Question 1

If saving is greater 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) A) and D)
F) A) and B)

Question 2

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

Question 3

Other things the same,an increase in the foreign price level leads to an increase in the real exchange rate.

Accepted Answer

A) True 
 B)False

Question 4

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

Question 5

A firm in China sells toys to a U.S.department store chain.Other things the same,these sales

Accepted Answer

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

Question 6

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 C)
F) C) and D)

Question 7

The law of one price states that

Accepted Answer

A)  a good must sell at the price fixed by law.
B)  a good must sell at the same price at all locations.
C)  a good cannot sell for a price greater than the legal price ceiling.
D)  nominal exchange rates will not vary.E) None of the above
F) C) and D) B

Question 8

If a country's imports exceed its exports it has a trade surplus.

Accepted Answer

A) True 
 B)False  False

Question 9

Net capital outflow is the purchase of domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.

Accepted Answer

A) True 
 B)False

Question 10

When making investment decisions,investors

Accepted Answer

A)  compare the real interest rates offered on different bonds.
B)  compare the nominal,but not the real,interest rates offered on different bonds.
C)  purchase the highest-priced bond available.
D)  All of the above are correct.E) None of the above
F) All of the above A

Question 11

List the factors that might influence a country's exports,imports,and trade balance.

Accepted Answer

a.
the tastes of consumers for domestic...

Question 12

In an open economy,gross domestic product equals $1,950 billion,government expenditure equals $280 billion,investment equals $500,and net capital outflow equals $280 billion.What is consumption expenditure?

Accepted Answer

A)  $280 billion
B)  $780 billion
C)  $890 billion
D)  $1,170 billionE) C) and D)
F) None of the above

Question 13

Other things the same,if the real exchange rate appreciates,then net exports

Accepted Answer

A)  increase and net capital outflow decreases.
B)  decrease and net capital outflow increases.
C)  and net capital outflow both increase.
D)  and net capital outflow both decrease.E) All of the above
F) None of the above

Question 14

An open economy's GDP is always given by

Accepted Answer

A)  Y = C + I + G.
B)  Y = C + I + G + T.
C)  Y = C + I + G + S.
D)  Y = C + I + G + NX.E) B) and C)
F) All of the above

Question 15

A country with negative net exports has a trade surplus.

Accepted Answer

A) True 
 B)False

Question 16

If purchasing power parity holds,when a country's central bank increases the money supply,its

Accepted Answer

A)  price level rises and its currency appreciates relative to other currencies in the world.
B)  price level rises and its currency depreciates relative to other currencies in the world.
C)  price level falls and its currency appreciates relative to other currencies in the world.
D)  price level falls and its currency depreciates relative to other currencies in the world.E) A) and C)
F) All of the above

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

A country's trade balance

Accepted Answer

A)  must be zero.
B)  must be greater than zero.
C)  is greater than zero only if exports are greater than imports.
D)  is greater than zero only if imports are greater than exports.E) A) and D)
F) All of the above

Question 19

If P = domestic prices,P* = foreign prices,and e is the nominal exchange rate,which of the following is implied by purchasing-power parity?

Accepted Answer

A)  P = e/P*
B)  1 = e/P*
C)  e = P*/P
D)  None of the above is correct.E) B) and C)
F) A) and D)

Question 20

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

Accepted Answer

A)  you can buy more euros.It will take less of your currency to buy a good that costs 50 euros.
B)  you can buy more euros.It will take more of your currency to buy a good that costs 50 euros.
C)  you can buy fewer euros.It will take less of your currency to buy a good that costs 50 euros.
D)  you can buy fewer euros.It will take more of your currency to buy a good that costs 50 euros.E) C) and D)
F) A) and B)

Exam 32: Open-Economy Macroeconomic Models

If saving is greater than domestic investment,then

Correct AnswerverifiedShow Answer

The nominal exchange rate is the

Correct AnswerverifiedShow Answer

Other things the same,an increase in the foreign price level leads to an increase in the real exchange rate.

Correct AnswerverifiedShow Answer

If a country has a trade surplus

Correct AnswerverifiedShow Answer

A firm in China sells toys to a U.S.department store chain.Other things the same,these sales

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

The law of one price states that

Correct AnswerverifiedB

If a country's imports exceed its exports it has a trade surplus.

Correct AnswerverifiedFalse

Net capital outflow is the purchase of domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.

Correct AnswerverifiedShow Answer

When making investment decisions,investors

Correct AnswerverifiedA

List the factors that might influence a country's exports,imports,and trade balance.

Correct Answerverifieda. the tastes of consumers for domestic...View AnswerShow Answer

In an open economy,gross domestic product equals $1,950 billion,government expenditure equals $280 billion,investment equals $500,and net capital outflow equals $280 billion.What is consumption expenditure?

Correct AnswerverifiedShow Answer

Other things the same,if the real exchange rate appreciates,then net exports

Correct AnswerverifiedShow Answer

An open economy's GDP is always given by

Correct AnswerverifiedShow Answer

A country with negative net exports has a trade surplus.

Correct AnswerverifiedShow Answer

If purchasing power parity holds,when a country's central bank increases the money supply,its

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A country's trade balance

Correct AnswerverifiedShow Answer

If P = domestic prices,P* = foreign prices,and e is the nominal exchange rate,which of the following is implied by purchasing-power parity?

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

Correct AnswerverifiedShow Answer

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B

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False

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A

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a.
the tastes of consumers for domestic...
View Answer

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