Question 1

Other things the same, an increase in the nominal exchange rate raises the real exchange rate.

Accepted Answer

A) True 
 B)False

Question 2

Suppose inflation is higher in the United States over the next six months than in foreign countries. If exchange rates are given in terms of how much foreign currency a dollar buys or how many foreign goods U.S. goods buy, then according to purchasing-power parity we should expect to see

Accepted Answer

A)   only the nominal exchange rate depreciate.
B)   both the real and nominal exchange rate appreciate.
C)   both the real and nominal exchange rate depreciate.
D)   only the real exchange rate appreciate.E) B) and C)
F) A) and B)

Question 3

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 4

All saving in the U.S. economy shows up as

Accepted Answer

A)   investment in the U.S. economy.
B)   U.S. net capital outflow.
C)   either investment in the U.S. economy or U.S. net capital outflow.
D)   None of the above is correct.E) A) and B)
F) All of the above

Question 5

Which of the following statements is correct for an open economy with a trade surplus?

Accepted Answer

A)   The trade surplus cannot last for very many years.
B)   The trade surplus must be offset by negative net capital outflow.
C)   The trade surplus implies that the country's national saving is greater than domestic investment.
D)   None of the above is correct.E) B) and C)
F) A) and C)

Question 6

In Ireland, a pint of beer costs 3 euros. In Australia, a pint of beer costs 4 Australian dollars. If the exchange rate is .8 euros per Australian dollar, what is the real exchange rate?

Accepted Answer

A)   4/2.4 pints of Irish beer per pint of Australian beer
B)   3/3.2 pint of Irish beer per pint of Australian beer
C)   3.2/3 pints of Irish beer per pint of Australian beer
D)   2.4/4 pints of Irish beer per pint of Australian beerE) B) and C)
F) A) and D)

Question 7

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 .75 euros per dollar, the prices of 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) C) and D)
F) B) and C)

Question 8

If the Kenyan nominal exchange rate declines, and prices are unchanged in Kenya and abroad, then the Kenyan real exchange rate

Accepted Answer

A)   does not change.
B)   rises.
C)   declines
D)   None of the above is necessarily correct.E) B) and D)
F) B) and C)

Question 9

A country sells more to foreign countries than it buys from them. It 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) None of the above
F) All of the above

Question 10

The price of a basket of goods is $2000 in the U.S. If purchasing power parity holds, and the dollar buys two units of some country's currency, then how many units of foreign currency does the same basket of goods cost in that country?

Accepted Answer

A)   4000
B)   2000
C)   1000
D)   None of the above are correct.E) None of the above
F) C) and D)

Question 11

Clear Brook Farms, a U.S. manufacturer of frozen vegetarian entrees, sells cases of its product to stores overseas. These sales

Accepted Answer

A)   decrease U.S. exports but increase U.S. net exports.
B)   decrease both U.S. exports and U.S. net exports.
C)   increase both U.S. exports and U.S. net exports.
D)   increase U.S. exports but decrease U.S. net exports.E) A) and B)
F) None of the above

Question 12

A Japanese bank buys U.S. government bonds this purchase

Accepted Answer

A)   increases U.S. net capital outflow and has no affect on Japanese net capital outflow.
B)   increases U.S. net capital outflow and increases Japanese net capital outflow.
C)   increases U.S. net capital outflow, but decreases Japanese net capital outflow.
D)   decreases U.S. net capital outflow, but increases Japanese net capital outflow.E) A) and B)
F) A) and D)

Question 13

The nominal exchange rate is 4 Saudi Arabian riyals, 8 Moroccan dirham, 45 Indian rupee, or .6 British pounds per U.S. dollar. A double latte espresso and a cinnamon biscotti costs $6 in the U.S., 24 riyals in Saudi Arabia, 40 Moroccan dirham in Morocco, 250 Indian rupees in India, and 5 British pounds in Britain. According to these numbers, where is the real exchange rate between American and foreign goods the lowest?

Accepted Answer

A)   Saudi Arabia
B)   Morocco
C)   India
D)   BritainE) B) and D)
F) All of the above

Question 14

Which of the following statements is incorrect for an open economy?

Accepted Answer

A)   A country can have a trade deficit, trade surplus, or balanced trade.
B)   A country that has a trade deficit has positive net capital outflow.
C)   Net exports must equal net capital outflow.
D)   National saving equals domestic investment plus net capital outflow.E) B) and C)
F) A) and D)

Question 15

Which of the following is correct?

Accepted Answer

A)   NCO + C = NX
B)   NCO = NX
C)   NX - NCO = C
D)   NX + NCO = CE) A) and B)
F) B) and D)

Question 16

An appreciation of the U.S. real exchange rate induces U.S. consumers to buy

Accepted Answer

A)   fewer domestic goods and fewer foreign goods.
B)   more domestic goods and fewer foreign goods.
C)   fewer domestic goods and more foreign goods.
D)   more domestic goods and more foreign goods.E) A) and B)
F) C) and D)

Question 17

Purchasing-power parity says that the nominal exchange rate must equal the real exchange rate.

Accepted Answer

A) True 
 B)False

Question 18

If citizens of a country are not saving much, it is better to

Accepted Answer

A)   force citizens to save.
B)   reduce investment.
C)   have foreigners invest in the domestic economy than no one at all.
D)   to prevent opportunities for citizens to buy capital assets abroad.E) A) and B)
F) None of the above

Question 19

If a country has net exports of $8 billion and sold $40 billion of goods and services abroad, then it has

Accepted Answer

A)   $48 billion of imports and $40 billion of exports.
B)   $48 billion of exports and $40 billion of imports.
C)   $40 billion of imports and $32 billion of exports.
D)   $40 billion of exports and $32 billion of imports.E) All of the above
F) A) and B)

Question 20

One year a country has negative net exports. The next year it still has negative net exports and imports have risen more than exports.

Accepted Answer

A)   its trade surplus fell.
B)   its trade surplus rose.
C)   its trade deficit fell.
D)   its trade deficit roseE) A) and D)
F) All of the above

Exam 13: Open-Economy Macroeconomic Models

If citizens of a country are not saving much, it is better to

Correct Answer
verified

Which of the following statements is incorrect for an open economy?

Correct Answer
verified

Suppose inflation is higher in the United States over the next six months than in foreign countries. If exchange rates are given in terms of how much foreign currency a dollar buys or how many foreign goods U.S. goods buy, then according to purchasing-power parity we should expect to see

Correct Answer
verified

In Ireland, a pint of beer costs 3 euros. In Australia, a pint of beer costs 4 Australian dollars. If the exchange rate is .8 euros per Australian dollar, what is the real exchange rate?

Correct Answer
verified

A Japanese bank buys U.S. government bonds this purchase

Correct Answer
verified

The price of a basket of goods is $2000 in the U.S. If purchasing power parity holds, and the dollar buys two units of some country's currency, then how many units of foreign currency does the same basket of goods cost in that country?

Correct Answer
verified

An appreciation of the U.S. real exchange rate induces U.S. consumers to buy

Correct Answer
verified

Other things the same, an increase in the nominal exchange rate raises the real exchange rate.

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

Correct Answer
verified

If the Kenyan nominal exchange rate declines, and prices are unchanged in Kenya and abroad, then the Kenyan real exchange rate

Correct Answer
verified

A country sells more to foreign countries than it buys from them. It has

Correct Answer
verified

If a country has net exports of $8 billion and sold $40 billion of goods and services abroad, then it has

Correct Answer
verified

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

Which of the following statements is correct for an open economy with a trade surplus?

Correct Answer
verified

Purchasing-power parity says that the nominal exchange rate must equal the real exchange rate.

Correct Answer
verified

All saving in the U.S. economy shows up as

Correct Answer
verified

One year a country has negative net exports. The next year it still has negative net exports and imports have risen more than exports.

Correct Answer
verified

Clear Brook Farms, a U.S. manufacturer of frozen vegetarian entrees, sells cases of its product to stores overseas. These sales

Correct Answer
verified

Correct Answer
verified

Exam 13: Open-Economy Macroeconomic Models

If citizens of a country are not saving much, it is better to

Correct AnswerverifiedShow Answer

Which of the following statements is incorrect for an open economy?

Correct AnswerverifiedShow Answer

Suppose inflation is higher in the United States over the next six months than in foreign countries. If exchange rates are given in terms of how much foreign currency a dollar buys or how many foreign goods U.S. goods buy, then according to purchasing-power parity we should expect to see

Correct AnswerverifiedShow Answer

In Ireland, a pint of beer costs 3 euros. In Australia, a pint of beer costs 4 Australian dollars. If the exchange rate is .8 euros per Australian dollar, what is the real exchange rate?

Correct AnswerverifiedShow Answer

A Japanese bank buys U.S. government bonds this purchase

Correct AnswerverifiedShow Answer

The price of a basket of goods is $2000 in the U.S. If purchasing power parity holds, and the dollar buys two units of some country's currency, then how many units of foreign currency does the same basket of goods cost in that country?

Correct AnswerverifiedShow Answer

An appreciation of the U.S. real exchange rate induces U.S. consumers to buy

Correct AnswerverifiedShow Answer

Other things the same, an increase in the nominal exchange rate raises the real exchange rate.

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the Kenyan nominal exchange rate declines, and prices are unchanged in Kenya and abroad, then the Kenyan real exchange rate

Correct AnswerverifiedShow Answer

A country sells more to foreign countries than it buys from them. It has

Correct AnswerverifiedShow Answer

If a country has net exports of $8 billion and sold $40 billion of goods and services abroad, then it has

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

Which of the following statements is correct for an open economy with a trade surplus?

Correct AnswerverifiedShow Answer

Purchasing-power parity says that the nominal exchange rate must equal the real exchange rate.

Correct AnswerverifiedShow Answer

All saving in the U.S. economy shows up as

Correct AnswerverifiedShow Answer

One year a country has negative net exports. The next year it still has negative net exports and imports have risen more than exports.

Correct AnswerverifiedShow Answer

Clear Brook Farms, a U.S. manufacturer of frozen vegetarian entrees, sells cases of its product to stores overseas. These sales

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow 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

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