U.S. investment.
D)   increase in U.S. national saving.E) C) and D)
F) A) and D)

Question 17

In the United States, a three-pound can of coffee costs about $5. If the exchange rate is about 0.8 euros per dollar and a three-pound can of coffee in Belgium costs about 7 euros. What is the real exchange rate?

Accepted Answer

A)   7/4 cans of Belgian coffee per can of U.S. coffee
B)   5.6/5 cans of Belgian coffee per can of U.S. coffee
C)   5/5.6 cans of Belgian coffee per can of U.S. coffee
D)   4/7 cans of Belgian coffee per can of U.S. coffeeE) B) and D)
F) A) and D)

Question 18

Stacey, a U.S. citizen, buys a bond issued by an Italian pasta manufacturer.

Accepted Answer

A)   This purchase is foreign direct investment. By itself it increases U.S. net capital outflow.
B)   This purchase is foreign direct investment. By itself it decreases U.S. net capital outflow.
C)   This purchase is foreign portfolio investment. By itself it increases U.S. net capital outflow.
D)   This purchase is foreign portfolio investment. By itself it decreases U.S. net capital outflow.E) B) and D)
F) A) and B)

Question 19

If the exchange rate is 8 Moroccan dirhams per U.S. dollars, a crate of oranges costs 400 dirhams in the Moroccan capital of Rabat, and a similar crate of oranges in Miami sells for $45 dollars, then

Accepted Answer

A)   the real exchange rate is greater than one and arbitrageurs could profit by buying oranges in the United States and selling them in Morocco.
B)   the real exchange rate is greater than one and arbitrageurs could profit by buying oranges in Morocco and selling them in the United States.
C)   the real exchange rate is less than one and arbitrageurs could profit by buying oranges in the United States and selling them in Morocco.
D)   the real exchange rate is less than one and arbitrageurs could profit by buying oranges in Morocco and selling them in the United States.E) B) and C)
F) None of the above

Question 20

Other things the same, a country could move from having a trade deficit to having a trade surplus 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) A) and C)

Exam 13: Open-Economy Macroeconomic Models

If a U.S. firm buys Chinese toys using previously obtained Chinese currency, then both U.S. net exports and U.S. net capital outflow decrease.

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In the United States, a three-pound can of coffee costs about $5. If the exchange rate is about 0.8 euros per dollar and a three-pound can of coffee in Belgium costs about 7 euros. What is the real exchange rate?

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U.S. exports are $400 billion, U.S. imports are $900 billion. Which of the following are consistent with the level of net exports?

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If a country has $2.4 billion of net exports and purchases $4.8 billion of goods and services from foreign countries, then it has

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A country's trade balance

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Stacey, a U.S. citizen, buys a bond issued by an Italian pasta manufacturer.

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

Correct AnswerverifiedShow Answer

When U.S. national saving rises, domestic investment also necessarily rises.

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When Ghana sells chocolate to the United States, U.S. net exports

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

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If the exchange rate is 8 Moroccan dirhams per U.S. dollars, a crate of oranges costs 400 dirhams in the Moroccan capital of Rabat, and a similar crate of oranges in Miami sells for $45 dollars, then

Correct AnswerverifiedShow Answer

The real exchange rate is the nominal exchange rate, defined as foreign currency per dollar, times

Correct AnswerverifiedShow Answer

If the U.S. price level is increasing by 3 percent annually and the Swiss price level is increasing by 2 percent annually, by about what percent would the price of a dollar in terms of Swiss francs need to change according to purchasing power parity?

Correct AnswerverifiedShow Answer

If the exchange rate changes from 148 Kazakhstan tenge per dollar to 155 Kazakhstan tenge per dollar, the dollar has

Correct AnswerverifiedShow Answer

Suppose that purchases of Irish assets by foreigners exceed Irish purchases of foreign assets. Ireland has

Correct AnswerverifiedShow Answer

After the 1980s, U.S. net capital outflow was

Correct AnswerverifiedShow Answer

If a country has a trade surplus

Correct AnswerverifiedShow Answer

Most of the change from 1980 to 1987 in U.S. net capital outflow as a percent of GDP was due to a(n)

Correct AnswerverifiedShow Answer

It is possible for a country to have domestic investment that exceeds national saving.

Correct AnswerverifiedShow Answer

A Japanese flour mill buys wheat from the United States and pays for it with pesos. Other things the same, Japanese

Correct AnswerverifiedShow Answer

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