Question 1

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 2

Which of the following is always correct?

Accepted Answer

A)   Y - I = NCO
B)   NCO = NX
C)   NX = I
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 3

When net capital outflow is negative,it means that on net the value of domestic assets purchased by foreigners exceeds the value of foreign assets purchased by domestic residents.

Accepted Answer

A) True 
 B)False

Question 4

If the price of a good in the U.S.is $10 and the unit of foreign currency is the stone,in which case is the real exchange rate 4/5?

Accepted Answer

A)   the foreign price is 4 stones and the exchange rate is 2 stones per dollar
B)   the foreign price is 5 stones and the exchange rate is 2.5 stones per dollar
C)   the foreign price is 4 stones and the exchange rate is 1/2 stones per dollar
D)   the foreign price is 5 stones and the exchange rate is 2/5 stones per dollarE) A) and B)
F) B) and D)

Question 5

You are planning a graduation trip to Nepal.Other things the same,if the dollar depreciates relative to the Nepalese rupee,then

Accepted Answer

A)   the dollar buys fewer rupees.Your purchases in Nepal will require fewer dollars.
B)   the dollar buys fewer rupees.Your purchases in Nepal will require more dollars.
C)   the dollar buys more rupees.Your purchases in Nepal will require fewer dollars.
D)   the dollar buys more rupees.Your purchases in Nepal will require more dollars.E) A) and D)
F) A) and B)

Question 6

Under what circumstances does purchasing-power parity explain how exchange rates are determined,and why is it not completely accurate?

Accepted Answer

Purchasing-power parity works well in he...

Question 7

A U.S.based company sells semiconductors to an Italian firm.The U.S.company uses all of the revenues from this sale to purchase automobiles from Italian firms.These transactions

Accepted Answer

A)   increase both U.S.net exports and U.S.net capital outflow.
B)   decrease both U.S.net exports and U.S.net capital outflow.
C)   increase U.S.net exports and do not affect U.S.net capital outflow.
D)   None of the above is correct.E) A) and B)
F) All of the above

Question 8

Foreign-produced goods and services that are purchased domestically are called

Accepted Answer

A)   imports.
B)   exports.
C)   net imports.
D)   net exports.E) B) and C)
F) C) and D)

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) A) and C)
F) A) and D)

Question 10

If a country were to save more,but its domestic investment remained the same,then which of the following would rise

Accepted Answer

A)   both net capital outflow and net exports
B)   net capital outflow but not net exports
C)   net exports but not net exports
D)   neither net exports nor net capital outflowE) B) and C)
F) A) and C)

Question 11

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

Accepted Answer

A)   Albert,a German citizen,buys stock in a U.S.computer company.
B)   Larry,a citizen of Ireland,opens a fish and chips restaurant in the United States.
C)   Nancy,a U.S.citizen,buys bonds issued by a Japanese bank.
D)   Dustin,a U.S.citizen,opens a country-western tavern in New Zealand.E) None of the above
F) B) and D)

Question 12

In the U.S.a delivery van costs $30,000.In Uruguay the same delivery van costs 720,000 pesos.The nominal exchange rate is 20 pesos per dollar.
A.Find the real exchange rate.Show your work.
B.In terms of dollars where is the television cheaper?

Accepted Answer

The real exchange rate = 30,00...

Question 13

Which of the following is correct?

Accepted Answer

A)   NCO = NX
B)   NCO + I = NX
C)   NX + NCO = Y
D)   Y = NCO - IE) All of the above
F) A) and B)

Question 14

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 B)
F) B) and C)

Question 15

Can purchasing-power parity be used to explain the fact that the U.S.dollar has depreciated by more than 50 percent against the German mark between 1970 and 1998,but appreciated by more than 100 percent against the Italian lira during the same period? Defend your answer.

Accepted Answer

The theory of purchasing-power parity su...

Question 16

From 2000-2006 net capital outflow as a percent of GDP became a

Accepted Answer

A)   larger positive number.
B)   smaller positive number.
C)   larger negative number.
D)   smaller negative numberE) B) and C)
F) A) and C)

Question 17

If the real exchange rate is greater than 1,then the

Accepted Answer

A)   nominal exchange rate x U.S.price > foreign price.The dollars required to purchase a good in the U.S.would buy more then enough foreign currency to buy the same good overseas.
B)   nominal exchange rate x U.S.price > foreign price.The dollars required to purchase a good in the U.S.would not buy enough foregoing currency to buy the same good overseas.
C)   nominal exchange rate x U.S.price 
D)   nominal exchange rate x U.S.price < foreign price.The dollars required to purchase a good in the U.S.would not buy enough foreign currency to buy the same good overseas.E) B) and D)
F) C) and D)

Question 18

In an open economy,national saving can be less than investment.

Accepted Answer

A) True 
 B)False

Question 19

Suppose that the real exchange rate between the United States and Vietnam is defined in terms of baskets of goods.Other things the same,which of the following will increase the real exchange rate (that is increase the number of baskets of Vietnamese goods a basket of U.S.goods buys) ?

Accepted Answer

A)   an increase in the quantity of Vietnamese currency that can be purchased with a dollar
B)   an increase in the price of U.S.baskets of goods
C)   a decrease in the price in Vietnamese currency of Vietnamese goods
D)   All of the above are correct.E) C) and D)
F) A) and D)

Question 20

Reductions in transportation costs help explain the increase in U.S.trade flows.

Accepted Answer

A) True 
 B)False

Exam 31: Open-Economy Macroeconomic Models

If a country were to save more,but its domestic investment remained the same,then which of the following would rise

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Reductions in transportation costs help explain the increase in U.S.trade flows.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Under what circumstances does purchasing-power parity explain how exchange rates are determined,and why is it not completely accurate?

Correct AnswerverifiedPurchasing-power parity works well in he...View AnswerShow Answer

In an open economy,national saving can be less than investment.

Correct AnswerverifiedShow Answer

If the real exchange rate is greater than 1,then the

Correct AnswerverifiedShow Answer

When net capital outflow is negative,it means that on net the value of domestic assets purchased by foreigners exceeds the value of foreign assets purchased by domestic residents.

Correct AnswerverifiedShow Answer

Foreign-produced goods and services that are purchased domestically are called

Correct AnswerverifiedShow Answer

From 2000-2006 net capital outflow as a percent of GDP became a

Correct AnswerverifiedShow Answer

In the U.S.a delivery van costs $30,000.In Uruguay the same delivery van costs 720,000 pesos.The nominal exchange rate is 20 pesos per dollar. A.Find the real exchange rate.Show your work. B.In terms of dollars where is the television cheaper?

Correct AnswerverifiedThe real exchange rate = 30,00...View AnswerShow Answer

If saving is greater than domestic investment,then

Correct AnswerverifiedShow Answer

You are planning a graduation trip to Nepal.Other things the same,if the dollar depreciates relative to the Nepalese rupee,then

Correct AnswerverifiedShow Answer

Suppose that the real exchange rate between the United States and Vietnam is defined in terms of baskets of goods.Other things the same,which of the following will increase the real exchange rate (that is increase the number of baskets of Vietnamese goods a basket of U.S.goods buys) ?

Correct AnswerverifiedShow Answer

If the price of a good in the U.S.is $10 and the unit of foreign currency is the stone,in which case is the real exchange rate 4/5?

Correct AnswerverifiedShow Answer

Can purchasing-power parity be used to explain the fact that the U.S.dollar has depreciated by more than 50 percent against the German mark between 1970 and 1998,but appreciated by more than 100 percent against the Italian lira during the same period? Defend your answer.

Correct AnswerverifiedThe theory of purchasing-power parity su...View AnswerShow Answer

A U.S.based company sells semiconductors to an Italian firm.The U.S.company uses all of the revenues from this sale to purchase automobiles from Italian firms.These transactions

Correct AnswerverifiedShow Answer

Which of the following is always correct?

Correct AnswerverifiedShow Answer

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Purchasing-power parity works well in he...
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The real exchange rate = 30,00...
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Correct Answer
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The theory of purchasing-power parity su...
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