Econ 202 Quiz 13

The nominal exchange rate is about 2 Aruban florin per dollar. If a basket of goods in the United States costs $50, how many florins must a basket of goods in Aruba cost for purchasing-power parity to hold? A. 25 florin B. 100 florin C. 52 florin D. 48 florin

B. 100 florin

A country's trade balance will fall if either A. investment or saving rise. B. investment falls or saving rises. C. saving falls or investment rises. D. investment or saving fall.

C. saving falls or investment rises.

If saving is greater than domestic investment, then there is a trade A. deficit and Y > C + I + G. B. deficit and Y < C + I + G. C. surplus and Y > C + I + G. D. surplus and Y < C + I + G.

C. surplus and Y > C + I + G.

Which of the following is correct? Since 1950 A. U.S. exports and U.S. imports each have increased slightly. B. U.S. exports increased only slightly and U.S. imports have increased significantly. C. U.S. exports have decreased and U.S. imports have increased. D. U.S. exports and U.S. imports each have increased significantly.

D. U.S. exports and U.S. imports each have increased significantly.

You are planning a graduation trip to Mexico. Other things the same, if the dollar appreciates relative to the peso, then the dollar buys A. fewer pesos. Your hotel room in Mexico will require more dollars. B. more pesos. Your hotel room in Mexico will require more dollars. C. fewer pesos. Your hotel room in Mexico will require fewer dollars. D. more pesos. Your hotel room in Mexico will require fewer dollars.

D. more pesos. Your hotel room in Mexico will require fewer dollars.

The purchase of U.S. government bonds by Japanese is an example of A. foreign portfolio investment by Japanese. B. U.S. imports. C. foreign direct investment by Japanese. D. U.S. exports.

A. foreign portfolio investment by Japanese.

Net capital outflow A. is always equal to net exports. B. is always greater than net exports. C. could be greater than, less than, or equal to net exports. D. is always less than net exports.

A. is always equal to net exports.

The nominal exchange rate is the A. rate at which a person can trade the currency of one country for another. B. ratio of a foreign country's interest rate to the domestic interest rate. C. real exchange rate minus the inflation rate. D. nominal interest rate in one country divided by the nominal interest rate in the other country.

A. rate at which a person can trade the currency of one country for another.

If the exchange rate is 9 Pound sterlings per U.S. dollar and a meal in London costs 225 Pound sterlings, then how many U.S. dollars does it take to buy a meal in Rio? A. $34 and your purchase will increase the United Kingdom's net exports. B. $25 and your purchase will increase the United Kingdom's net exports. C. $34 and your purchase will decrease the United Kingdom's net exports. D. $25 and your purchase will decrease the United Kingdom's net exports.

B. $25 and your purchase will increase the United Kingdom's net exports.

When Bill, a Mexican citizen, sells dresses he desings to Spain, the sale is A. both Spain's and Mexico's import. B. Spain's import and Mexico's export. C. both Spain's and Mexico's export. D. Spain's export and Mexico's import.

B. Spain's import and Mexico's export.

Purchasing-power parity theory does not hold at all times because A. consumer preferences are different across countries. B. many goods are not easily transported and the same goods produced in different countries may be imperfect substitutes. C. prices are different across countries. D. the same goods produced in different countries are perfect substitutes for each other.

B. many goods are not easily transported and the same goods produced in different countries may be imperfect substitutes.

Suppose that real interest rates in the U.S. rise relative to real interest rates in other countries. This increase would make foreigners A. less willing to purchase U.S. bonds, so U.S. net capital outflow would rise. B. more willing to purchase U.S. bonds, so U.S. net capital outflow would fall. C. more willing to purchase U.S. bonds, so U.S. net capital outflow would rise. D. less willing to purchase U.S. bonds, so U.S. net capital outflow would fall.

B. more willing to purchase U.S. bonds, so U.S. net capital outflow would fall.

If the real exchange rate for coal is 1.5, the price of coal in the United States is $50 per ton, and the price of coal in Britain is 20 British pounds per ton, what is the nominal exchange rate? A. 4/15 or 2.67 pounds per dollar B. 15/4 or 3.75 pounds per dollar C. 3/5 or 0.6 pounds per dollar D. 5/3 or 1.67 pounds per dollar

C. 3/5 or 0.6 pounds per dollar

A Chinese company exchanges yuan (Chinese currency) for dollars. It uses these dollars to purchase scrap metal from a U.S. company. As a result of these transactions, Chinese net exports A. increase, and U.S. net capital outflow increases. B. decrease, and U.S. net capital outflow increases. C. decrease, and U.S. net capital outflow decreases. D. increase, and U.S. net capital outflow decreases.

C. decrease, and U.S. net capital outflow decreases.

If the price levels in the United States and in the United Kingdom are unchanged, but the nominal exchange rate (Pound sterling per U.S. dollar) falls, then the U.S. dollar A. depreciates and so U.S. net exports falls. B. appreciates and so U.S. net exports falls. C. depreciates and so U.S. net exports rises. D. appreciates and so U.S. net exports rises.

C. depreciates and so U.S. net exports rises.

Net exports of a country are the value of A. goods imported minus the value of goods exported. B. goods exported minus the value of goods imported. C. goods and services exported minus the value of goods and services imported. D. goods and services imported minus the value of goods and services exported.

C. goods and services exported minus the value of goods and services imported.

During some year a country had exports of $85 billion, imports of $60 billion, and domestic investment of $130 billion. What was its saving during the year? A. $105 billion B. $70 billion C. $45 billion D. $155 billion

D. $155 billion

In an open economy, gross domestic product equals $2,460 billion, consumption expenditure equals $1,435 billion, government expenditure equals $325 billion, investment equals $560 billion, and net capital outflow equals $375 billion. What is national saving? A. $1,260 billion B. $1,900 billion C. $2,135 billion D. $935 billion

D. $935 billion

Which of the following is an example of U.S. foreign direct investment? A. A Swedish car manufacturer opens a plant in Tennessee. B. A U.S. bank buys bonds issued by an Australian corporation. C. A Swiss bank buys a U.S. government bond. D. A U.S. based restaurant chain opens new restaurants in India.

D. A U.S. based restaurant chain opens new restaurants in India.

Suppose a country's net capital outflow does not change, but its investment declines by $420 billion. Its saving must have A. risen by $420 billion, but its net exports are unchanged. B. fallen by $420 billion, but its net exports are unchanged. C. risen by $420 billion, so its net exports have fallen. D. fallen by $420 billion, so its net exports have risen.

B. fallen by $420 billion, but its net exports are unchanged.

Which of the following equations is correct? A. S = I + NCO B. S = NX − NCO . C. S = I − NX D. S = I + C

A. S = I + NCO

If the exchange rate is expressed as euros/dollar, the dollar is said to depreciate against the euro if the exchange rate A. falls. Other things the same, it will cost more euros to buy U.S. goods. B. falls. Other things the same, it will cost fewer euros to buy U.S. goods. C. rises. Other things the same, it will cost fewer euros to buy U.S. goods. D. rises. Other things the same, it will cost more euros to buy U.S. goods.

B. falls. Other things the same, it will cost fewer euros to buy U.S. goods.

If the value of goods and services that Mexico purchases from the United States is greater than the value of goods and services that the United States purchases from Mexico, then the United States has A. negative net exports and a trade deficit with Mexico. B. negative net exports and a trade surplus with Mexico. C. positive net exports and a trade deficit with Mexico. D. positive net exports and a trade surplus with Mexico.

D. positive net exports and a trade surplus with Mexico.

Suppose that foreign citizens decide to purchase more U.S. pharmaceuticals and U.S. citizens decide to buy stock in foreign corporations. Other things the same, these actions A. raise U.S. net exports and lower U.S. net capital outflows. B. raise both U.S. net exports and U.S. net capital outflows. C. lower both U.S. net exports and U.S. net capital outflows. D. lower U.S. net exports and raise U.S. net capital outflows.

B. raise both U.S. net exports and U.S. net capital outflows.

The dollar is said to appreciate against the euro if the exchange rate A. rises. Other things the same, it will cost fewer euros to buy U.S. goods. B. falls. Other things the same, it will cost fewer euros to buy U.S. goods. C. falls. Other things the same, it will cost more euros to buy U.S. goods. D. rises. Other things the same, it will cost more euros to buy U.S. goods.

D. rises. Other things the same, it will cost more euros to buy U.S. goods.