Ch. 18 Macro Homework

Oceania buys $100 of wine from Escudia and Escudia buys $80 of wool from Oceania. Suppose this is the only trade that these countries do. What are the net exports of Oceania and Escudia, in that order?

$-20 and $20

A country has $100 million of net exports and $170 million of saving. Net capital outflow is

$100 million and domestic investment is $70 million.

A country has $60 million of saving and domestic investment of $40 million. Net exports are

$20 million

If the exchange rate is .60 British pounds = $1, a bottle of ale that costs 3 pounds costs

$5

A country has $3 billion of domestic investment and net exports of $2 billion. What is its saving?

$5 billion

If a country has $2.4 billion of net exports and purchases $4.8 billion of goods and services from foreign countries, then it has

$7.2 billion of exports and $4.8 billion of imports

A country has $45 million of domestic investment andante capital outflow of -$60 million. What is its saving?

-$15 million

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

-.3 trillion euros, so it must have a trade deficit.

A country has net capital outflow of -10 billion euros and domestic investment of 20 billion euros. What is its national saving?

10 billion euros

If a U.S. dollar purchases 4 Argentinean pesos, and a gallon of milk costs $3 in the U.S. and 6 pesos in Argentina what is the real exchange rate?

2

The price of a basket of goods and services in the U.S. is $600. In Canada the same basket of goods costs 700 Canadian dollars. If the nominal exchange rate were 1.2 Canadian dollars per U.S. dollar, what would be the real exchange rate?

720/700

A nation has a positive net capital outflow. Which of the following is correct?

Purchases of foreign assets by domestic residents exceed purchases of domestic assets by foreigners, It has positive net exports, and Its savings exceeds its domestic investment.

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

S>I and it has a trade surplus

A U.S. firm opens a factory that produces power tools in Korea.

This increases US net capital outflow and decreases Korean net capital outflow

A nation's domestic investment is greater than its savings. Which of the following is correct?

This nation has a negative net capital outflow

Dave, a US citizen buys a bicycle manufactured in China. Dave's purchase is

a US import and a Chinese export

A country purchases more goods and services fro residents of foreign countries than residents of foreign countries purchase from it. This country has

a trade deficit and negative net exports

If a country has saving of $2 trillion and investment of $1.5 trillion, then it has

a trade surplus and its net capital outflow = $.5 trillion.

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

a trade surplus and positive net exports

Suppose that the real exchange rate between the United States and Kenya 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 Kenyan goods a basket of U.S. goods buys)?

an increase in the number of Kenyan shillings that can be purchased with a dollar, an increase in the price of U.S. goods, and a decrease in the price in Kenyan shillings of Kenyan goods

If you go to the bank and notice that a dollar buys more Japanese yen than it used to, then the dollar has

appreciated. Other things the same, the appreciation would make Americans more likely to travel to Japan.

Other things the same, if the exchange rate changes from .8 euros per dollar to .9 euros per dollar, the dollar

appreciates so US goods become more expensive relative to foreign goods

Carl and Carly are American residents. Carl buys stock of a corporation in Austria. Carly opens a coffee shop in Austria. Whose purchase, by itself, decreases Austria's net capital outflow?

both Carl's and Carly's

A Portuguese company exchanges euros for $60,000 from a U.S. bank. The Portuguese firm then uses the dollars to purchase $60,000 of canning equipment from a U.S. company. As a result of these two transactions alone

both US net capital outflow and US net exports rise

Domestic sing must equal domestic investment in

closed, but not open economies

When a Japanese automaker opens a factory in the US, US net capital outflow

declines because the foreign company makes a direct investment in capital in the US

An American retailer sells dollars to obtain euros. It then uses the euros to buy ready-to- assemble furniture from Sweden. These transactions

decrease US net capital outflow because foreigners obtain US assets

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

decrease and US imports increase

A Japanese bank buys US government bonds, this purchase

decreases US net capital outflow, but increases Japanese net capital outflow

If the number of Japanese yen a dollar buys falls, but neither country's price level changes, then the real exchange rate

depreciates, which cause US net exports to increase

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

e(P/P*)

All saving in the U.S. economy shows up as

either investment in the US economy or US net capital outflow

A country's trade balance will fall if

either saving falls or investment rises

If U.S. consumers increase their demand for apples from New Zealand, then other things the same New Zealand's

exports and net exports rise

A utilities company in the Netherlands buys wind generators made by a US company, It pays from them with perviously obtained dollars. By itself, this exchange

increases both US net exports and US net capital outflow

Net capital outflow

is always equal to net exports

S=I+NCO

is correct

If a country has a trade deficit

it has negative net exports and negative net capital outflow

If a country has a trade surplus,

it has positive net exports and positive net capital outflow

One year a country has negative net exports. The next year it still has negative net exports and imports have risen more than exports.

its trade deficit rose

Suppose that real interest rates in the U.S. rise relative to real interest rates in other countries. This increase would make foreigners

more willing to purchase US bonds, so US net capital outflow would fall

Other things the same, if a country saves less, then

net capital outflow falls, so net exports fall

A country has a trade deficit. Its

net capital outflow must be negative and saving is smaller than investment

Other things the same, if a country's domestic investment decreases, then

net capital outflow rises, so net exports rise

If it took as many dollars to buy goods in the United States as it did to buy enough currency to buy the same goods in India, the real exchange rate would be computed as how many Indian goods per U.S. goods?

one

Which type of economies interact with other economies?

only open economies

If purchases of French assets by foreigners are less than French purchases of foreign assets, then France has a

positive net capital outflow and a trade surplus

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

positive net capital outflow and positive net exports

If Canada's national saving exceeds its domestic investment, then Canada has

positive net capital outflows and positive net exports

If a country's purchases of foreign assets exceeds foreign purchases of domestic assets, that country has

positive net exports and positive net capital outflows

Other things the same, the real exchange rate between U.S. and Belgian goods would be higher if

prices in the U.S. were higher, or the number of euro the dollar purchased were higher.

Other things the same, the real exchange rate between American and French goods would be lower if

prices of French goods were higher, or the number of euros a dollar purchased was lower.

Suppose that foreign citizens decide to purchase more U.S. pharmaceuticals and U.S. citizens decide to buy more stock in foreign corporations. Other things the same, these actions

raise both US net exports and US net capital outflows

The nominal exchange rate is the

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

If a country changes its corporate tax laws so that domestic businesses build and manage more business in other countries, then the net capital outflow of that country

rises and the net capital outflow of other countries fall

The dollar is said to depreciate against the euro if

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

The dollar is said to appreciate against the euro if

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

Net capital outflow equals

the value of foreign assets purchased by domestic residents - the value of domestic assets purchased by foreigners.

Suppose that the real return from operating factories in Canada rises relative to the real rate of return in the United States. Other things the same,

this will increase US net capital outflow and decrease Canadian net capital outflow

If Chileans buy more U.S. stocks and bonds and U.S. residents buy more Chilean wine, then

both US net exports and US net capital outflows fall

If business opportunities in a country become relatively less attractive relative to those of other countries, then

both its net exports and net capital outflows rise

Which of the following both reduce net exports?

exports fall, imports rise

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

fall, and European exports to the US rise

Greg, a U.S. citizen, opens an ice cream store in Bermuda. His expenditures are U.S.

foreign direct investment that increase US net capital outflow

In an open economy, gross domestic product equals $3,500 billion, consumption expenditure equals $2100 billion, government expenditure equals $400 billion, investment equals $800 billion, and net exports equals $200 billion. What is national savings?

$1000 billion

A German mutual fund sells euros to a U.S. bank for $20,000. The mutual fund then uses these dollars to purchase a bond issued by United Express, a U.S. delivery company. As a result of these two transactions, what happened to U.S. net capital outflow?

It was unchanged

If U.S. residents purchase $600 billion worth of foreign assets and foreigners purchase $300 billion worth of U.S. assets,

U.S. net capital outflow is $300 billion; capital is flowing out of the U.S.

Other things the same, which of the following would both make foreigners more willing to engage in U.S. portfolio investment?

US interest rates rise, the default risk of US assets fall

The real exchange rate is the nominal exchange rate, defined as foreign currency per dollar, times

US prices divided by foreign prices

A U.S. firm buys bonds issued by a technology center in India. This purchase is an example of U.S.

foreign portfolio investment. By itself it is an increase in U.S. holdings of foreign bonds and increases U.S. net capital outflow.

Other things the same, the real exchange rate between American and Chinese goods would be higher if

price of Chinese goods were lower, or the number of yuan a dollar purchases was higher