Question 1

Bolivia buys railroad engines from a U.S. firm and pays for them with Bolivianos (Bolivian currency) . By itself, this exchange

Accepted Answer

A)   increases both U.S. net exports and U.S. net capital outflow.
B)   decreases both U.S. net exports and U.S. net capital outflow.
C)   increases U.S. net exports and does not affect U.S. net capital outflow.
D)   None of the above is correct.E) B) and C)
F) C) and D)

Question 2

When Claudia, a U.S. citizen, purchases a handbag made in France, the purchase is

Accepted Answer

A)   both a U.S. and French import.
B)   a U.S. export and a French import.
C)   a U.S. import and a French export.
D)   neither an export nor an import for either country.E) A) and B)
F) C) and D)

Question 3

Jason plans to buy shrimp in Florida and sell them in Manhattan, Kansas where the price is higher. Jason plans to engage in arbitrage.

Accepted Answer

A) True 
 B)False

Question 4

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) All of the above

Question 5

The nominal exchange rate is .80 euros per dollar and the real exchange rate is 4/3. Which of the following prices for a particular good are consistent with these exchange rates?

Accepted Answer

A)   $4 in the U.S. and 3 euros in Italy.
B)   $4 in the U.S. and 3.75 euros in Italy.
C)   $5 in the U.S. and 3 euros in Italy.
D)   $6 in the U.S. and 2.50 euros in Italy.E) A) and B)
F) A) and C)

Question 6

If a country had a trade surplus of $50 billion and then its exports rose by $30 billion and its imports rose by $20 billion, its net exports would now be

Accepted Answer

A)   $0 billion.
B)   $20 billion.
C)   $40 billion.
D)   $60 billion.E) A) and C)
F) B) and C)

Question 7

Suppose the real exchange rate is .80 pounds of bananas in Guatemala per pound of bananas in the U.S. If a pound of bananas in the U.S. costs $.50, and the exchange rate is 8 Guatemalan Quetzals per dollar, what is the price of bananas in Guatemala?

Accepted Answer

A)   3.20 Quetzals per pound
B)   4.00 Quetzals per pound
C)   5.00 Quetzals per pound
D)   6.40 Quetzals per poundE) B) and C)
F) C) and D)

Question 8

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) A) and B)

Question 9

Sheri, a U.S. citizen, builds and operates a bookstore in Spain. This action is an example of

Accepted Answer

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

Question 10

If you are vacationing in France and the dollar depreciates relative to the euro, then

Accepted Answer

A)   the dollar buys more euros. It will take fewer dollars to buy a good that costs 50 euros.
B)   the dollar buys more euros. It will take more dollars to buy a good that costs 50 euros.
C)   the dollar buys fewer euros. It will take fewer dollars to buy a good that costs 50 euros.
D)   the dollar buys fewer euros. It will take more dollars to buy a good that costs 50 euros.E) A) and B)
F) B) and C)

Question 11

How do we find the real exchange rate from the nominal exchange rate?

Accepted Answer

Real Exchange Rate =...

Question 12

If the dollar buys less cotton in Egypt than in the United States, then traders could make a profit by

Accepted Answer

A)   buying cotton in the United States and selling it in Egypt, which would tend to raise the price of cotton in the United States.
B)   buying cotton in the United States and selling it in Egypt, which would tend to raise the price of cotton in Egypt.
C)   buying cotton in Egypt and selling it in the United States, which would tend to raise the price of cotton in Egypt.
D)   buying cotton in Egypt and selling it in the United States, which would tend to raise the price of cotton in the United States.E) A) and B)
F) All of the above

Question 13

If a country has business opportunities that are relatively attractive to other countries, we would expect it to have

Accepted Answer

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

Question 14

If the unit of foreign currency is the peso, in which case is the real exchange rate 1.2?

Accepted Answer

A)   the U.S. price is $2, the foreign price is 5 pesos, and the exchange rate is 3 pesos per dollar.
B)   the U.S. price is $3, the foreign price is 18 pesos, and the exchange rate is 5 pesos per dollar.
C)   the U.S. price is $5, the foreign price 12 pesos, and the exchange rate is 2 pesos per dollar.
D)   the U.S. price is $10, the foreign price is 3 pesos, and the exchange rate is 4 pesos per dollar.E) A) and B)
F) A) and C)

Question 15

To increase domestic investment, a country must increase its saving.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A)   real exchange rate is equal to one.
B)   nominal exchange rate is equal to one.
C)   real exchange rate is equal to the nominal exchange rate.
D)   real exchange rate is equal to the difference in inflation rates between the two countries.E) A) and D)
F) None of the above

Question 18

Suppose a Starbucks tall latte cost $4.00 in the United States and 3.20 euros in the Euro area. Also, suppose a McDonald's Big Mac costs $3.50 in the United States and 2.45 euros in Euro area. If the nominal exchange rate is .80 euros per dollar, which goods have prices that are consistent with purchasing power parity?

Accepted Answer

A)   Both the tall latte and the Big Mac.
B)   Neither the tall latte nor the Big Mac.
C)   The tall latte but not the Big Mac.
D)   The Big Mac but not the tall latte.E) B) and C)
F) All of the above

Question 19

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 B)
F) C) and D)

Question 20

A British grocery chain uses previously obtained U.S. dollars to purchase apples from the United States. This transaction

Accepted Answer

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

Exam 13: Open-Economy Macroeconomic Models

Sheri, a U.S. citizen, builds and operates a bookstore in Spain. This action is an example of

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

How do we find the real exchange rate from the nominal exchange rate?

Correct Answer
verified
Real Exchange Rate =...
View Answer

Bolivia buys railroad engines from a U.S. firm and pays for them with Bolivianos (Bolivian currency) . By itself, this exchange

Correct Answer
verified

If a country had a trade surplus of $50 billion and then its exports rose by $30 billion and its imports rose by $20 billion, its net exports would now be

Correct Answer
verified

If the unit of foreign currency is the peso, in which case is the real exchange rate 1.2?

Correct Answer
verified

Jason plans to buy shrimp in Florida and sell them in Manhattan, Kansas where the price is higher. Jason plans to engage in arbitrage.

Correct Answer
verified

When Claudia, a U.S. citizen, purchases a handbag made in France, the purchase is

Correct Answer
verified

To increase domestic investment, a country must increase its saving.

Correct Answer
verified

Suppose the real exchange rate is .80 pounds of bananas in Guatemala per pound of bananas in the U.S. If a pound of bananas in the U.S. costs $.50, and the exchange rate is 8 Guatemalan Quetzals per dollar, what is the price of bananas in Guatemala?

Correct Answer
verified

From 1980 to 1987

Correct Answer
verified

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

Correct Answer
verified

A country has a trade deficit. Its

Correct Answer
verified

The nominal exchange rate is .80 euros per dollar and the real exchange rate is 4/3. Which of the following prices for a particular good are consistent with these exchange rates?

Correct Answer
verified

If you are vacationing in France and the dollar depreciates relative to the euro, then

Correct Answer
verified

A British grocery chain uses previously obtained U.S. dollars to purchase apples from the United States. This transaction

Correct Answer
verified

If the dollar buys less cotton in Egypt than in the United States, then traders could make a profit by

Correct Answer
verified

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

Correct Answer
verified

If a country has business opportunities that are relatively attractive to other countries, we would expect it to have

Correct Answer
verified

Exam 13: Open-Economy Macroeconomic Models

Sheri, a U.S. citizen, builds and operates a bookstore in Spain. This action is an example of

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 buying assets abroad.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

How do we find the real exchange rate from the nominal exchange rate?

Correct AnswerverifiedReal Exchange Rate =...View AnswerShow Answer

Bolivia buys railroad engines from a U.S. firm and pays for them with Bolivianos (Bolivian currency) . By itself, this exchange

Correct AnswerverifiedShow Answer

If a country had a trade surplus of $50 billion and then its exports rose by $30 billion and its imports rose by $20 billion, its net exports would now be

Correct AnswerverifiedShow Answer

If the unit of foreign currency is the peso, in which case is the real exchange rate 1.2?

Correct AnswerverifiedShow Answer

Jason plans to buy shrimp in Florida and sell them in Manhattan, Kansas where the price is higher. Jason plans to engage in arbitrage.

Correct AnswerverifiedShow Answer

When Claudia, a U.S. citizen, purchases a handbag made in France, the purchase is

Correct AnswerverifiedShow Answer

To increase domestic investment, a country must increase its saving.

Correct AnswerverifiedShow Answer

Suppose the real exchange rate is .80 pounds of bananas in Guatemala per pound of bananas in the U.S. If a pound of bananas in the U.S. costs $.50, and the exchange rate is 8 Guatemalan Quetzals per dollar, what is the price of bananas in Guatemala?

Correct AnswerverifiedShow Answer

From 1980 to 1987

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A country has a trade deficit. Its

Correct AnswerverifiedShow Answer

The nominal exchange rate is .80 euros per dollar and the real exchange rate is 4/3. Which of the following prices for a particular good are consistent with these exchange rates?

Correct AnswerverifiedShow Answer

If you are vacationing in France and the dollar depreciates relative to the euro, then

Correct AnswerverifiedShow Answer

A British grocery chain uses previously obtained U.S. dollars to purchase apples from the United States. This transaction

Correct AnswerverifiedShow Answer

If the dollar buys less cotton in Egypt than in the United States, then traders could make a profit by

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If a country has business opportunities that are relatively attractive to other countries, we would expect it to have

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Real Exchange Rate =...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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