Question 1

If the real exchange rate for coal is 1.5, the price of coal in the U.S. is $50 per ton, and the price of coal in Britain is 20 British pounds per ton, what is the nominal exchange rate?

Accepted Answer

A)   15/4
B)   5/3
C)   3/5
D)   4/15E) B) and D)
F) B) and C)

Question 2

If purchasing-power parity holds, a dollar will buy

Accepted Answer

A)   one unit of each foreign currency.
B)   foreign currency equal to the U.S. price level divided by the foreign country's price level.
C)   enough foreign currency to buy as many goods as it does in the United States.
D)   None of the above is implied by purchasing-power parity.E) B) and C)
F) B) and D)

Question 3

Over the past five decades, the U.S. economy has become

Accepted Answer

A)   more closed.
B)   more open.
C)   less trade-oriented.
D)   more self-sufficient.E) A) and D)
F) None of the above

Question 4

For an economy as a whole, net exports must equal minus one times net capital outflow.

Accepted Answer

A) True 
 B)False

Question 5

Mark, a U.S. citizen, buys stock in a British Shipping company. This purchase is an example of

Accepted Answer

A)   investment for Mark and U.S. foreign direct investment.
B)   investment for Mark and U.S. foreign portfolio investment.
C)   saving for Mark and U.S. foreign direct investment.
D)   saving for Mark and U.S. foreign portfolio investment.E) A) and B)
F) B) and C)

Question 6

If over the next year the price level in Turkey increases and the price level in Japan falls, then the Turkish lira should depreciate relative to the Japanese Yen.

Accepted Answer

A) True 
 B)False

Question 7

If a country has positive net capital outflows, then its net exports are

Accepted Answer

A)   positive, and its saving is larger than its domestic investment.
B)   positive, and its saving is smaller than its domestic investment.
C)   negative, and its saving is larger than its domestic investment.
D)   negative, and its saving is smaller than its domestic investment.E) A) and D)
F) None of the above

Question 8

Other things the same, if a country has a trade deficit and saving rises,

Accepted Answer

A)   net capital outflow rises, so the trade deficit increases.
B)   net capital outflow rises, so the trade deficit decreases.
C)   net capital outflow falls, so the trade deficit increases.
D)   net capital outflow falls, so the trade deficit decreases.E) A) and B)
F) A) and C)

Question 9

If the exchange rate is 70 Bangladesh taka per dollar and a bushel of rice costs 200 taka in Bangladesh and $3 in the United States, then the real exchange rate is

Accepted Answer

A)   greater than one and arbitrageurs could profit by buying rice in the United States and selling it in Bangladesh.
B)   greater than one and arbitrageurs could profit by buying rice in Bangladesh and selling it in the United States.
C)   less than one and arbitrageurs could profit by buying rice in the United States and selling it in Bangladesh.
D)   less than one and arbitrageurs could profit by buying rice in Bangladesh and selling it in the United States.E) None of the above
F) A) and C)

Question 10

According to purchasing power parity, if over the course of a year the price level in the U.S. rises more than in Canada, then which of the following rises?

Accepted Answer

A)   the U.S. real exchange rate, but not the U.S. nominal exchange rate
B)   the U.S. nominal exchange rate, but not the U.S. real exchange rate
C)   the U.S. nominal exchange rate and the U.S. real exchange rate
D)   neither the real exchange rate nor the nominal exchange rateE) None of the above
F) B) and D)

Question 11

In which period was most of the change in U.S. net capital outflow due to an increase in investment in the U.S.?

Accepted Answer

A)   1980-1987
B)   1991-2000
C)   2000-2006
D)   None of the above are correct.E) None of the above
F) B) and C)

Question 12

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

Accepted Answer

A)   nominal exchange rate is equal to one. A dollar buys as many goods in the U.S. as it does overseas.
B)   nominal exchange rate is equal to one. A dollar buys the quantity of foreign currency equal to the U.S. price level divided by the foreign country's price level.
C)   real exchange rate is equal to one. A dollar buys as many goods in the U.S. as it does overseas.
D)   real exchange rate is equal to one. A dollar buys the quantity of foreign currency equal to the U.S. price level divided by the foreign country's price level.E) B) and C)
F) A) and D)

Question 13

According to purchasing power parity which of the following would happen if a country raised its money supply growth rate?

Accepted Answer

A)   its nominal exchange rate would fall
B)   its real exchange rate would fall
C)   its real net exports would rise
D)   All of the above would happen.E) A) and B)
F) A) and C)

Question 14

If the exchange rate is 80 yen per dollar, then a hotel room in Tokyo that costs 25,000 yen costs $200.

Accepted Answer

A) True 
 B)False

Question 15

If the U.S. real exchange rate appreciates, U.S. exports to Europe

Accepted Answer

A)   and European exports to the U.S. both rise.
B)   and European exports to the U.S. both fall.
C)   rise, and European exports to the U.S. fall.
D)   fall, and European exports to the U.S. rise.E) A) and B)
F) All of the above

Question 16

If P = domestic prices, P* = foreign prices, and e is the nominal exchange rate, which of the following is implied by purchasing-power parity?

Accepted Answer

A)   P = e/P*
B)   1 = e/P*
C)   e = P*/P
D)   None of the above is correct.E) A) and C)
F) B) and C)

Question 17

Suppose that money supply growth continues to be higher in Turkey than it is in the United States. What does purchasing-power parity imply will happen to the real and to the nominal exchange rate?

Accepted Answer

Higher money growth leads to higher pric...

Question 18

If a country's net exports fall, then its net capital outflow falls by the same amount.

Accepted Answer

A) True 
 B)False

Question 19

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 million.E) A) and B)
F) A) and C)

Question 20

Perhaps the most dramatic change in the U.S. economy over the past four decades has been the increasing relative importance of international trade and finance.

Accepted Answer

A) True 
 B)False

Exam 13: Open-Economy Macroeconomic Models

Perhaps the most dramatic change in the U.S. economy over the past four decades has been the increasing relative importance of international trade and finance.

Correct AnswerverifiedShow Answer

If purchasing-power parity holds, a dollar will buy

Correct AnswerverifiedShow Answer

According to purchasing power parity which of the following would happen if a country raised its money supply growth rate?

Correct AnswerverifiedShow Answer

If over the next year the price level in Turkey increases and the price level in Japan falls, then the Turkish lira should depreciate relative to the Japanese Yen.

Correct AnswerverifiedShow Answer

Suppose that money supply growth continues to be higher in Turkey than it is in the United States. What does purchasing-power parity imply will happen to the real and to the nominal exchange rate?

Correct AnswerverifiedHigher money growth leads to higher pric...View AnswerShow Answer

If the exchange rate is 70 Bangladesh taka per dollar and a bushel of rice costs 200 taka in Bangladesh and $3 in the United States, then the real exchange rate is

Correct AnswerverifiedShow Answer

In which period was most of the change in U.S. net capital outflow due to an increase in investment in the U.S.?

Correct AnswerverifiedShow Answer

Other things the same, if a country has a trade deficit and saving rises,

Correct AnswerverifiedShow Answer

If P = domestic prices, P* = foreign prices, and e is the nominal exchange rate, which of the following is implied by purchasing-power parity?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to purchasing power parity, if over the course of a year the price level in the U.S. rises more than in Canada, then which of the following rises?

Correct AnswerverifiedShow Answer

If the U.S. real exchange rate appreciates, U.S. exports to Europe

Correct AnswerverifiedShow Answer

If a country's net exports fall, then its net capital outflow falls by the same amount.

Correct AnswerverifiedShow Answer

For an economy as a whole, net exports must equal minus one times net capital outflow.

Correct AnswerverifiedShow Answer

If a country has positive net capital outflows, then its net exports are

Correct AnswerverifiedShow Answer

Over the past five decades, the U.S. economy has become

Correct AnswerverifiedShow Answer

If the real exchange rate for coal is 1.5, the price of coal in the U.S. is $50 per ton, and the price of coal in Britain is 20 British pounds per ton, what is the nominal exchange rate?

Correct AnswerverifiedShow Answer

Mark, a U.S. citizen, buys stock in a British Shipping company. This purchase is an example of

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

If the exchange rate is 80 yen per dollar, then a hotel room in Tokyo that costs 25,000 yen costs $200.

Correct AnswerverifiedShow Answer

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Higher money growth leads to higher pric...
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