Question 1

A U.S. firm exchanges dollars for yen and then uses them to buy Japanese goods. Overall as a result of these transactions

Accepted Answer

A)  both U.S. net capital outflow and U.S. net exports rise.
B)  both U.S. net capital outflow and U.S. net exports fall.
C)  U.S. net capital outflow rises and U.S. net exports fall.
D)  U.S. net capital outflow falls and U.S. net exports rise.E) A) and C)
F) B) and C)

Question 2

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) All of the above

Question 3

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) None of the above
F) All of the above

Question 4

If a country had a trade deficit of $10 billion and then its exports rose by $20 billion and its imports rose by $10 billion, its net exports would now be

Accepted Answer

A)  $0
B)  $10 billion.
C)  -$10 billion.
D)  -$20 billion.E) A) and D)
F) A) and C)

Question 5

If a dollar currently purchases 12.5 pesos and someone forecasts that in a year it will be 14 pesos, then the forecast is given in

Accepted Answer

A)  real terms and implies the dollar will appreciate.
B)  real terms and implies the dollar will depreciate.
C)  nominal terms and implies the dollar will appreciate.
D)  nominal terms and implies the dollar will depreciate.E) A) and B)
F) A) and C)

Question 6

Suppose that a U.S. dollar buys more gold in Australia than it buys in Russia. What does purchasing-power parity imply should happen?

Accepted Answer

People can make a profit by buying gold ...

Question 7

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

Question 8

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

Question 9

If a country had a trade surplus of $100 billion and then its exports rose by $40 billion and its imports rose by $30 billion, its net exports would now be

Accepted Answer

A)  $110 billion
B)  $90 billion.
C)  $70 billion.
D)  $60 billion.E) C) and D)
F) A) and D)

Question 10

A country has a trade deficit. Its

Accepted Answer

A)  net capital outflow must be positive, and saving is larger than investment.
B)  net capital outflow must be positive and saving is smaller than investment.
C)  net capital outflow must be negative and saving is larger than investment.
D)  net capital outflow must be negative and saving is smaller than investment.E) A) and C)
F) A) and D)

Question 11

Purchasing-power parity theory does not hold at all times because

Accepted Answer

A)  many goods are not easily transported.
B)  the same goods produced in different countries may be imperfect substitutes for each other.
C)  Both a and b are correct.
D)  prices are different across countries.E) None of the above
F) B) and C)

Question 12

If saving is less than domestic investment, then

Accepted Answer

A)  there is a trade deficit and Y > C + I + G.
B)  there is a trade deficit and Y 
C)  there is a trade surplus and Y > C + I + G.
D)  there is a trade surplus and Y < C + I + G.E) All of the above
F) A) and B)

Question 13

The nominal exchange rate is the

Accepted Answer

A)  nominal interest rate in one country divided by the nominal interest rate in the other country.
B)  the ratio of a foreign country's interest rate to the domestic interest rate.
C)  rate at which a person can trade the currency of one country for another.
D)  the real exchange rate minus the inflation rate.E) All of the above
F) A) and D)

Question 14

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

Question 15

If a lobster in Maine costs $10 and that the same type of lobster in Massachusetts costs $30, then people could make a profit by

Accepted Answer

A)  buying lobsters in Maine and selling them in Massachusetts. This action would increase the price of lobster in Massachusetts.
B)  buying lobsters in Maine and selling them in Massachusetts. This action would decrease the price of lobster in Massachusetts.
C)  buying lobsters in Massachusetts and selling them in Maine. This action would increase the price of lobster in Massachusetts.
D)  buying lobsters in Massachusetts and selling them in Maine. This action would decrease the price of lobster in Massachusetts.E) A) and C)
F) A) and B)

Question 16

On behalf of your firm, you make frequent trips to Singapore. You notice that you always have to pay more dollars to get enough local currency to get your nails manicured than you have to pay to get manicured in the United States. This is

Accepted Answer

A)  inconsistent with purchasing-power parity, but might be explained by limited opportunities for arbitrage in manicuring across international borders.
B)  consistent with purchasing-power parity if prices in Hong Kong are rising more rapidly than prices in the United States.
C)  consistent with purchasing-power parity if prices in Hong Kong are rising less rapidly than prices in the United States.
D)  None of the above is correct.E) C) and D)
F) B) and D)

Question 17

If Walmart buys $50 million worth of consumer goods from China and sells them in the U.S., and China uses the $50 million to purchase U.S. bonds, U.S. net exports and U.S. net capital outflow both fall.

Accepted Answer

A) True 
 B)False

Question 18

If the exchange rate were 5 Egyptian pounds per U.S. dollar, a watch that costs $25 US dollars would cost

Accepted Answer

A)  125 Egyptian pounds
B)  50 Egyptian pounds
C)  5 Egyptian pounds
D)  None of the above is correct.E) All of the above
F) None of the above

Question 19

If a nation is selling more goods and services to foreigners than it is buying from them, then on net it must be selling assets abroad.

Accepted Answer

A) True 
 B)False

Question 20

In the U.S. a candy bar costs $1. If the nominal exchange rate were 6 Chinese yuan per dollar and the real exchange rate were 1.2, then, what would be the price of a candy bar in China?

Accepted Answer

A)  7.2 yuan
B)  6 yuan
C)  5 yuan
D)  3.6 yuanE) C) and D)
F) A) and B)

Exam 18: Open-Economy Macroeconomic Models

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

Correct AnswerverifiedShow Answer

The nominal exchange rate is the

Correct AnswerverifiedShow Answer

If a country had a trade surplus of $100 billion and then its exports rose by $40 billion and its imports rose by $30 billion, its net exports would now be

Correct AnswerverifiedShow Answer

If a country has a trade surplus

Correct AnswerverifiedShow Answer

A country has a trade deficit. Its

Correct AnswerverifiedShow Answer

On behalf of your firm, you make frequent trips to Singapore. You notice that you always have to pay more dollars to get enough local currency to get your nails manicured than you have to pay to get manicured in the United States. This is

Correct AnswerverifiedShow Answer

Suppose that a U.S. dollar buys more gold in Australia than it buys in Russia. What does purchasing-power parity imply should happen?

Correct AnswerverifiedPeople can make a profit by buying gold ...View AnswerShow 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

A U.S. firm exchanges dollars for yen and then uses them to buy Japanese goods. Overall as a result of these transactions

Correct AnswerverifiedShow Answer

If a nation is selling more goods and services to foreigners than it is buying from them, then on net it must be selling assets abroad.

Correct AnswerverifiedShow Answer

Purchasing-power parity theory does not hold at all times because

Correct AnswerverifiedShow Answer

If a dollar currently purchases 12.5 pesos and someone forecasts that in a year it will be 14 pesos, then the forecast is given in

Correct AnswerverifiedShow Answer

If the exchange rate were 5 Egyptian pounds per U.S. dollar, a watch that costs $25 US dollars would cost

Correct AnswerverifiedShow Answer

In the U.S. a candy bar costs $1. If the nominal exchange rate were 6 Chinese yuan per dollar and the real exchange rate were 1.2, then, what would be the price of a candy bar in China?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If saving is less than domestic investment, then

Correct AnswerverifiedShow Answer

If a country had a trade deficit of $10 billion and then its exports rose by $20 billion and its imports rose by $10 billion, its net exports would now be

Correct AnswerverifiedShow Answer

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

If Walmart buys $50 million worth of consumer goods from China and sells them in the U.S., and China uses the $50 million to purchase U.S. bonds, U.S. net exports and U.S. net capital outflow both fall.

Correct AnswerverifiedShow Answer

If a lobster in Maine costs $10 and that the same type of lobster in Massachusetts costs $30, then people could make a profit by

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
People can make a profit by buying gold ...
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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified