Question 1

Which of the following is correct?

Accepted Answer

A)   NCO = NX
B)   NCO + I = NX
C)   NX + NCO = Y
D)   Y = NCO - IE) B) and D)
F) C) and D)

Question 2

If US goods cost one dollar for each euro German goods costs, the real exchange rate would be computed as how many German goods per U.S. goods?

Accepted Answer

A)   one
B)   the price of the U.S. goods
C)   the amount of euros that can be bought with one U.S. dollar
D)   None of the above is correct.E) All of the above
F) A) and B)

Question 3

If purchasing-power parity holds, a dollar will buy

Accepted Answer

A)   more goods in foreign countries than in the United States.
B)   as many goods in foreign countries as it does in the United States.
C)   fewer goods in foreign countries than it does in the United States.
D)   None of the above is implied by purchasing-power parity.E) A) and D)
F) C) and D)

Question 4

If a Starbucks tall latte cost $3.20 in the United States and 3 euros in the Euro area, then purchasing-power parity implies the nominal exchange rate is how many euros per dollar?

Accepted Answer

A)   .938 If the exchange rate is less than this, it costs more dollars to buy a tall latte in the U.S. than in the Euro area.
B)   .938 If the exchange rate is less than this, it costs fewer dollars to buy a tall latte in the U.S. then in the Euro area.
C)   1.067 If the exchange rate is less than this, it costs more dollars to buy a tall latte in the U.S. than in the Euro area.
D)   1.067 If the exchange rate is less than this, it costs fewer dollars to buy a tall latte in the U.S. than in the Euro area.E) A) and D)
F) A) and C)

Question 5

Bill, a U.S. citizen, pays a Spanish architect to design a metal casting factory. Which country's exports increase?

Accepted Answer

A)   Spain's
B)   the U.S.'s
C)   Spain's and the U.S.'s
D)   neither Spain's nor the U.S.'sE) B) and D)
F) B) and C)

Question 6

Ann, a U.S. citizen, uses some previously obtained euros to purchase a bond issued by a Spanish company. This transaction

Accepted Answer

A)   increases U.S. net capital outflow by more than the value of the bond.
B)   increases U.S. net capital outflow by the value of the bond.
C)   does not change U.S. net capital outflow.
D)   decreases U.S. net capital outflow.E) None of the above
F) A) and B)

Question 7

Other things the same, if U.S. net capital outflow rises, so does U.S. saving.

Accepted Answer

A) True 
 B)False

Question 8

After 1980 in the United States,

Accepted Answer

A)   national saving fell below investment and net capital outflow was a large positive number.
B)   national saving fell below investment and net capital outflow was a large negative number.
C)   investment fell below saving and net capital outflow was a large positive number.
D)   investment fell below saving, so net capital outflow was a large negative number.E) A) and B)
F) None of the above

Question 9

If Saudi Arabia had positive net exports last year, then it

Accepted Answer

A)   sold more abroad than it purchased abroad and had a trade surplus.
B)   sold more abroad than it purchased abroad and had a trade deficit.
C)   bought more abroad than it sold abroad and had a trade surplus.
D)   bought more abroad than it sold abroad and had a trade deficit.E) B) and D)
F) A) and B)

Question 10

Domestic saving must equal domestic investment in

Accepted Answer

A)   both closed and open economies.
B)   closed, but not open economies.
C)   open, but not closed economies.
D)   neither closed nor open economies.E) A) and D)
F) None of the above

Question 11

When the yen gets "stronger" relative to the dollar,

Accepted Answer

A)   the U.S. trade deficit with Japan will rise.
B)   the U.S. trade deficit with Japan will fall.
C)   the U.S. trade deficit with Japan will be unchanged.
D)   None of the above necessarily happens.E) C) and D)
F) B) and C)

Question 12

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

Question 13

If the U.S. has a trade deficit and the nominal exchange rate depreciates, then other things the same

Accepted Answer

A)   the trade deficit rises and net capital outflow rises.
B)   the trade deficit rises and net capital outflow falls.
C)   the trade deficit falls and net capital outflows rise.
D)   the trade deficit falls and net capital outflows fall.E) None of the above
F) B) and D)

Question 14

International trade

Accepted Answer

A)   raises the standard of living in all trading countries.
B)   lowers the standard of living in all trading countries.
C)   leaves the standard of living unchanged.
D)   raises the standard of living for importing countries and lowers it for exporting countries.E) C) and D)
F) A) and B)

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) All of the above

Question 16

The nominal exchange rate is .80 euros per U.S. dollar and a basket of goods in France costs 1,000 euros while the same basket costs $800 in the U.S. The nominal exchange rate is 1.2 Australian dollars per U.S. dollar and a basket of goods in Australia costs 960 Australian dollars while the same basket costs $800 in the U.S.. Which country has purchasing-power parity with the U.S.?

Accepted Answer

A)   both France and Australia
B)   France but not Australia
C)   Australia but not France
D)   neither France nor AustraliaE) A) and B)
F) A) and C)

Question 17

Other things the same, if the exchange rate changes from .30 Kuwaiti dinar per dollar to .35 Kuwaiti dinar per dollar, then the dollar has

Accepted Answer

A)   appreciated and so buys more Kuwaiti goods.
B)   appreciated and so buys fewer Kuwaiti goods.
C)   depreciated and so buys more Kuwaiti goods.
D)   depreciated and so buys fewer Kuwaiti goods.E) A) and D)
F) A) and B)

Question 18

The large trade deficits in the United States in the 1990s were primarily associated with a rise in domestic investment rather than a rise in the budget deficit.

Accepted Answer

A) True 
 B)False

Question 19

In an open economy, gross domestic product equals $1,650 billion, government expenditure equals $250 billion, and savings equals $550 billion. What is consumption expenditure?

Accepted Answer

A)   $250 billion
B)   $300 billion
C)   $550 billion
D)   $850 billionE) C) and D)
F) A) and D)

Question 20

If US goods cost 1/5 of one dollar for every kroner Danish goods cost, the real exchange rate would be computed as how many Danish goods per U.S. goods?

Accepted Answer

A)   five
B)   one fifth the price of the U.S. goods
C)   the amount of kroner that can be bought with 1/5 of one dollar.
D)   None of the above is correct.E) C) and D)
F) B) and D)

Exam 13: Open-Economy Macroeconomic Models

In an open economy, gross domestic product equals $1,650 billion, government expenditure equals $250 billion, and savings equals $550 billion. What is consumption expenditure?

Correct Answer
verified

If US goods cost one dollar for each euro German goods costs, the real exchange rate would be computed as how many German goods per U.S. goods?

Correct Answer
verified

The large trade deficits in the United States in the 1990s were primarily associated with a rise in domestic investment rather than a rise in the budget deficit.

Correct Answer
verified

Ann, a U.S. citizen, uses some previously obtained euros to purchase a bond issued by a Spanish company. This transaction

Correct Answer
verified

If US goods cost 1/5 of one dollar for every kroner Danish goods cost, the real exchange rate would be computed as how many Danish goods per U.S. goods?

Correct Answer
verified

International trade

Correct Answer
verified

Other things the same, if the exchange rate changes from .30 Kuwaiti dinar per dollar to .35 Kuwaiti dinar per dollar, then the dollar has

Correct Answer
verified

If Saudi Arabia had positive net exports last year, then it

Correct Answer
verified

Other things the same, if U.S. net capital outflow rises, so does U.S. saving.

Correct Answer
verified

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 Answer
verified

After 1980 in the United States,

Correct Answer
verified

Bill, a U.S. citizen, pays a Spanish architect to design a metal casting factory. Which country's exports increase?

Correct Answer
verified

If the U.S. has a trade deficit and the nominal exchange rate depreciates, then other things the same

Correct Answer
verified

When the yen gets "stronger" relative to the dollar,

Correct Answer
verified

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

Correct Answer
verified

Domestic saving must equal domestic investment in

Correct Answer
verified

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

If purchasing-power parity holds, a dollar will buy

Correct Answer
verified

If a Starbucks tall latte cost $3.20 in the United States and 3 euros in the Euro area, then purchasing-power parity implies the nominal exchange rate is how many euros per dollar?

Correct Answer
verified

Exam 13: Open-Economy Macroeconomic Models

In an open economy, gross domestic product equals $1,650 billion, government expenditure equals $250 billion, and savings equals $550 billion. What is consumption expenditure?

Correct AnswerverifiedShow Answer

If US goods cost one dollar for each euro German goods costs, the real exchange rate would be computed as how many German goods per U.S. goods?

Correct AnswerverifiedShow Answer

The large trade deficits in the United States in the 1990s were primarily associated with a rise in domestic investment rather than a rise in the budget deficit.

Correct AnswerverifiedShow Answer

Ann, a U.S. citizen, uses some previously obtained euros to purchase a bond issued by a Spanish company. This transaction

Correct AnswerverifiedShow Answer

If US goods cost 1/5 of one dollar for every kroner Danish goods cost, the real exchange rate would be computed as how many Danish goods per U.S. goods?

Correct AnswerverifiedShow Answer

International trade

Correct AnswerverifiedShow Answer

Other things the same, if the exchange rate changes from .30 Kuwaiti dinar per dollar to .35 Kuwaiti dinar per dollar, then the dollar has

Correct AnswerverifiedShow Answer

If Saudi Arabia had positive net exports last year, then it

Correct AnswerverifiedShow Answer

Other things the same, if U.S. net capital outflow rises, so does U.S. saving.

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

After 1980 in the United States,

Correct AnswerverifiedShow Answer

Bill, a U.S. citizen, pays a Spanish architect to design a metal casting factory. Which country's exports increase?

Correct AnswerverifiedShow Answer

If the U.S. has a trade deficit and the nominal exchange rate depreciates, then other things the same

Correct AnswerverifiedShow Answer

When the yen gets "stronger" relative to the dollar,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Domestic saving must equal domestic investment in

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

If purchasing-power parity holds, a dollar will buy

Correct AnswerverifiedShow Answer

If a Starbucks tall latte cost $3.20 in the United States and 3 euros in the Euro area, then purchasing-power parity implies the nominal exchange rate is how many euros per dollar?

Correct AnswerverifiedShow Answer

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