Question 1

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

Accepted Answer

A)   A Chinese company opens a restaurant in the U.S.
B)   An Australian bank buys stocks issued by a U.S. corporation.
C)   A U.S. bank buys bonds issued by an Australian corporation.
D)   A U.S. company opens an auto parts factory in Canada.E) B) and C)
F) B) and D)

Question 2

A country purchases more goods and services from residents of foreign countries than residents of foreign countries purchase from it. This country has

Accepted Answer

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

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

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) None of the above
F) A) and B)

Question 5

Which of the following events would be consistent with purchasing-power parity?

Accepted Answer

A)   The price level in the United States rises more rapidly than that in Ireland and the real exchange rate defined as Irish goods per unit of U.S. goods stays the same.
B)   The money supply in the United States rises more rapidly than in Egypt and the nominal exchange rate defined as Egyptian pounds per dollar falls.
C)   Earl, a worldwide traveler, looks at exchange rates and worldwide breakfast prices one morning and finds that whatever country he decides to go to he can convert $15 into enough local currency to buy the same breakfast.
D)   All of the above are correct.E) A) and B)
F) None of the above

Question 6

Other things the same, if a country saves more, 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) B) and D)

Question 7

A good in the U.S. costs $20. The same good costs 150 pesos in Mexico. If the nominal exchange rate is 10 pesos per dollar, what is the real exchange rate?

Accepted Answer

A)   4/3 so the good is more expensive in the U.S.
B)   4/3 so the good is more expensive in Mexico
C)   3/4 so the good is more expensive in the U.S.
D)   3/4 so the good is more expensive in MexicoE) All of the above
F) B) and C)

Question 8

During a hyperinflation the real domestic value of a country's currency

Accepted Answer

A)   falls and its nominal exchange rate depreciates.
B)   falls and its nominal exchange rate appreciates.
C)   rises and its nominal exchange rate depreciates.
D)   rises and its nominal exchange rate appreciates.E) B) and C)
F) C) and D)

Question 9

The Norwegian government uses $500,000 of previously obtained U.S. dollars to buy $500,000 of police cars from a U.S. company. As a result of this exchange, by how much, if at all, and in which direction did:
A. U.S. net exports change?
B. U.S. net capital outflow change?

Accepted Answer

A. U.S. net exports ...

Question 10

If a country exports more than it imports, then it has

Accepted Answer

A)   positive net exports and positive net capital outflows.
B)   positive net exports and negative net capital outflows.
C)   negative net exports and positive net capital outflows.
D)   negative net exports and negative net capital outflows.E) All of the above
F) A) and D)

Question 11

If the exchange rate is 2 Brazilian reals per dollar and a meal in Rio costs 20 reals, then how many dollars does it take to buy a meal in Rio?

Accepted Answer

A)   40 and your purchase will increase Brazil's net exports.
B)   10 and your purchase will increase Brazil's net exports.
C)   40 and your purchase will decrease Brazil's net exports.
D)   10 and your purchase will decrease Brazil's net exports.E) C) and D)
F) A) and B)

Question 12

You are staying in London over the summer and you have a number of dollars with you. If the dollar appreciates relative to the British pound, then other things the same,

Accepted Answer

A)   the dollar would buy more pounds. The appreciation would discourage you from buying as many British goods and services.
B)   the dollar would buy more pounds. The appreciation would encourage you to buy more British goods and services.
C)   the dollar would buy fewer pounds. The appreciation would discourage you from buying as many British goods and services.
D)   the dollar would buy fewer pounds. The appreciation would encourage you to buy more British goods and services.E) B) and C)
F) A) and B)

Question 13

Which of the following is an example of U.S. foreign direct investment and by itself increases U.S. net capital outflow?

Accepted Answer

A)   A Swedish bank buys a bond issued by the U.S. government.
B)   A German company builds a car factory in the U.S.
C)   A U.S. mutual fund purchases stock issued by a corporation in Bolivia.
D)   A U.S. grocery chain builds and operates a new warehouse in Honduras.E) None of the above
F) B) and C)

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

A U.S. fast food restaurant chain sells dollars for Argentinean pesos and then uses the pesos to buy Argentinean beef. Which of the following do these transactions increase?

Accepted Answer

A)   Argentinean net capital outflow and Argentinean net exports
B)   only Argentinean net exports
C)   only Argentinean net capital outflow
D)   neither Argentinean net exports nor Argentinean capital outflowE) C) and D)
F) None of the above

Question 16

Net capital outflow equals

Accepted Answer

A)   the value of domestic assets purchased by foreigners.
B)   the value of foreign assets purchased by domestic residents.
C)   the value of domestic assets purchased by foreigners - the value of foreign assets purchased by domestic residents.
D)   the value of foreign assets purchased by domestic residents - the value of domestic assets purchased by foreigners.E) C) and D)
F) A) and D)

Question 17

Last year a country sold $500 billion euros worth of goods to foreigners and had a trade deficit of $100 billion euros. What was the value of its imports?

Accepted Answer

The answer of Last year a country sold $500 billion...

Question 18

Net capital outflow

Accepted Answer

A)   is always greater than net exports.
B)   is always less than net exports.
C)   is always equal to net exports.
D)   could be any of the above.E) C) and D)
F) A) and D)

Question 19

In an open economy, gross domestic product equals $2,450 billion, consumption expenditure equals $1,390 billion, government expenditure equals $325 billion, investment equals $510 and net capital outflow equals $225 billion. What is national saving?

Accepted Answer

A)   $225 billion
B)   $510 billion
C)   $735 billion
D)   $1,390 billionE) All of the above
F) C) and D)

Question 20

Which of the following equations is correct?

Accepted Answer

A)   S = I + C
B)   S = I - NX
C)   S = I + NCO
D)   S = NX - NCO.E) B) and C)
F) None of the above

Exam 31: Open-Economy Macroeconomics: Basic Concepts

During a hyperinflation the real domestic value of a country's currency

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Which of the following events would be consistent with purchasing-power parity?

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Which of the following equations is correct?

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

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Last year a country sold $500 billion euros worth of goods to foreigners and had a trade deficit of $100 billion euros. What was the value of its imports?

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

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

Correct AnswerverifiedShow Answer

The Norwegian government uses $500,000 of previously obtained U.S. dollars to buy $500,000 of police cars from a U.S. company. As a result of this exchange, by how much, if at all, and in which direction did: A. U.S. net exports change? B. U.S. net capital outflow change?

Correct AnswerverifiedA. U.S. net exports ...View AnswerShow Answer

Other things the same, if a country saves more, then

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If a country exports more than it imports, then it has

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A country purchases more goods and services from residents of foreign countries than residents of foreign countries purchase from it. This country has

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If the exchange rate is 2 Brazilian reals per dollar and a meal in Rio costs 20 reals, then how many dollars does it take to buy a meal in Rio?

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Net capital outflow

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A U.S. fast food restaurant chain sells dollars for Argentinean pesos and then uses the pesos to buy Argentinean beef. Which of the following do these transactions increase?

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You are staying in London over the summer and you have a number of dollars with you. If the dollar appreciates relative to the British pound, then other things the same,

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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?

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In an open economy, gross domestic product equals $2,450 billion, consumption expenditure equals $1,390 billion, government expenditure equals $325 billion, investment equals $510 and net capital outflow equals $225 billion. What is national saving?

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Which of the following is an example of U.S. foreign direct investment and by itself increases U.S. net capital outflow?

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A good in the U.S. costs $20. The same good costs 150 pesos in Mexico. If the nominal exchange rate is 10 pesos per dollar, what is the real exchange rate?

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Net capital outflow equals

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A. U.S. net exports ...
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