Macro Exam 4

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

$1 billion

The country of Sylvania has a GDP of $900, investment of $200, government purchases of $200, and net capital outflow of -$100. What is consumption?

$600

A country has private saving of $100 billion, public saving of -$30 billion, domestic investment of $50 billion, and net capital outflow of $20 billion. What is its supply of loanable funds?

$70 billion

In an open economy, gross domestic product equals $2,450 billion, consumption expenditure equals $1,390 billion, government expenditure equals $325 billion, investment equals $510 and net capital outflow equals $225 billion. What is national saving?

$735 billion.

A tall latte in China costs 30 yuan. The same latte in the U.S. costs 4 dollars. If the exchange rate is 6.5 yuan per dollar then, the real exchange rate is

.867 so the good is more expensive in China

In Ireland, a pint of beer costs 3 euros. In Australia, a pint of beer costs 4 Australian dollars. If the exchange rate is .8 euros per Australian dollar, what is the real exchange rate?

3.2/3 pints of Irish beer per pint of Australian beer.

Which of the following is an example of U.S. foreign direct investment and by itself increases U.S. net capital outflow?

A U.S. electronics company opens and operates a new factory in India.

A U.S. fast food restaurant chain sells dollars for Argentinean pesos and then uses the pesos to buy Argentinean beef. Which of the following do these transactions increase?

Argentinean net capital outflow and Argentinean net exports

The nominal exchange rate is .80 euros per U.S. dollar and a basket of goods in France costs 1,000 euros while the same basket costs $800 in the U.S. The nominal exchange rate is 1.2 Australian dollars per U.S. dollar and a basket of goods in Australia costs 960 Australian dollars while the same basket costs $800 in the U.S.. Which country has purchasing-power parity with the U.S.?

Australia but not France.

Other things the same, which of the following could be a consequence of an appreciation of the U.S. real exchange rate?

Nick, a U.S. citizen, decides that the trip to Nepal he's been thinking about is now affordable.

A U.S. retailer buys shoes from an Italian company. The Italian firm then uses all of the revenues to buy leather from the U.S. These transactions 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

None of the above is correct.

Which of the following is most likely to result if foreigners decide to withdraw the funds that they have loaned to the United States?

U.S. net capital outflow will rise

Which of the following contains a list only of things that increase when the budget deficit of the U.S. decreases?

U.S. supply of loanable funds, U.S. net capital outflow, U.S. domestic investment

From 1980 to 1987, U.S. net capital outflows decreased. According to the open-economy macroeconomic model, which of the following could have caused this?

a decrease in the supply of loanable funds

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)?

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

Other things the same, in the open-economy macroeconomic model, which of the following would make China's net capital outflow increase?

an increase in U.S. interest rates

In the open-economy macroeconomic model, if the supply of loanable funds increases, then the interest rate

and the real exchange rate decrease.

A country produces two goods, soda and chips. It currently exports soda and imports chips. If it were to impose a tariff on chips,

both imports of chips and exports of sodas would fall.

At the original exchange rate an import quota

creates a shortage in the market for foreign-currency exchange, so the exchange rate rises.

Which of the following statements is incorrect for an open economy? a. A country can have a trade deficit, trade surplus, or balanced trade. b. National saving equals domestic investment plus net capital outflow. c. Net exports must equal net capital outflow. d. A country that has a trade deficit has positive net capital outflow.

d. A country that has a trade deficit has positive net capital outflow.

In the open-economy macroeconomic model, the market for loanable funds equates national saving with a. domestic investment. b. net capital outflow. c. national consumption minus domestic investment. d. None of the above is correct.

d. None of the above is correct.

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

decrease and U.S. imports increase.

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

depreciates which causes U.S. net exports to increase.

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

e=P*/P

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

foreign direct investment that increase U.S. net capital outflow.

A Texas ranch sells beef to a U.S. company that sells it to a grocery chain in Japan. These sales

increase both U.S. exports and U.S. net exports

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

increases both U.S. net exports and U.S. net capital outflow.

If the supply of loanable funds shifts right, then the equilibrium

interest rate falls, so domestic residents will want to purchase more foreign assets.

In an open economy, the source for the demand for loanable funds is

investment+net capital outflow

Prices in both the U.S. and India rise, but prices in India increase by a smaller percentage. According to purchasing-power parity the U.S. dollar

loses value both in terms of the domestic goods and services it can buy and in terms of the Indian currency it can buy.

In the open-economy macroeconomic model, the supply of loanable funds comes from

national saving

In the open-economy macroeconomic model, the supply of loanable funds equals

national saving. The demand for loanable funds comes from domestic investment + net capital outflow.

If a country's government reduced corruption and reformed its tax system so that businesses found operating there less risky, it's likely that this country's

net exports and net capital outflow would decrease.

If a dollar currently purchases 12.5 pesos and someone forecasts that in a year it will purchase 14 pesos, then the forecast is given in

nominal terms and implies the dollar will appreciate.

If a country has a positive net capital outflow, then

on net it is purchasing assets from abroad. This adds to its demand for domestically generated loanable funds.

If over the next six months inflation is higher in the U.S. than in foreign countries, then according to purchasing-power parity

only the nominal exchange rate depreciates.

Net capital outflow equals the difference between a country's

purchases of foreign assets and sales of domestic assets abroad.

If there is a surplus in the market for loanable funds, the resulting change in the real interest rate

reduces the quantity of loanable funds supplied and raises the quantity of loanable funds demanded

If a government increases its budget deficit, then the real exchange rate

rises and domestic investment falls.

If the Mexican nominal exchange rate does not change, but prices rise faster in Mexico than in all other countries, then the Mexican real exchange rate

rises.

If people decide that some country is now a more risky place to keep their saving, then at the original interest rate in that country there is a

shortage of loanable funds, so the interest rate increases.

Which of the following happens in the market for loanable funds when there is capital flight?

the demand curve shifts right

Which of the following is consistent with moving from a surplus to equilibrium in the market for foreign currency exchange?

the exchange rate falls causing U.S. residents to import less

If the demand for loanable funds shifts left, then

the real interest rate and the equilibrium quantity of loanable funds both fall.

If saving is greater than domestic investment, then

there is a trade surplus and Y>C+I+G.