Question 1

Other things the same,if a country's domestic investment decreases,then

Accepted Answer

A)   net capital outflow rises,so net exports rise.
B)   net capital outflow rises,so net exports fall.
C)   net capital outflow falls,so net exports rise.
D)   net capital outflow falls,so net exports fall.E) None of the above
F) A) and D)

Question 2

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

Question 3

If purchasing power parity holds,the price level in the U.S.is 120,and the price level in Canada is 140,which of the following is true?

Accepted Answer

A)   the real exchange rate is 120/140.
B)   the real exchange rate is 140/120.
C)   the nominal exchange rate is 120/140
D)   the nominal exchange rate is 140/120E) A) and B)
F) None of the above

Question 4

If the real exchange rate of the U.S.dollar falls,U.S.net exports will fall.

Accepted Answer

A) True 
 B)False

Question 5

When making investment decisions,investors

Accepted Answer

A)   compare the real interest rates offered on different bonds.
B)   compare the nominal,but not the real,interest rates offered on different bonds.
C)   purchase the highest-priced bond available.
D)   All of the above are correct.E) B) and D)
F) B) and C)

Question 6

The nominal exchange rate is about 2 Aruban florin per dollar.If a basket of goods in the United States costs $40,how many florins must a basket of goods in Aruba cost for purchasing power parity to hold?

Accepted Answer

A)   20 florin
B)   40 florin
C)   60 florin
D)   80 florinE) B) and C)
F) C) and D)

Question 7

From 1980 to 1987

Accepted Answer

A)   foreigners were buying more capital assets from the United States than Americans were buying abroad.The United States was going into debt.
B)   Americans were buying more capital assets abroad than foreigners were buying from the United States.The United States was going into debt.
C)   foreigners were buying more capital assets from the United States than Americans were buying abroad.The United States was moving into surplus.
D)   Americans were buying more capital assets abroad than foreigners were buying from the United States.The United States was moving into surplus.E) A) and D)
F) None of the above

Question 8

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

Accepted Answer

A)   Albert,a German citizen,buys stock in a U.S.computer company.
B)   Larry,a citizen of Ireland,opens a fish and chips restaurant in the United States.
C)   Nancy,a U.S.citizen,buys bonds issued by a Japanese bank.
D)   Dustin,a U.S.citizen,opens a country-western tavern in New Zealand.E) A) and C)
F) A) and B)

Question 9

Greg,a U.S.citizen,opens an ice cream store in Bermuda.His 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) None of the above

Question 10

According to purchasing-power parity,if prices in the United States increase by a smaller percentage than prices in Poland,then

Accepted Answer

A)   the real exchange defined as Polish goods per unit of U.S.goods rises.
B)   the real exchange defined as Polish goods per unit of U.S.goods falls.
C)   the nominal exchange rate defined as Polish currency per dollar rises.
D)   the nominal exchange rate defined as Polish currency per dollar falls.E) A) and C)
F) A) and D)

Question 11

The country of Sylvania has a GDP of $900,investment of $200,government purchases of $200,and net capital outflow of -$100.What is consumption?

Accepted Answer

A)   $700
B)   $600
C)   $500
D)   $300E) None of the above
F) A) and D)

Question 12

Many economists believe that the theory of purchasing-power parity describes the forces that determine exchange rates in the long run.

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 equations is always correct in an open economy?

Accepted Answer

A)   I = Y - C
B)   I = S
C)   I = S - NCO
D)   I = S + NXE) A) and C)
F) B) and C)

Question 15

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 C)
F) C) and D)

Question 16

According to the theory of purchasing-power parity,the nominal exchange rate between two countries must reflect the differing

Accepted Answer

A)   price levels in those countries.
B)   resource endowments in those countries.
C)   income levels in those countries.
D)   standards of living between those countries.E) None of the above
F) A) and C)

Question 17

Table 31-1
 
-Refer to Table 31-1.What are Argentina's exports?

Accepted Answer

A)   $60 billion
B)   $35 billion
C)   $10 billion
D)   None of the above are correct.E) None of the above
F) A) and D)

Question 18

A roll of duct tape costs 2 Canadian dollars in Canada and 3 U.S.dollars in the U.S.If the nominal exchange rate is .80 Canadian dollars per U.S.dollar.

Accepted Answer

A)   A profit could be made by buying duct tape in Canada and selling it in the U.S.This would tend to drive up the price of U.S.duct tape.
B)   A profit could be made by buying duct tape in Canada and selling it in the U.S.This would tend to drive up the price of Canadian duct tape.
C)   A profit could be made by buying duct tape in the U.S.and selling it in Canada.This would tend to drive up the price of U.S.duct tape.
D)   A profit could be made by buying duct tape in the U.S.and selling it in Canada.This would tend to drive up the price of Canadian duct tape.E) A) and B)
F) A) and C)

Question 19

If a country has net exports of $9 billion and sold $50 billion of goods and services abroad,then it has

Accepted Answer

A)   $59 billion of imports and $50 billion of exports.
B)   $59 billion of exports and $50 billion of imports.
C)   $50 billion of imports and $41 billion of exports.
D)   $50 billion of exports and $41 billion of imports.E) C) and D)
F) None of the above

Question 20

Net capital outflow is the purchase of domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.

Accepted Answer

A) True 
 B)False

Exam 31: Open-Economy Macroeconomics: Basic Concepts

When making investment decisions,investors

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If a country has net exports of $9 billion and sold $50 billion of goods and services abroad,then it has

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If purchasing power parity holds,the price level in the U.S.is 120,and the price level in Canada is 140,which of the following is true?

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Which of the following equations is always correct in an open economy?

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According to the theory of purchasing-power parity,the nominal exchange rate between two countries must reflect the differing

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Table 31-1 -Refer to Table 31-1.What are Argentina's exports?

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From 1980 to 1987

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The country of Sylvania has a GDP of $900,investment of $200,government purchases of $200,and net capital outflow of -$100.What is consumption?

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Many economists believe that the theory of purchasing-power parity describes the forces that determine exchange rates in the long run.

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Greg,a U.S.citizen,opens an ice cream store in Bermuda.His expenditures are U.S.

Correct AnswerverifiedShow Answer

Other things the same,if a country's domestic investment decreases,then

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

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

Correct AnswerverifiedShow Answer

According to purchasing-power parity,if prices in the United States increase by a smaller percentage than prices in Poland,then

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A roll of duct tape costs 2 Canadian dollars in Canada and 3 U.S.dollars in the U.S.If the nominal exchange rate is .80 Canadian dollars per U.S.dollar.

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The nominal exchange rate is about 2 Aruban florin per dollar.If a basket of goods in the United States costs $40,how many florins must a basket of goods in Aruba cost for purchasing power parity to hold?

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Net capital outflow is the purchase of domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.

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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

If the real exchange rate of the U.S.dollar falls,U.S.net exports will fall.

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

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Start from the national income accountin...
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