Question 1

If Norway sold more goods and services abroad than it purchased from abroad,then it had

Accepted Answer

A)  positive net exports which is a trade surplus.
B)  positive net exports which is a trade deficit.
C)  negative net exports which is a trade surplus.
D)  negative net exports which is a trade deficit.E) All of the above
F) A) and C)

Question 2

The theory of purchasing-power parity states that a unit of a country's currency should be able to buy the same quantity of goods in foreign countries as it does domestically.

Accepted Answer

A) True 
 B)False

Question 3

An American hardware chain sells dollars to obtain Indian rupees.It then uses the rupees to buy electrical generators manufactured by an Indian firm.This exchange

Accepted Answer

A)  increases U.S.net capital outflow because Indians obtain U.S.assets.
B)  decreases U.S.net capital outflow because Indians obtain U.S.assets.
C)  increases U.S.net capital outflow because the U.S.buys capital goods.
D)  decreases U.S.net capital outflow because the U.S.buys capital goods.E) C) and D)
F) All of the above

Question 4

A rational investor will always purchase the bond that pays the highest real interest rate.

Accepted Answer

A) True 
 B)False

Question 5

What does purchasing-power parity imply about the real exchange rate?

Accepted Answer

That it is equal to one.The nu...

Question 6

If the nominal exchange rate e is foreign currency per dollar,the domestic price is P,and the foreign price is P*,then the real exchange rate is defined as

Accepted Answer

A)  e(P*/P) .
B)  e(P/P*) .
C)  e + P*/P.
D)  e - P/P*.E) C) and D)
F) A) and B)

Question 7

If domestic residents of France purchase 1.2 trillion euros of foreign assets and foreigners purchase 1.5 trillion euros of French assets,then France's net capital outflow is

Accepted Answer

A)  -.3 trillion euros,so it must have a trade deficit.
B)  -.3 trillion euros,so it must have a trade surplus.
C)  .3 trillion euros,so it must have a trade deficit.
D)  .3 trillion euros,so it must have a trade surplus.E) A) and D)
F) A) and C)

Question 8

Net capital outflow is defined as the purchase of

Accepted Answer

A)  foreign assets by domestic residents minus the purchase of domestic assets by foreign residents.
B)  foreign assets by domestic residents minus the purchase of foreign goods and services by domestic residents.
C)  domestic assets by foreign residents minus the purchase of domestic goods and services by foreign residents.
D)  domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.E) A) and B)
F) A) and C)

Question 9

Which type(s) of economies interact with other economies?

Accepted Answer

A)  only closed economies
B)  only open economies
C)  closed economies and open economies
D)  neither closed nor open economiesE) None of the above
F) B) and C)

Question 10

When the central bank of some country prints large quantities of money,that county's currency loses value both in terms of the goods and services it buys and in terms of the amount of foreign currencies it can buy.

Accepted Answer

A) True 
 B)False

Question 11

A nation with a trade surplus will necessarily have domestic investment that is greater than domestic saving.

Accepted Answer

A) True 
 B)False

Question 12

If a country sells more goods and services abroad than it purchases abroad,it has positive net exports and a trade surplus.

Accepted Answer

A) True 
 B)False

Question 13

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) A) and B)
F) A) and C)

Question 14

If a country has Y > C + I + G,then

Accepted Answer

A)  S > I and it has a trade surplus.
B)  S > I and it has a trade deficit.
C)  S 
D)  S < I and it has a trade deficit.E) None of the above
F) B) and D)

Question 15

Purchasing-power parity describes the forces that determine

Accepted Answer

A)  prices in the short run.
B)  prices in the long run.
C)  exchange rates in the short run.
D)  exchange rates in the long run.E) B) and C)
F) A) and B)

Question 16

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

Accepted Answer

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

Question 17

Purchasing-power parity implies that the nominal exchange rate given as foreign currency per unit of U.S.currency must rise if the price levels in

Accepted Answer

A)  foreign countries rise.
B)  the United States rises.
C)  both countries rise.
D)  both countries fall.E) B) and D)
F) B) and C)

Question 18

If the U.S.real exchange rate appreciates,U.S.exports to Europe

Accepted Answer

A)  and European exports to the U.S.both rise.
B)  and European exports to the U.S.both fall.
C)  rise,and European exports to the U.S.fall.
D)  fall,and European exports to the U.S.rise.E) B) and D)
F) C) and D)

Question 19

If a nation is selling more goods and services to foreigners than it is buying from them,then on net it must be buying assets abroad.

Accepted Answer

A) True 
 B)False

Question 20

If a dinar buys more potatoes in Saudi Arabiathan in France,then

Accepted Answer

A)  the real exchange rate is greater than 1; a profit might be made by buying potatoes in Saudi Arabia and selling them in France.
B)  the real exchange rate is greater than 1; a profit might be made by buying potatoes in France.and selling them in Saudi Arabia.
C)  the real exchange rate is less than 1; a profit might be made by buying potatoes in Saudi Arabia and selling them in France.
D)  the real exchange rate is less than 1; a profit might be made by buying potatoes in France and selling them in Saudi Arabia.E) None of the above
F) B) and D)

Exam 32: Open-Economy Macroeconomic Models

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

Correct AnswerverifiedShow Answer

If a country sells more goods and services abroad than it purchases abroad,it has positive net exports and a trade surplus.

Correct AnswerverifiedShow Answer

What does purchasing-power parity imply about the real exchange rate?

Correct AnswerverifiedThat it is equal to one.The nu...View AnswerShow Answer

An American hardware chain sells dollars to obtain Indian rupees.It then uses the rupees to buy electrical generators manufactured by an Indian firm.This exchange

Correct AnswerverifiedShow Answer

If a dinar buys more potatoes in Saudi Arabiathan in France,then

Correct AnswerverifiedShow Answer

A rational investor will always purchase the bond that pays the highest real interest rate.

Correct AnswerverifiedShow Answer

If the U.S.real exchange rate appreciates,U.S.exports to Europe

Correct AnswerverifiedShow Answer

Purchasing-power parity describes the forces that determine

Correct AnswerverifiedShow Answer

When the central bank of some country prints large quantities of money,that county's currency loses value both in terms of the goods and services it buys and in terms of the amount of foreign currencies it can buy.

Correct AnswerverifiedShow Answer

A nation with a trade surplus will necessarily have domestic investment that is greater than domestic saving.

Correct AnswerverifiedShow Answer

If domestic residents of France purchase 1.2 trillion euros of foreign assets and foreigners purchase 1.5 trillion euros of French assets,then France's net capital outflow is

Correct AnswerverifiedShow Answer

If Norway sold more goods and services abroad than it purchased from abroad,then it had

Correct AnswerverifiedShow Answer

Net capital outflow

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If a country has Y > C + I + G,then

Correct AnswerverifiedShow Answer

If the nominal exchange rate e is foreign currency per dollar,the domestic price is P,and the foreign price is P*,then the real exchange rate is defined as

Correct AnswerverifiedShow Answer

The theory of purchasing-power parity states that a unit of a country's currency should be able to buy the same quantity of goods in foreign countries as it does domestically.

Correct AnswerverifiedShow Answer

Net capital outflow is defined as the purchase of

Correct AnswerverifiedShow Answer

Which type(s) of economies interact with other economies?

Correct AnswerverifiedShow Answer

If a nation is selling more goods and services to foreigners than it is buying from them,then on net it must be buying assets abroad.

Correct AnswerverifiedShow Answer

Purchasing-power parity implies that the nominal exchange rate given as foreign currency per unit of U.S.currency must rise if the price levels in

Correct AnswerverifiedShow Answer

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That it is equal to one.The nu...
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